Goal is to provide transparency to help consumers shop for hospitals; experts predict more transparency in healthcare prices, including for clinical laboratory and pathology testing

For the first time ever, a federal agency has posted on the Internet the prices hospitals charge for healthcare services specifically to help consumers price shop when they select a hospital. This is a major development and has direct implications for clinical laboratories and pathology groups that are based in hospitals and health systems.

On May 8th, the U.S. Department of Health and Human Services announced the availability of hospital-specific cost data for inpatient services at 3,000 hospitals. The data are now available on the Medicare Website.

Will Medical Laboratory and Pathology Prices Be Next to Go on Internet?

This is the latest step forward on the march toward full transparency in the prices and outcomes of individual hospitals, physicians, and other providers, including medical laboratories. It is also another early warning to pathologists and clinical laboratory managers that they would be well-served to prepare for the day when the majority of consumers will expect labs and pathology groups to make lab test prices easy to find and understand.

“When consumers can easily compare the price of goods and services, producers have a strong incentive to keep prices low,” said HHS Secretary Kathleen Sebelius in announcing publication of the hospital cost data, noted an article published in The Salt Lake Tribune. “Hospitals that charge two or three times the going rate will rightfully face scrutiny, and those that charge lower rates may gain more customers,” she added, noting that higher prices do not necessarily buy higher quality of care.

Hospital Prices Developed from Medicare Cost Data

Some healthcare experts were quick to point out that this hospital price data has little value for consumers already covered by a health insurance policy. That’s because the prices posted on the Internet by HSS are largely the maximum price point from which hospitals negotiate discounts with government health programs and private health insurers, pointed out The Tribune.

However, for patients who may need to pay cash and for patients with high-deductible health plans, access to hospital prices in advance of treatment is expected to help them negotiate more favorable rates. In turn, this would help to hold down the cost of healthcare.

“If you’re in the ambulance on the way to the emergency room, you’re not going to call around and see who has the best rates,” pointed out Devon M. Herrick, Ph.D., Healthcare Policy Analyst and Economist at Dallas-based National Center for Policy Analysis, in the The Tribune story. “But if your doctor orders a CT scan or a [clinical] lab test, and you find out that you can maybe get it somewhere cheaper, we know that a lot of people will get on the phone and call around.”

Pricing Variances at Independent Medical Labs vs. Hospital Labs

Insured patients with high copays and deductibles also could benefit by shopping around, especially for outpatient services like medical laboratory tests. Pamela Campbell, for example, learned the hard way. She was profiled in a story on CBS San Francisco.

Her six-year-old son needed a series of clinical laboratory tests. His pediatrician gave Campbell a choice between the medical laboratory at the University of California, San Francisco (UCSF) Children’s Hospital or an independent clinical laboratory a half-mile away. She decided on the hospital lab because it was convenient and the pediatrician said the staff is “great with kids.”

But Campbell was shocked when she received the bill. After her insurance paid its part of the $1,800 bill, she still owed $1,026! Campbell later found out that had she gone to the independent clinical laboratory to have the same tests done, her out-of-pocket charges would have been only $82.

Herrick noted that, over time, pricing transparency may also have a “shaming” effect on providers, who are finding it increasingly tougher to answer questions from consumers about pricing disparities. Studies show that when consumers are exposed to data on higher prices, they reduce their use of medical care by about 40%, he said.

Even when patients do require emergency care, there is often room for negotiating price with hospitals and other providers, according to Renee Hsia, M.D., a researcher at UCSF Medical Center. She led a nationwide study of variances in emergency department charges for the 10 most common complaints.

The study, was published in the journal PLOS One. Hsia and her colleagues analyzed charges for 76.6 million ED encounters, from 2006 to 2008. Charges for an upper respiratory infection, for instance, ranged from $19 to $17,421. For a headache, the low to high charges went from $17 to $17,797.

This chart lists minimum and maximum charges for the 10 most common emergency department visits nationwide. This information was developed in a study by researchers at the University of California, San Francisco that was published in the journal PLOS ONE. The analysis involved 76.6 million ED encounters between 2006 and 2008. (Chart copyright PLOS One.)

This chart lists minimum and maximum charges for the 10 most common emergency department visits nationwide. This information was developed in a study by researchers at the University of California, San Francisco that was published in the journal PLOS ONE. The analysis involved 76.6 million ED encounters between 2006 and 2008. (Chart copyright PLOS One.)

“There’s no Blue Book for healthcare costs,” Hsia said, in an article published by the AARP Bulletin. She suggested that ED patients always ask for an itemized bill and try to negotiate charges, because they just might succeed.

Predicted Impact of Consumer-driven Healthcare

Healthcare experts predict a coming era of consumer-driven healthcare that will result in more competitive pricing for medical services. This trend is emerging due to growth in lower-cost health plans with higher copays and deductibles, along with an array of inexpensive wireless medical technologies entering the marketplace that are capable of performing accurate clinical laboratory and imaging tests. (See Dark Daily, “Anticipating the Digital Medicine Revolution, Scripps Doctor Prescribes Smartphone Apps as Frequently as Medications,” May 17, 2013.)

It goes without saying that there were many executives in the hospital industry who were not happy that the Department of Health and Human Services has made the prices charged by 3,000 hospitals available to consumers on the Internet. Dark Daily expects that a number of websites are likely to pop up that will make it fast and easy for consumers to use this same data to price shop hospitals.

Clinical laboratory managers and pathologists can expect that there will be Medicare program officials who will want to post the prices of individual physicians and ancillary providers, including radiology groups, pathology groups, and clinical laboratories. Whether this happens quickly or takes several more years has yet to be determined. Since Medicare officials have established the principle of putting provider price data on the Internet, it is likely they will continue to release the prices charged by other types of healthcare providers.

—By Patricia Kirk

Related Information:

ConsumerWatch: Hospital Lab Tests May Lead To Expensive Results

Obama administration lifts veil off hospital pricing

Medicare Provider Charge Data

Administration offers consumers an unprecedented look at hospital charges

HHS RELEASES HOSPITAL DATA ON CHARGE VARIATION TO PROMOTE TRANSPARENCY

New Data Help Explain Hospital Pricing, But Experts Caution That Medicare And Insurers Get Much Lower Rates

Use Independent Labs

The Tragic Inefficiency Of America’s Health Care System

Anticipating the Digital Medicine Revolution, Scripps Doctor Prescribes Smartphone Apps as Frequently as Medications

From Outreach to Outsourcing

Medicare Discontinues Payment to Laboratories for Hospital Anatomic Pathology Services

ConsumerWatch: Hospital Lab Tests May Lead To Expensive Results

“How Much Will I Get Charged for This?” Patient Charges for Top Ten Diagnoses in the Emergency Department