Is the Price Right?

Texas Debates Publicly Posting Physician Fees 

 Texas Medicine Logo 

Medical Economics – March 2013 

Tex Med. 2013;109(3):35-38.

 By Amy Lynn Sorrel 
Associate Editor 

The price of a gallon of gasoline is no secret, prominently displayed on stations' signs, often across the street from a competitor. The same goes for milk or bread, whose prices are out there for all to see. If consumers are unhappy with one offer, they can shop for another and wind up with the same product for less.

So why can't shopping for health care work the same way?

For one thing, the cost of medical services is not nearly as simple or predictable, says Susan M. Strate, MD, a pathologist in Wichita Falls and past chair of the Texas Medical Association Council on Socioeconomics.

"Purchasing health care is not like purchasing a loaf of bread or a gallon of ice cream, where every loaf or gallon is the same. Every patient comes in with a different health record, a different manifestation of even the same disease, and you can't make them the same. Nor do patients want to be treated the same," she said.

As Texas looks for ways to stymie increasing health care costs and to improve health care delivery, that answer struck at the heart of recent recommendations by a state-appointed advisory board tasked with evaluating the role of transparency in the equation, among other factors.

The 2011 legislature created the Texas Institute of Health Care Quality and Efficiency under the state's own version of health system reform, Senate Bill 7. Dr. Strate was among a group of 15 appointed health care experts directed to study and report back to the legislature on three broad areas:  

  1. Improving the quality and efficiency of health care delivery by developing things like reportable measures;
  2. Implementing innovative payment and delivery systems; and
  3. Enhancing the reporting, organization, and transparency of health care data. 

Discussions on the latter sparked heated debate among board members in their charge to more specifically look at whether requiring physicians to publicly report the payment amounts they accept for specific services – and to stick to them – could help consumers make more informed health care decisions.

A majority of the institute's board ultimately rejected the proposal in its Nov. 30 report to the legislature. Instead, they pointed to existing remedies that allow physicians, hospitals, and health plans to estimate patients' out-of-pocket costs, and recommended additional solutions that encourage patients to seek that information ahead of treatment.

Still, as the report makes its way into lawmakers' hands, the idea is likely to resurface this legislative session.

Transparency in health care pricing is just one part of improving the overall health care delivery system, but an important one, says Rep. Lois Kolkhorst (R-Brenham), chair of the House Committee on Public Health.

Armed with payment information, "patients might make more investments in their health care, and [lawmakers] could see where the big dollars are being spent," she said. "There's a concern we are creating a more opaque system versus going the other direction, and this is just a starting point. There is no silver bullet to fix the health care system, but these are conversations that need to be had."

What's in a Price? 

The discussions were prompted in part by the emergence of new benefit plans – so-called consumer-directed health plans – that offer lower monthly premiums with higher deductibles to incentivize patients to more judiciously choose their care.

The higher out-of-pocket costs resulted in some "sticker shock" to patients unaware of their obligations under such plans, says Houston family physician Patrick M. Carter, MD. The TMA Council on Legislation member and chief of family medicine at Kelsey-Seybold Clinic also serves on the institute board.

One possible solution posed to the institute was to publicly reveal the amounts physicians and hospitals "accept as payment in full" for a particular service. That would include any negotiated discounts from their original billed charge, combined with a requirement to adhere to those prices.

Physicians and other institute members agreed that improving patients' ability to assess their financial responsibilities before receiving care "is an important dimension of price transparency."

But so many factors go into the cost of medical services they would not fit on a typical price tag, Dr. Carter says. Nor would such information be meaningful to patients or feasible for physicians to share.

Doctors do have a set price, or billed charge, for a basic office visit. Before evaluating a patient, however, there's no way to predict his or her combination of symptoms or the kind of testing and treatment needed to respond.

"And the next visit could be totally different," he said, making it difficult to follow a fixed price, even if one could be set. "The number of things I as a family doctor could decide to do runs into the thousands for each visit."

That's just step one.

The billed charge does not take into account the fact that physicians individually negotiate different rates with different health insurers based on a host of factors, like the number of patients in a particular plan. And insurers themselves have scores of different products.

"So even if my rate is the same for two patients, those patients might have different benefit plans," Dr. Carter said.

If physicians were to somehow explain all that by posting a single price, it still wouldn't tell patients what they really want to know, says Dr. Strate, vice speaker of the TMA House of Delegates. "If patients have insurance, they want to know where they are with their deductible and copayment. They want to know what their out-of-pocket expenses are. If patients are uninsured, posting an amount tells them nothing about any prompt-pay discount or other discounts they may be eligible for."

Nor does a health care price mean much if it is isolated from information on the quality of those services, she added.

A recent study in the Journal of Consumer Research showed patients also may misinterpret and misuse health care pricing information. Patients in the study translated lower prices for a particular medical service as a sign of greater accessibility and therefore greater need for that care. The reverse was true with higher prices.

The findings suggest that consumers "make inconsistent assumptions about risk, prevalence, and need with price exposure." And, "while greater price transparency may indeed reduce consumption of higher-priced goods, it may do so for both necessary and unnecessary care," researchers concluded in their report, "Price Inferences for Sacred Versus Secular Goods: Changing the Price of Medicine Influences Perceived Health Risk."

Dr. Strate adds that even if doctors could research all the various treatment options, CPT codes, and insurance scenarios to come up with such a price in advance – a near impossibility administratively for physician practices to do, let alone for patients to understand – physicians don't always have access to all of the benefits and pricing information patients would need.

Health plans do, however, and much of it is already available to patients, the institute found. Instead of posting health care prices, the board said transparency could be achieved in other ways.

 Seeking Transparency 

Members recommended implementing and enhancing existing transparency initiatives that encourage a wide range of players – physicians, hospitals, payers, employers, and consumer groups – to make quality and cost information more widely available and that encourage patients to seek it.

State law already requires hospitals to give patients estimates of their charges and any applicable uninsured discounts, the board noted. And nothing prevents doctors from discussing their billed charges or other estimates with their patients, Dr. Carter says.

The institute also recommended state agencies regularly report on the implementation of Senate Bill 1731, passed by the legislature in 2007. The law already requires insurers to give their members cost estimates upon request. Other provisions designed to educate patients about their out-of-network obligations and help them avoid expensive bills are still under development. (See "Adequate to Inadequate.")

Other suggestions included support for requirements that:  

  • Hospitals and other providers help patients and their insurers, as applicable, with preauthorization and review of proposed health care services;
  • Hospitals and other providers supply, upon request by an uninsured patient or patient seeking an out-of-network service, a good faith estimate of payment amounts for planned treatment, and do so within two to 10 days; and
  • Insurers inform their policyholders of their right to request information about out-of-pocket costs, treatment outcomes, and less costly alternatives, and how different negotiated rates may impact patients' costs. 

The full report is available online.

M. Shannon Stansbury, Blue Cross and Blue Shield of Texas vice president for health care delivery, said in the report that the health plan supported SB 1731 and is already implementing it. He also served on the institute board and agreed with physicians that "the provision of health care is highly individualized," making price disclosure difficult.

Doing so would not help consumers and would "violate legal and contractual requirements to keep negotiated rates confidential between health plans and providers," Mr. Stansbury wrote.

Health plans and physicians can share that information with individual enrollees or other parties to the contract.

But a 2011 study by the Government Accountability Office suggests that disclosing negotiated payment rates among competing physicians and health plans may violate federal antitrust laws. Guidance from the Federal Trade Commission (FTC) and Department of Justice indicates exchanging price information could amount to collusion. The report affirmed that "several health care and legal factors may make it difficult for consumers to obtain price information for the health care services they receive … include[ing] the difficulty of predicting health care services in advance, billing from multiple providers, and the variety of insurance benefit structures."

Some dissenters argue that such barriers could be overcome to allow such disclosures.

For one, antitrust laws would come into play only if physicians and others communicate with each other about their individual prices, says board member attorney Ronald T. Luke, PhD, a health care consultant and director of the Texas Association of Business. He declined to comment for this story.

In the report, Mr. Luke says the legislature could relieve other liability concerns by prohibiting contractual confidentiality clauses on pricing information.

Lawmakers also could enact measures "to standardize the pricing structure, but not the price" for health care services "to make price comparisons possible for consumers," he says. For example, physicians, hospitals and other health care facilities could post a so-called reference price for a particular service, akin to what Medicare uses.

Giving patients estimates of their costs doesn't go far enough, and until patients can comparison shop on health care prices, physicians and hospitals are "under little or no competitive pressure to compete by lowering prices," Mr. Luke wrote.

In fact, Dr. Carter pointed to FTC research showing price disclosures could drive costs up, rather than down.

As for a standardized pricing structure, "we already have an example of that. It's Medicare. And it's not a system that has been very open to innovation or successful in controlling health care costs," he said. "There is a fixed reference price. Doctors take it, and patients know what they are going to pay. But there is no incentive to provide better services in a more efficient way because doctors are not going to get paid for it."

Moving in that direction would undermine the very kind of innovation Texas is looking to implement through the institute and other health care reform efforts, TMA leaders say.

Mandating that physicians post a single price and adhere to it would all but kill the risk-sharing arrangement Dr. Carter's clinic has with payers, who give him a monthly fee for taking care of a patient as a way of incentivizing more efficient care. Experiments with shared savings programs, medical homes, and bundled payments for joint physician-hospital services – all models that allow payers to negotiate financial rewards in exchange for quality and cost improvements – would not be possible.

"It goes against everything we are trying to do in terms of value-based payments and all of the other innovations we are looking at to refine the system," Dr. Strate said.

SIDEBAR 

No Small Task 

In addition to health care pricing, the Texas Institute for Health Care Quality and Efficiency's first legislative report addressed a host of recommendations likely to be the subject of ongoing debates on how to reform health care delivery in Texas. The report also included recommendations to: 

  • Collect and publicly report on a small, focused set of outcome measures with the long-term goal of building a robust, integrated health care information system;
  • Hold off on pursuing an all-payer claims database that mandates claims reporting by insurance carriers until there is progress on setting up an integrated data collection system;
  • Promote efforts by health care delivery organizations, payers, clinicians, plans, employers, consumer-groups, and associations to increase the availability of information on health care quality, costs to the consumer, outcomes of care, and safety;
  • Require hospitals to publicly report potentially preventable Medicaid readmission and complication rates; and
  • Comprehensively study consumer behaviors, preferences, and ways to maximize their use of health care information for development of a consumer-friendly website with information on state health care performance metrics and quality and cost-effectiveness resources. 

Amy Lynn Sorrel can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by email. 


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