Electronic Health Reporter

Guest post by Dr. Andrew Agwunobi, leader of the Hospital Performance Improvement practice at Berkeley Research Group.

One symptom of the complexity of hospitals is our inability to give consumers upfront prices for procedures and services. In May 2006, Mike Leavitt, then Secretary of the Department of Health and Human Services, wrote an Op Ed in which he observed:

“Americans know the price of almost everything they pay for, except for one of the most important things they pay for — their healthcare. With a point and click, they can find the price of anything from clothes to cars. Yet they don’t know what they are paying for healthcare and what sort of quality to expect in return.”

He was right. In 2005 as part of a California Healthcare Foundation study 622 people posing as patients visited 64 hospitals to determine how easy it was for consumers to obtain information on hospital prices. Most of these “mystery shoppers” were bounced from one department to another as they sought answers. The authors of the study reported:

“Hospital employees gave various reasons why they could not provide shoppers with a price. Frequently they said the shoppers had been sent to the wrong department; sometimes they cited the lack of a diagnostic (CPT) code, and occasionally, the employees claimed it was against hospital policy to give out prices. On some occasions the employees gave no reason at all.”

These mystery shoppers had to endure multiple telephone transfers, voice mail messages, long hold times, conflicting price information, and repetitive questioning. One shopper documented 17 points of contact in her quest to receive a price for a procedure. The report concluded:

“Obtaining a price depended primarily upon luck and persistence.”

So what are hospitals doing about it? Well nothing or at least nothing voluntarily. More than 30 states have passed laws aimed at making hospitals post prices, but the level of disclosure required and the results are mixed. For example, a 2005 South Dakota law requires hospitals to send charge information for their top 25 diagnoses to the South Dakota Department of Health. The department then posts the charges on its website. But what South Dakota hospitals submit are not “prices” in the sense any regular shopper would understand. They are historical averages, and median amounts that these hospitals have charged patients in the past; there is no guarantee, that these charges will be anywhere near the amount the hospitals will charge new patients. Also the amounts listed are incomplete: they do not include charges for physician treatment and some other services related to the care. Finally the hospitals provide care for well over 500 diagnoses but are only required to post charges for 25 of them.

Hospitals in California are no better. In 2009 a study was conducted to assess the effectiveness of a 2005 California law (AB 1045) requiring that hospitals disclose the 25 most common outpatient procedures and services. The study surveyed 353 California hospitals and concluded:

“The current legislation fails to meet its objective of enabling uninsured patients to compare prices for hospital-based healthcare services.”

So what’s the answer? Unfortunately, healthcare reform’s existing requirement that hospitals post “standard charges” won’t get us there because it’s the same old approach.  The only solution is for the hospital industry to commit to a deadline for posting upfront prices-not historical charges- for all their services. Hospitals must also commit to honor those prices despite unforeseen complications; shoppers don’t allow Walmart or other retail stores to adjust their prices at the check-out counter. Patients shouldn’t allow hospitals to do so either. Also to be meaningful, the posted prices must include all the amounts the patient is expected to pay related to that episode of care.

None of this is easy. It will take leadership-courage, creativity, collaboration with physicians, and the adoption of innovative technology on the part of hospital managers. But it is definitely doable despite hospital complexity. If we in the U.S. can put a price on a gallon of gasoline, a price that depends on multiple factors including crude oil extraction costs, level of instability in the Middle East, OPEC cartel rationing, refining costs, storage costs, distribution and marketing costs, U.S. excise taxes, and gas station markups, we can price a hip replacement surgery.

Dr. Andrew Agwunobi is a leader of the Hospital Performance Improvement practice at Berkeley Research Group. Prior to joining BRG, Dr. Agwunobi served as chief executive of Providence Healthcare, a five-hospital region of Providence Health & Services in Spokane, Washington. He previously held the positions of president and chief executive officer of Grady Health System in Atlanta; president and CEO of Tenet South Fulton Hospital in East Point, Georgia; chief operating officer of 14-hospital St. Joseph Health System in California; and secretary of the Florida Agency for Health Care Administration. Dr. Agwunobi has also served as chief of the Main Pediatric Urgent-Care Department for Harvard Vanguard Medical Associates in Boston. 

A board-certified pediatrician, Dr. Agwunobi received a master of business administration from the Stanford Graduate School of Business. In 2003, Tenet Healthcare awarded Dr. Agwunobi its “CEO Circle of Excellence” award. In 2005, Dr. Agwunobi was named one of the “100 Most Influential Georgians” by Georgia Trend Magazine. In 2007, Dr. Agwunobi was named one of the “50 Most Powerful Physician Executives” by Modern Healthcare magazine.

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I) Leavitt, Mike. “Transparency in Healthcare a Priority.” The Hill [Washington D.C.] 10 May 2006: 1-2. Print.

2) Farrell MD, Kate S., Leonard J. Finocchio DrPH, Amal N. Trivedi MD, MPH, and Ateev Mehrotra MD, MPH. “Does Price Transparency Legislation Allow the Uninsured to Shop for Care?” J. Gen Intern Med (2009). Society of General Internal Medicine, 21 Nov. 2009. Web.

3) Price Check: The Mystery of Hospital Pricing – CHCF.org.” California HealthCare Foundation – Improving Health Care Delivery and Financing. Web. 10 Aug. 2010. <http://www.chcf.org/publications/2005/12/price-check-the-mystery-of-hospital-pricing>.