In our New Year’s note, we highlighted some of the major health care policy themes that we expect to pre-occupy this Congress and the White House. One of those themes is a renewed emphasis on market competition and patient choice. The Trump administration’s approach marks a significant departure from the last 30 years of health policy which can best be characterized as academic, with an emphasis on changing supply side behavior. Accountable Care Organizations, for example, spring from the work of Dr. Elliot Fisher at Dartmouth College. All of it is very interesting but very little of it caught fire with your average health care consumer.
The Trump administration is trying a different approach designed to influence consumer instead of provider behavior. Through a variety of policies, the administration is seeking greater transparency around prices and services, which they believe will educate and perhaps even empower the consumer.
Nothing gets an American consumer’s attention quite like price, so the Trump administration required, effective Jan. 1, 2019, hospitals to post their “standard charges” in machine readable format on their website. The requirement conceded that the “standard charges” could be the hospitals’ chargemaster, or some other price list.
To be fair, the Obama administration, as part of the ACA, required hospitals to make their prices available. That requirement was generally honored through a printed brochure handed to a patient when requested. Not surprisingly it had a limited influence on price discovery or comparison for health care consumers.
Required price disclosure has been panned by the health care industry which notes that prices are negotiated between insurers and providers and no one pays the “standard charge.” Certainly, in the near term, price disclosure is not likely to have an impact on consumer behavior. At the moment there is no standard language for describing procedures, making it difficult to decipher price lists.
For example, Vanderbilt University posts MS-DRG 775, Vaginal Delivery w/o Complicating Diagnoses with a price tag of $14,252.16. Meanwhile, just down the street at HCA’s flagship TriStar Centennial Hospital, a Delivery, Level I is $3,309.17 and Labor 0-4 hours is $3,309.17 for a total cost for L & D services of about $6,620 dollars. St. Thomas Midtown, also in the immediate neighborhood, lists “Vaginal Delivery” at $559.59 and the initial hour in the Labor Room at $207.21. Each additional 30 minutes in the Labor Room are billed at $43.54.
(In all cases there are other charges such as supplies like IVs and sutures, as well as drugs.)
However, we expect it is only a matter of months before HCA or another provider points out to the public that having a baby at their hospital appears to be cheaper than at the one down the street. Will their claims be entirely accurate? Who knows? The price paid is, as the industry has pointed out, negotiated between the provider and the insurer.
Will it matter? Most procedures are performed at the location recommended by a patient’s physician. However, if competing providers make price an issue and raise awareness about alternatives, then publicly disclosed list prices are more likely to reflect actual prices for the typical consumer.
In the process, which we expect will take less time than we would have imagined a few years ago, companies the CSLT may suffer collateral damage as price transparency becomes democratized.
And yes, the Hedgeye Data team is all over this new treasury trove of data. Stay tuned for what we find in the mine.