One of the many things that makes American healthcare so ridiculously expensive is the bizarre and deeply shady practice of hospital billing. Hospital pricing is not, as you might hope, closely tied to the cost of providing the service or procedure that the patient receives. A Minnesota Department of Health study from August last year found massive variations in the costs of procedures even at the same hospital: according to the agency, “prices for a bowel procedure at the most expensive hospital ranged from about $14,500 to $68,800.” At the same hospital!
A Trump administration rule that went into effect on Jan. 1 was ostensibly supposed to bring some transparency to these prices. The new rule requires hospitals to publish the list prices for the care they provide—procedures, tests, drugs, and so on.
But as Kaiser Health News outlined in an article today, those list prices are next-to-impossible to understand for the vast majority of people:
The University of California San Francisco Medical Center’s chargemaster, for example, includes a $378 charge for “Arthrocentesis Aspir&/Inj Small Jt/Bursa w/o Us,” which is basically draining fluid from the knee.
At Sentara in Hampton Roads, Va., there’s a $307 charge for something described as a LAY CLOS HND/FT=<2.5CM. What? Turns out that is the charge for a small suture in surgery.
You know, the ol’ LAY CLOS HND. I got one of those last week. Love to get a LAY CLOS HND.
The chargemaster lists are also impossibly long. The George Washington University Hospital list, for example, which requires you to check eight boxes to affirm that you understand that the prices are subject to change and not guaranteed in order to view it, has almost 5,000 separate items. There are 118 separate listings for various MRIs. The most expensive item on its list is “HEART TRANSPLANT OR IMPLANT OF HEART ASSIST SYSTEM,” at a cool $1.2 million, but then there’s “OTHER HEART ASSIST SYSTEM IMPLANT” for just $247,392.98. How are you supposed to know which you need? There’s a listing for “OTHER CIRCULATORY SYSTEM PROCEDURES,” too, at $527,738.02.
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The major problem for patients is that these list prices don’t to what they actually end up paying, because that depends largely on their insurance. That’s not the same thing as saying it doesn’t really matter what hospitals charge because insurers are the ones paying it—insurers make those big fat profits by passing on those costs to consumers, and it matters in cases where insurers don’t pay because a patient went to an in-network hospital but saw an out-of-network doctor and ends up with a big bill (also known as balance billing). But for most patients, finding out a procedure costs $200,000 at one hospital and $150,000 at another matters a whole lot less than what they’ll have to pay after insurance covers its portion of the cost.
This was the thrust of hospital industry arguments against the rule. In a public comment filed about the rule, Charles Kahn, the CEO and president of the Federation of American Hospitals—a trade association that acts as the spokesperson for for-profit hospitals,—said “requiring hospitals to publish median contracted rates or discounts or to provide an estimate of the patient’s out-of-pocket costs before furnishing a service is not an appropriate avenue to address concerns about transparency,” instead arguing payers (insurers) should have to carry that burden.
Kahn also charmingly argued that though hospital prices are more relevant to the uninsured, pricing lists won’t help them because of the discounts they can receive, and those patients “should consult with the provider’s financial counselor to obtain an individualized assessment of her eligibility for charity care, discounts, or free or subsidized health coverage.” Poor people, if you think you’re having a heart attack, make sure to stop in with the hospital’s financial counselor for a quick and simple chat about your eligibility for charity care or subsidized coverage, and then if the answer is no, just toddle along to the next hospital for the same conversation. Wherever that is. And please try not to die on the carpet, we just had it cleaned.
Kahn is not wrong that insurers will have more relevant information for individual patients about what they’ll pay, but he is not-wrong for the wrong reasons. Of course the hospital industry doesn’t want any sunlight on its absurd pricing; it happens to be true that insurers are the best source of cost information for individuals, but the prices that hospitals actually charge are also incredibly relevant to the community at large. Transparency measures have many other uses than simply providing patients with a menu of charges they might incur, too; one that immediately springs to mind is giving interested journalists lots of data to look at about which hospitals are charging the most. I can’t imagine why hospitals wouldn’t want that!
The only thing that can force some sense into hospital pricing is actual regulation of prices, which can’t be achieved while healthcare is treated as a profit-making bonanza by players at every level. Transparency measures continue to operate under the pretense that healthcare is anything like a real market, where consumers are free to make informed choices and those choices will drive prices. Just look at a July speech given by Seema Verma, the head of the Centers for Medicare and Medicaid Services, about the rule:
We will transform the individual patient into a consumer of healthcare – one that is empowered to shop for the provider that delivers the best care at the lowest price. As the American patient is seeking care, they will seek providers that deliver innovative, transformative care, those that leverage the technological efficiencies that we have seen from other industries. But in order for patients to become consumers of healthcare they must have transparency in pricing and in outcomes, so that they can shop for quality and value.
That’s a risible, disgusting, and utterly fraudulent way to look at healthcare. Patients are not consumers who want to be empowered to shop; they are humans who need healthcare, and she knows it. She knows, too, that patients can’t “become consumers of healthcare” and “shop for quality and value” through transparency requirements. Free market ideology is generally bullshit, but it’s especially useless when you try to apply it to a situation where your life is literally at stake, you have very little time to make a decision, and you might only have one or two hospital choices anyway. Just look at the map in this Huffington Post article of how many areas in Georgia are more than half an hour’s drive from an open hospital; if you know you’re going to have to drive 30 minutes or more to a hospital and you’re having a stroke, where every second counts, the only hospital that matters is the closest hospital, regardless of how much they charge.
It’s not surprising that these transparency requirements have, so far, proved to be very useless for patients. That doesn’t mean they’re unnecessary per se: Hospitals should absolutely have to be open about what they charge, preferably through a robust and aggressive system of government regulation of prices where hospitals would face consequences for charging 10 times what a procedure actually costs. But the Trump administration’s claim that this has anything to do with “empowering” patients is demonstrably false.
Hospital pricing is the result of a negotiation game played with insurers, where hospitals try to get away with charging as much as they can and insurers are only able to negotiate the best prices if they cover a large portion of that hospital’s patients—and if they’re willing to walk away and make a hospital out-of-network if they don’t like the prices. That is the problem, not transparency, and it’s something only single-payer (or something more comprehensive like Britain’s National Health Service) could address. Market measures will never save or improve lives, and that’s what healthcare should be about.