Letter to the editor regarding "Medical costs: incomprehensible and unsustainable"

TO THE EDITOR:

A recent editorial was dedicated to the incomprehensible and unsustainable medical costs prevalent throughout the nation today.¹

For the first time, the government is publically revealing how much hospitals charge, and the differences are astounding: some bill tens of thousands of dollars more than others for the same treatment, even within the same city.² These massive pricing differentials are too large to be explained by obvious differences among hospitals, such as a more expensive regional economy, older or sicker patients, or the extra costs of running a teaching hospital. This is particularly evident when we consider that hospitals in the same city as well as hospitals with similar levels of prestige charge profoundly divergent rates. At the Beth Israel Medical Center in New York, the average charge to treat a blood clot in a lung is $51,580. Down the street at the NYU Hospitals Center, the charge for the same care would be $29,869. At the Mayo Clinic in Minnesota, the list price is $16,861.

Medicare pays hospitals on its own fee schedule that isn’t based on these charges, and the insurance companies routinely negotiate discount rates. But patients who are uninsured are billed the full amount. The Obama administration hopes that releasing the information, at the website www.cms.gov, will pressure some hospitals to lower their charges.

The Dartmouth Institute for Health Policy has long found wide geographic variation in Medicare payments for the similarly ill, yet people who receive more expensive care don’t necessarily receive better care.³ Besides the regional variations, the application of unnecessary testing and treatments can dramatically and unnecessarily increase medical costs.

In all hospitals, from low-level community hospitals to high-powered academic centers and massive health care systems, a patient’s bill of rights is proudly displayed. It generally recounts a patient’s right to equal medical care independently of the patient’s race, gender, religion, and sexual preferences. However, patients, as consumers, are entering into a mystifying system that too often leaves them with little way of knowing what a hospital will charge or what their insurance companies are paying for their treatments. Thus, patients are deprived of the knowledge [ . . . ] of the price of tests, procedures, and consulting fees. Patients should be fully aware of the costs of tests, procedures, and consultative services and have the right to decline them after proper counseling.

Furthermore, protecting the patient’s rights as a consumer of medical products and services is particularly important because [ . . . ] patients, due to the nature of medical treatment, generally do not have the ability to compare prices with those of other institutions offering the same services. While a customer looking for a car might go to 3 or 4 stores to get the best price, the patient seeking treatment will often not have this same opportunity for obtaining medical care. At very least, patients should have the opportunity to be fully informed of the pricing and cost effectiveness of their different treatment options to be able to make a fully informed decision.

A hospital’s charges are akin to a car dealership’s “list price.” Hospitals say they frequently give discounts to the uninsured: $41 billion in financial aid in 2011. But some people pay full price because they don’t know they can seek a discount and even for those who do bargain, the listed charge “is the opening bid in the hospital’s attempt to get as much money as possible out of [the patient and his/her family].”²
 

Boris Petrikovsky, MD, PhD

Chief, Maternal-Fetal Medicine, New York Downtown Hospital

New York, New York

References

1. Lockwood CJ. Medical costs: incomprehensible and unsustainable. Contemporary OB GYN. 2013;58:6-9.

2. Cass C, Neergaard L. High hospital bills go public, but will it help?  May 8, 2013. http://news.yahoo.com/high-hospital-bills-public-help-211625086.html. Accessed July 12, 2013.

3. Skinner J. Dartmouth Institute for Health Policy and Clinical Practice responds to Reschovsky et al. May 29, 2013. http://tdi.dartmouth.edu/press/updates/dartmouth-institute-for-health-policy-and-clincial-practice-responds-to-res. Accessed July 12, 2013.

IN REPLY:

I thank Dr. Petrikovsky for his passionate commentary on my recent editorial. Clearly the Accountable Care Act (ACA) embodies his call for a hospital pricing “Bill of Rights” by requiring transparent pricing information.¹

However, while I am sympathetic to his arguments, in the absence of high deductibles and copays, it is unlikely that most consumers will avail themselves of this information. Moreover, while the intent of this ACA provision is to create market discipline and curb healthcare price inflation, our more libertarian readers might contend that it is the consumer’s job to look out for himself or herself (caveat emptor) and that such price comparisons are one of the reasons for purchasing health insurance in the first place. That is because insurance companies actively negotiate with providers for discounted prices and would rarely tolerate such extremes in the price they paid to comparable providers in the same area for treating similar patients in similar fashions.

Finally, while the Dartmouth Institute for Health Policy’s findings on regional variations in pricing are oft touted, it must be pointed out that at least some of this cost variability, if not all of it, is due to regional variations in population health (i.e., sicker patients cost more to care for).²

Thanks again for your comments.

Charles J. Lockwood, MD, MHCM

Editor in Chief, Contemporary OB/GYN

References

1. American Hospital Association. Hospital price transparency. http://www.aha.org/content/13/13-hosppricetransp.pdf. Accessed July 12, 2013.

2. Harris G. Report cited by Obama on hospitals is criticized. February 17, 2010. http://www.nytimes.com/2010/02/18/health/policy/18dartmouth.html?_r=0. Accessed July 12, 2013.