By Stacie Beck, Guest Contributor
Who would start a home renovation project or get car repairs without having at least an idea of the cost? We need to know what to expect. Perhaps we would also like to find alternatives and determine what those would cost. But have you ever tried to find out, in advance, the cost of a medical procedure, such as a hip replacement or a diagnostic test, such as an MRI?
The health care industry makes it almost impossible for patients to shop around for the best value for non-emergency, routine medical care. This lack of price competition is one of the key reasons the cost of health care keeps spiraling upward. Providers who are more efficient can provide more value for the money and/or equal value for less money. Price competition signals and rewards that efficiency, eventually leading the industry to better outcomes and lower costs. But this does not happen when there are barriers to entry into the industry. Delaware state government’s Certificate of Public Review (CPR) is one such barrier.
Price Transparency in Delaware
Thanks to the federal government, hospital price transparency is beginning to arrive in Delaware. In 2021 the Center for Medicare & Medicaid Services (CMS) issued regulations that hospitals must post prices in two separate ways. One is a machine-readable (flat) file and the other is a consumer-friendly price estimator tool. The price estimator tool must include 70 specific procedures, common across hospitals. The theory is that, if a patient wants to compare the price of a procedure between hospitals, and it is one of the 70 shoppable services, the patient should be able to do so. That process is so difficult for Delaware hospitals that we won’t even address the multitude of procedures that are not required to be shown.
Recently, CMS has determined that hospital machine-readable files are under-utilized. It is now updating its regulations to improve hospital compliance (currently below 50% according to some surveys), and require use of a common coding language, format and data headings. CMS is also pushing the health care industry to comply with the price reporting requirements in the No Surprises Act (2021), which requires providers to give a good faith estimate (GFE), before a procedure, of the cost of care to an uninsured cash-paying patient and an Advanced Explanation of Benefits (AEOB) to insured patients. Implementation has been slow.
A previous survey reported on the results of a search of Delaware hospital websites. All had the price estimator tool, although it was difficult to find, and the link, often at the bottom of the front page of their website, is sometimes in microscopic font. They include the 70 shoppable services, but it is difficult to compare procedures across hospitals. Most qualify the cost may not include all the costs, but do not specify what costs are not included in specific procedures. Fonts and programs differ between providers, and one large Delaware hospital uses non-CMS-approved coding.
Market-wide health cost information is useful for patients to get a general estimate of what the final cost of care will be. Medical care providers typically do not disclose prices until after a procedure is completed, which can result in significant price discrepancies between what the patient may expect from market-wide price websites and the final bill. The practice of disclosing costs after the service is provided is almost unique to the medical community and needs to be changed to allow consumers to accurately make decisions regarding their medical care.
Price Competition in Delaware
Delaware has high hospital costs relative to other states.
The Certificate of Public Review (also known as a Certificate of Need (CON)) requires a new healthcare provider to establish that there is a need for additional capacity or new services before a certificate is granted to build additional health care facilities or make major equipment purchases. The federal government ended the incentive for states to establish CON programs in 1987, and the Federal Trade Commission and the US Department of Justice make a strong case for their elimination, finding instances of anti-competitive behavior by health providers.[1] A CON is equivalent to denying a grocery store a permit to build because there is already an adequate grocery store in the area. A new, more efficient store may be able to underprice existing stores or provide better quality produce but could be kept from consumers by the less efficient stores. Even the threat of a new store will force existing stores to become more efficient. However, we have medical providers in Delaware deciding if their competition will be allowed to compete. Studies repeatedly find the CON can reduce the quality of care and raises prices.[2]
Patients need to know the self-pay (cash) prices, insurance plans that are accepted, and billing codes for procedures. Even if providers are unsure of the ultimate cost, at a minimum they should be able to quote a standard initial consultation cash price and the billing code to every patient. Many procedures are routine and predictable, and while providers may not know the specifics of each patient’s insurance coverage, they do know the prices they charge uninsured and out-of-network patients.
Further, hospitals and other providers should be required to give prices for more complex, non-emergency procedures. It may be difficult, but it is not impossible. The Oklahoma City Surgery Center provides prices for a variety of surgical procedures. These are for self-paying patients are all inclusive for cases without complications. Some states, including California, Illinois and New Hampshire, have taken steps to improve pricing practices in health care, and require hospitals/surgery centers/physician’s practices to post prices for common inpatient or outpatient procedures. A number of states (FL, MN, MA, CT) require hospitals and/or surgery centers to provide cost estimates upon request. Two states (TX, CT) require hospitals to provide cost estimates to patients who are uninsured or out-of-network, apparently regardless of request. [3] Texas requires that patients must be informed if services are from a provider that is out-of-network for that patient’s insurer.
Price/Cost Availability in Delaware
Currently no Delaware laws require health care providers to post prices, give cost estimates, or provide billing codes. Nor is there a requirement that providers list the plans that they accept. In an informal survey of the websites of major hospitals/hospital chains in Delaware, we discovered one that, with sufficient persistence, yields a phone number to call for cost estimates. One website has a Consumer Guide, but a login name and password are required. Two (with plenty of clicking around) reveal offers to make ‘arrangements but no dedicated phone number. One lists accepted insurance plans but no way to secure a cost estimate. There is one standout: a southern Delaware facility posts both procedure prices and billing codes on its website.
In an admittedly unscientific survey of nine Delaware primary care, walk-in and urgent care clinic websites, none quote an initial consultation fee for self-payers. Only one offers to quote over the phone and is willing to provide cost estimates (only in person however). Several list accepted insurance plans. With the spread of high-deductible insurance plans, health savings accounts and non-insurance, it is difficult to believe that patients do not need this information.
The solution to these problems is to model Delaware’s law, in part, after existing Delaware laws for other industries. A hired contractor or auto mechanic must provide an itemized list of costs to the customer before doing any work. The customer is entitled to this list by law, and the final price listed on this bill is the agreed upon price the customer will pay for the service provided. A similar approach to healthcare is a much more straightforward method for pricing. It is not unreasonable to expect that a fairly accurate estimate could be made, and, like other services, could be amended when unforeseen problems develop. This policy, along with a posted initial consultation fee, would go a long way toward removing the fear many self-pay health care consumers have when going to the doctor that they will end up being charged an amount massively greater than expected.
For insured patients, providers should be required to provide billing codes for the initial consultation and any foreseeable procedures to patients who can then contact their insurers directly. Insurers should be required to provide a hotline or website so that patients can get quotes quickly. As in other states, patients should be informed whether any providers involved in their care are out-of-network. Finally, since insured patients are almost always required to sign a statement accepting ultimate responsibility for bills not paid by insurance, a medical bill should include a specified price or maximum cost, beyond which there is no liability for the patient.
Conclusions
Two problems have been identified here. One is the need to require providers and insurers to post their self-pay prices and/or the billing codes of standard procedures and consultations. The second is to make patients aware that they have a right to this information and to make it accessible to them. Unlike other states, Delaware should require providers give this information to patients or sign a statement that the patients waive their right to it.
Consumer protection laws already exist in Delaware for other industries, such as construction and auto repairs. Given the evolution of the health care industry toward patient-directed care, high deductibles, health savings accounts, self-payers and narrowing insurer networks, laws are needed in health care to protect patient consumers. Other states have taken steps toward this. Delaware should learn from their experience and act to fill this gap, promote health care price transparency, and adopt and enforce disclosure laws consistent with existing federal law.
Stacie Beck is an Associate Professor of Economics at the University of Delaware.
[1] Joint Statement of the Federal Trade Commission and the Anti-Trust Division of the US Department of Justice to the Virginia Certificate of Public Need Work Group, October 26, 2015.
[2] See National Conference of State Legislatures at www.ncsl.org/research/health/con-certificate-of-need-state-lasws.aspx and Mitchell, Matthew “Do Certificate-of-Need Laws Limit Spending?” Mercatus Working Paper, September 2016.
[3] National Conference of State Legislatures www.ncsl.org accessed June 21, 2017.
