Once a closely-held competitive secret, hospital prices are beginning to shake loose from the grips of healthcare executives in the wake of last week’s unprecedented move by the federal government to publicly share what hospitals bill Medicare for the most common diagnoses and treatments.
The data dump revealed that hospitals across the country, and even in the same communities, charge the government wildly different amounts for the same care, and they receive varying reimbursements from Medicare in return.
While prices for private insurers still remain secret, South Florida hospital executives and industry experts believe more will be revealed as federal healthcare reform rolls out next year — giving consumers more information to decide where to seek medical treatment and creating greater competition in the market.
Steve Sonenreich, chief executive of Mount Sinai Medical Center in Miami Beach, made a public pledge Monday to divulge the contractual rates the hospital charges private insurers for diagnoses and treatments.
“We will post our prices relative to Blue Cross, and Aetna, our contractual prices, and we’ll challenge Baptist and the other systems in the community to do the same,’’ said Sonenreich, who made his pledge during a studio interview on WLRN 91.3-FM with host Tom Hudson.
Also in the radio studio was Brian Keeley, chief executive of Baptist Health South Florida, which manages seven hospitals in the region. Keeley declined to accept Sonenreich’s challenge for price transparency, but acknowledged “That’s where the whole industry is going, undoubtedly.”
By making public the varying hospital charges billed to Medicare, the Obama administration said it hoped to increase transparency from healthcare providers and give consumers the power to be smarter shoppers.
For years, hospitals and government agencies have reported patient satisfaction rates, quality of care measures and other data designed to help consumers.
But for most individuals with health insurance, hospital prices do not affect their decisions because they can only see a doctor in their network, and that doctor has staff privileges at certain hospitals, said Sal Barbera, a former hospital chief executive and now a Florida International University professor of health services administration.
However, Barbera said, “Once this stuff becomes more public, it will have an impact because it’s going to focus attention on it, and hospitals are going to start being accountable.’’
As healthcare reform changes the way consumers pay for insurance coverage, prices will become a bigger factor in consumer decisions, said Steven Ullmann, a professor of health management and policy at the University of Miami.
“We’re moving more from co-pays to co-insurance, which means that instead of paying a dollar amount for an MRI, say $100 out-of-pocket, now they’re moving it toward a percentage of the price, so you might be paying 20 percent,’’ Ullmann said. “So 20 percent of a $1,000 MRI is going to be really different in terms of out-of-pocket costs versus a $3,000 MRI.’’
Another change happening with insurance, Ullmann said, is a move toward high deductible plans, or “consumer driven healthcare,’’ in which patients are responsible for paying a pre-agreed amount of the costs before the insurance kicks in.
“That’s a growing trend in insurance policies,’’ Ullmann said, “moving from a defined benefit to a defined contribution plan, much like with pensions. As a result, because now the person is going to be responsible for, say, the first $1,500 of costs, and then the insurance kicks in, the premiums for those insurance policies is going to be very low.’’
That’s also likely to spur consumers to shop around more since the first chunk comes out of their pockets, he said.
In South Florida and across the country, few if any hospitals publish prices for medical treatment. But some indicated they were intrigued by Sonenreich’s challenge.
Jackson Health System does not publish prices, said spokesman Ed O’Dell, but Miami-Dade’s safety net hospital for the poor and uninsured is open to the idea.
“Jackson sets the standard for transparency,’’ O’Dell said in a prepared statement. “We are always interested in new ways to share information, and we will explore this idea.’’
Memorial Healthcare System, which manages six hospitals in Broward, has published prices online and in marketing materials to promote imaging services, said Kerting Baldwin, a spokeswoman. But Memorial does not publish prices for diagnoses and treatments.
It was unclear from her written statement whether that might change: “Memorial Healthcare System has historically demonstrated transparency in the reporting of its finances, quality, safety and patient satisfaction data. Transparency in hospital pricing will be no different.’’
Baptist Health’s urgent care centers post prices for services, Keeley said, but the hospitals within the system do not.
Keeley said he worries that dumping raw prices on consumers would be more confusing than helpful because the prices Baptist Health charges private insurers are based on formulas different from the way the government reimburses hospitals.
“The problem with the pricing is it’s so convoluted,’’ he said. “It’s all pre-negotiated rates based many times on an aggregate number of per-stay, per-diagnosis or per-day, not broken down piecemeal.’’
The complexity of hospital prices may be one reason that information has not been divulged before.
When a patient asks a hospital the price for open heart surgery, the hospital might be able to give that person a ballpark range but not an exact amount because physicians don’t know how long that person will be in the operating room, or how many gauze pads they’ll need, or what equipment may be required.
Keeley said many hospitals have begun to “bundle” prices to include the charges that go into the total cost of treatment. Baptist Health’s urgent care centers already do this, he said.
Sonenreich has yet to say exactly what pricing information Mount. Sinai will reveal to the public, explaining that the hospital bills private insurers according to negotiated rates, sometimes at a per diem rate, sometimes as a percentage of cost.
He said he intends to meet with Mount Sinai’s executive team and decide what information to publish, most likely online and in a way that is “easily understandable for the public.”
Sonenreich said he’s not worried about losing a competitive edge by publishing Mount Sinai’s prices : “We’re already the lowest price.’’
Like officials in the Obama administration, Sonenreich argues that price transparency among hospitals of similar quality will lead to lower healthcare costs. Without naming names, he accused some South Florida hospitals of driving up costs by leveraging their market position to extract higher fees from private health insurers.
But by charging higher rates, Sonenreich said, these hospitals force private insurers to negotiate lower rates of payment with other hospitals for the same procedure.
“When you have a large hospital system that has leverage because of their location in the marketplace,’’ Sonenreich said, “they’re able to command much higher payments from insurance companies than hospitals that do not have that type of market clout.”
That leads to higher costs for employers and higher premiums for employees, he said.
Ullmann said health insurance companies are willing to pay a premium to contract with providers favored by their members.
“They know the ones that patients in their member group are going to indicate or perceive they need,’’ he said. “Hospitals know that, and are able to negotiate better rates for themselves. It’s basically market power. If you have a need for something, the price negotiated is going to be higher.’’
If insured patients assume responsibility for a greater share of those costs, though, then their decisions — based on publicly available hospital prices — also will have a market effect, said Ullmann, the UM healthcare management professor.
“If this trend continues,’’ he said, “then that will start to put downward pressure on certain prices.’’