I Like Transparency, Don’t You?

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Transparency: the ability to transmit light through a substance so that bodies situated behind it can be seen.

Or, in relation to health care, the practice of transmitting or disclosing all fees associated with a medical procedure.

Is providing the cost of services truly that difficult in the medical field? Let’s ponder this for a moment. When someone has a medical procedure, it doesn’t take long for the provider to generate an invoice.  So the question becomes: if providers are able to fairly quickly process charges after a procedure, why can’t patients have the same information in advance?

In order to help address the transparency issue, a number of states across the nation have enacted legislation requiring the health care industry to provide patients with access to pricing in advance of receiving services.  Unfortunately, despite new regulations, the results have been poor.

As a matter of fact, the Catalyst for Payment Reform and the Health Care Incentives Improvement Institute recently released an annual 50 state report card which highlighted that 45 states received an F grade in medical price transparency.  In an era when patients are becoming increasingly more responsible for medical costs, many view this year’s report card as an issue.

Massachusetts, a state viewed as a leader in price transparency, enacted legislation in 2012 that eventually became effective in 2014. The Pioneer Institute, a Boston based public policy research center, conducted a simple survey to evaluate the effectiveness of the new Massachusetts law. [1]

The objective of the survey was to determine the level of difficulty in obtaining the price of an MRI on the left knee. Here are the results:

  • A Pioneer representative’s phone call was transferred 6 to 7 times before someone was able to help with pricing.
  • In some cases, a caller had to contact a third-party organization.
  • Not all providers disclosed that there is a cost for the MRI itself and another cost for reading the MRI.
  • Some providers required a diagnostic code prior to releasing pricing information. (Requiring a diagnostic code is in conflict with Massachusetts law.)
  • It took anywhere from 10 minutes to 7 business days to obtain pricing information.
  • The cost of the MRI ranged from $700 to $8,000

The results of the survey were, to say the least, disappointing.  Transparency is critically important to the approximately 20% of Americans – mostly middle class – who are enrolled in high deductible health insurance policies (with deductibles ranging from $2,000 to $6,500).

If costs for services were available prior to treatment, consumers would likely be motivated to shop for the best price, which would effectively lower their deductibles and potentially save thousands of dollars.  Take the more than 1,000% variance in price for the MRI: it is highly probable that if given the choice, the patient would choose the MRI for $700 rather $8,000.

Unsurprisingly, the public policy group Public Agenda found that 74% of people with deductibles over $3,000 attempted to uncover pricing information.

With health care costs projected to grow at 6% per year, services are just going to get more expensive.  Under this assumption, in 2016, that MRI will escalate from $742 to $8,480.

As a larger number of Americans adopt high deductible coverage, it becomes even more important to provide patients with the ability to evaluate options, which should translate into more competitive pricing today and in the future.

Let’s face it: the time has come for the health care industry to disclose all fees associated with medical procedures.