Bill would put surgery costs in patients’ hands

05/08/2006

Some worry ‘transparency’ will encourage consumers to choose by price, not quality

BY JEREMY OLSON
Pioneer Press

Estimates are commonplace for bodywork on cars. Soon they may be available for bodywork on humans.

Minnesota lawmakers are considering legislation that would make the cost of health care “transparent,” so that people could shop around. The approach is irrelevant for patients suffering heart attacks or other emergencies, but patients in need of hip replacements or elective procedures could take the time to review estimates and select the hospitals with the best deals.

“Some of the differences in price are very significant,” said Rep. Tim Wilkin, R-St. Paul, author of the bill that was approved by the House last week.

The public demand to know health care pricing has increased after a decade of rising costs. Many consumers pay high deductibles or co-insurance payments, while others have enrolled in new consumer-directed plans that make them responsible for the costs of their care. The concern is that some patients might overlook quality while searching for the best price.

The Minnesota Hospital Association will unveil in October a Web site that will list hospital charges for the 50 most common procedures. The proposed legislation expands the concept, requiring hospitals and outpatient surgical centers to provide estimates when patients request them for any procedure. Insurers, pharmacists and doctors would be required to provide cost information as well.

“In earlier years, perhaps, it wasn’t as important,” said Mike McKim of PreferredOne, a local benefits administrator. “As long as I could pay my $10 co-pay, that was all I cared about. The sky was the limit after that, and it was between the insurance company and the doctor. Well, that’s changing.”

Pricing hospital care is far more complicated than choosing bread at the grocery store. Hospitals establish basic charges for procedures, but those amounts are discounted through negotiations with health plans. Patients have varying co-payments and out-of-pocket expenses as well. Costs for procedures also vary when patients have chronic illnesses, allergies or other complications.

The legislation allows hospitals some discretion about how they reveal costs. They can give estimates based on the full price or on the price after insurance discounts. The bill also requires insurers to disclose their reimbursement amounts so patients can determine their out-of-pocket costs.

Leaders of Minnesota’s hospitals, clinics and health plans generally support price transparency but have varying responses to the state legislation. Some critics argue that patients won’t be able to compare prices if the legislation allows hospitals to use different methods for their estimates. Others worry that cost will trump quality.

The vaunted Mayo Clinic, for example, has been penalized by some “tiered” insurance plans that give consumers financial incentives to select hospitals that provide cheaper care.

High cost doesn’t always mean high quality, though, and sometimes reflects inefficiency and waste. Several studies have shown that the federal Medicare program is paying more money per capita to states that score lower on measures of health care quality. Low cost doesn’t ensure high quality, either.

“It’s important that people have price information, but you really need to have quality information to go along with that,” said Sara Collins, who has studied transparency on behalf of The Commonwealth Fund, a national health policy organization.

Minnesota has several sources of information on health care quality, including Web sites that evaluate hospitals (http://www.mnhospitalquality.org) and clinic groups (http://www.mnhealthcare.org).

Price information is just starting to reach the public, mostly through insurers. PreferredOne provides average costs by clinic for its members via its Web site. Medica lists prices for common procedures, though only if hospitals volunteer the information. Blue Cross and Blue Shield of Minnesota doesn’t provide actual costs but uses its financial data to rank hospitals by their prices.

While PreferredOne officials support the legislation, a Blue Cross executive said a state mandate to provide cost information might distract health care organizations from providing necessary quality information as well. An Ohio insurer recently released pricing information, and consumers didn’t find it useful, said MaryAnn Stump, Blue Cross’ vice president for strategic and consumer innovation.

“It isn’t one without the other,” she said.

Republican lawmakers initiated the transparency proposal, but the House gave it broad support in a 132-0 vote. The bill also includes a range of insurance regulations. The Senate version doesn’t include the transparency language, so its fate may be determined in a conference committee of House and Senate leaders.

Commonwealth’s Collins said cost information for a specific procedure could be deceptive. A hospital might charge more for a surgery, but if it does a better job, then patients won’t pay as much in follow-up care.

“What people really need to know is the expected total out-of-pocket costs from the beginning of their treatment to the end of their treatment — not just the price of individual services,” she said. “I don’t think just knowing the price of an anesthesiologist is that helpful in making decisions.”

Health Care Pricing in Minnesota

The cost of health care is gradually becoming more transparent to consumers, but state legislation would accelerate that process. Here is what the legislation would require:

Doctors already must report average charges and insurance discounts for 20 common procedures. The legislation would increase that list to 50.

Hospitals would provide estimates to patients for any procedures, regardless of whether they are common. The legislation gives hospitals latitude in providing an estimate. They could provide their average charge or the adjusted charge after factoring in insurance discounts.

Pharmacists would provide their average charges to dispense a drug and account histories for customers, including the total amounts they have spent.

Insurers would provide consumers with estimates of how much they would reimburse specific providers for health care services.