Disinfecting Healthcare Prices with Sunlight

by Charles Katebi

When we walk into a hospital, we have access to a cornucopia of different tests, procedures, and specialists. What we will hardly ever see is how much all of this costs. When insurers pay most of the bill, patients have no incentive to find the best deal, and hospitals are more than happy to keep their cost hidden. Now a revolution is underway to pull back the veil on what hospitals are charging.

For 70 years, insurance companies paid most of our healthcare bills. When someone else is paying, why look for the best deal? Hospitals have exploited our disregard for value by raising prices to astronomical levels. Between 1985 and 2015, the cost of medical care has quadrupled. This is unsustainable.

Many states are trying to make patients more cost conscious by forcing hospitals to post their prices on websites called All-Payer Claims Databases, or APCDs. However, knowing the official price of a hospital service is useless because insurers rarely pay the listed price. That's because insurers and hospitals negotiate fees in advance—often at a fraction of the list price. Because these website don't actually provide meaningful information, patients are no more informed than before.

Even when states compel healthcare providers to reveal how much insurers pay, politicians exempt large swathes of the industry from the rules. For example, some states require that hospitals show the cost of inpatient services but not outpatient ones. In addition, these laws often apply to hospitals but leave private practices free to conceal their prices.

In Wyoming, our hospital association voluntarily launched an APCD with the same problems found in mandatory databases. The site, wyopricepoint.com, only tells visitors the listed price of procedures and not what insurers actually pay for them. Established hospitals that benefit under the current system do not seem to be interested in showing patients their real prices.

Indeed, nearly every state's transparency policies received an F grade from the 2014 Report Card on State Price Transparency Laws.

If APCDs aren't the answer to price transparency, what is?

When it comes to informing patients, no one does it better than hospitals that make transparency part of their business model. In Oklahoma City, the Surgery Center of Oklahoma posts the price of every service they render online. The Surgery Center's cofounder and head Anesthesiologist, Dr. Keith Smith started the facility to provide an affordable alternative to the current system that obscures prices and fleeces patients:

"It makes me mad that a lot of people are bankrupted by our current healthcare system when many times the costs are completely unjustified."

For 15 years, Dr. Smith and the Surgery Center's 40 surgeons have provided care at a fraction of the cost of their competitors. Surgery Center patients pay 30% to 80% less for services than those performed in Wyoming. For example, a hip replacement here costs $28,208 compared to just $19,400 at the Surgery Center. Imagine if we enjoyed those savings.

After seeing Dr. Smith's success, providers are following his example and educating patients on what they're paying for. One health plan administrator, the Kempton Group, developed a network of 29 facilities across five states that make shopping for medical care as easy as logging onto Amazon.

Wyoming should welcome physicians looking to bring this kind of price sanity to our healthcare system and not impose faux transparency mandates on providers that have failed in other states.