John Locke Update / Research Newsletter

A Push For More Health Care Price Transparency

posted on in Health Care

View in your browser.

While Obamacare continues to flood the health care sector with more taxes and mandates, it’s simultaneously driving insurers and health care providers to increase price transparency. Because the law’s pricey regulations are either driving employers to push more benefit cost sharing onto employees or release them to find coverage in the individual marketplace  (which features a plethora of high deductible health plans), knowledge of  upfront costs is in greater demand.   

This explains why Blue Cross and Blue Shield of North Carolina’s publicly accessible treatment cost estimator tool made its debut last month. As mentioned in last week’s newsletter, regardless of whether you have a BCBS card, anyone can now compare costs for more than 1,200 procedures in any zip code across the state. According to the Charlotte Observer, it’s attracted over 8,000 unique visitors and counting along with some national press. Medical providers can also take a peek at how their competitors negotiate with the middleman.

There are some important disclaimers to mention, however. Some of the prices posted on Blue Cross and Blue Shield’s cost estimator are misleading, as the lowest may not include the costs of anesthesia, drugs, medical supplies, or other professional fees for some procedures. Prices may also vary depending on location, complexity of the procedure, and patient health status.

Of course, price alone isn’t necessarily the deciding factor when getting an x-ray or going under the knife. Quality metrics and physician credentials need to be considered, too. But it’s pretty clear that patients can access outpatient medical care at a fraction of the cost in stand-alone settings compared to larger non-profit health systems that pass on hefty facility fees or artificially raise prices to cross subsidize the losses accrued from indigent care.

On the national front, promoting price transparency has been tried for over a decade in both the private and public sectors. Tina Rosenberg at the New York Times wrote an excellent article a couple years ago on the increasing number of cost comparison websites. The article also features the Surgery Center of Oklahoma (SCO), an outpatient facility that displays total bundled payment for all services, which is the same for patients of all ages and health statuses. Its direct care business model and bargain prices have attracted people from all over the map. In fact, numerous patients in surrounding states have leveraged SCOs prices to negotiate lower rates with their local hospitals.

The National Conference of State Legislatures also provides a state-by-state breakdown of laws that push health care entities to take on more of this responsibility. In 2013, North Carolina received accolades from the Washington Post for passing its Health Care Cost Reduction and Price Transparency Act. The law states that the Department of Health and Human Services will publish cost data from hospitals and ambulatory surgery centers on the most common inpatient, surgical, and imaging services that include a breakdown of each hospital’s infamous chargemaster rates and reimbursement from Medicare, Medicaid, and the five largest insurers.

Implementation is supposedly underway, and the first wave of data was due to DHHS just last week. Interestingly enough, however, you will still come across a lot of "no data available" when searching the site. Apparently hospitals and outpatient centers are questioning a substantial fee that is being imposed on them by Truven Health Analytics, the data processing company responsible for collecting the necessary codes.

Moving forward, state legislators should leverage the discussion of price transparency to push for Certificate of Need reform this legislative session.  This will allow for the establishment of physician-led ambulatory surgery centers and allow physician offices to offer more diagnostic services without the need for state permission. Over 70 percent of the 635,000 annual surgeries in North Carolina are performed in outpatient settings, and 70 percent of these surgeries are conducted in the highest cost hospital systems. Meanwhile, North Carolina is the only state in the nation that requires physician offices to gain a CON for providing diagnostic services over a monetary threshold of $500,000. The fact that the state’s Division of Health Service Regulation suppresses a freer health care sector ultimately denies patients choice and lower health care costs.  

Click here for the Health Care Update archive.

You can unsubscribe to this and all future e-mails from the John Locke Foundation by clicking the "Manage Subscriptions" button at the top of this newsletter.

Katherine Restrepo is the Director of Health Care Policy at the John Locke Foundation. Before joining the John Locke Foundation, she interned at the Cato Institute under the direction of Michael Cannon, Director of Health Policy Studies. Katherine’s… ...

Donate Today

About John Locke Foundation

We are North Carolina’s Most Trusted and Influential Source of Common Sense. The John Locke Foundation was created in 1990 as an independent, nonprofit think tank that would work “for truth, for freedom, and for the future of North Carolina.” The Foundation is named for John Locke (1632-1704), an English philosopher whose writings inspired Thomas Jefferson and the other Founders.

The John Locke Foundation is a 501(c)(3) research institute and is funded solely from voluntary contributions from individuals, corporations, and charitable foundations.