New transparency rules are generating vast amounts of pricing information; however, the health care industry is finding that while collecting data is one thing, making sense of it can be something else entirely
"The original intent was for a consumer to be able to understand what a procedure would cost and be able to compare and make choices," said David Cardelle, chief strategy officer for Advanced Medical Strategies. "To be honest, it is extremely difficult for a consumer to be able to do that. I have tried it myself, and you quickly see that it's apples to oranges."
Cardelle shared his thoughts during his session, "A Fair Price: Getting to and Understanding Hospital and Provider Pricing" during the recent Self-Insurance Institute of America's (SIIA) Price Transparency Forum in Kansas City. He compared the current state of transparency to the first inning of a baseball game or a restaurant menu with prices for only half of the items.
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"Usable data is super important," Cardelle said. "Even though hospitals have posted machine-readable files, the vast majority of that data is not usable, and there are different degrees of how useful it is. We have to not only collect the data but also curate it, because it's a massive amount. The good thing is we have two years of experience with information about everything they could charge for off their chargemaster. It's out there, and they have done it for the most part. But the takeaway here is that two years in, we have only a subset of what we should have today in terms of accurate, transparent pricing."
He also noted that mining this data has been revealing in many ways.
"One of the surprising things with one-third or so of the usable data is that the billed amounts do not match the chargemaster in a lot of cases," he said. "A majority of the time, they do to the penny, but the differences can be exponential. Something that is $1,400 on the chargemaster is billed at $5,500. These are pretty big discrepancies. The problem here is billions of dollars that we are talking about."
Accurate pricing information is critical to cost control, he added.
"We have talked about hospitals charging three times what another hospital charges, but the disparity is at the very starting point of what that charge is supposed to be in the first place," Cardelle said "It's a new starting point that people need to get used to. And to me, it's table stakes. It's important to apply the chargemaster as the single source of truth before you apply any discounts. I think this is the first step in fiduciary responsibility."
And for those paying the bill, Information is power.
"Why would a participating payer in network ever negotiate with a hospital for more than the lowest discounted cash price based on one patient and one unit of care?" he asked. "The cash price is what the hospital is willing to accept for reimbursement. What makes it different is that now it's publicly posted. The plan sponsor should go to the source and at least be sure that the discount is being based on correct information. There is a subtle but huge difference when you look at it from a payment integrity perspective."
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Alan Goforth
Alan Goforth is a freelance writer in suburban Kansas City. In addition to freelancing for several publications, he has written a dozen books about sports and other topics.
