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Comparison Shopping and Consumer Driven Health Care

Hospital Bills: Comparison Shopping in Gibberish

By Richard L. Reece, M.D., for HealthLeaders News, March 31, 2005


The whole idea of consumer-driven healthcare rests on consumers being able to make informed choices on their care based on price and quality. Much emphasis has already been placed on developing consumer-driven health plan products. Somewhere along the line, a key ingredient has mostly been overlooked:

What good is consumer-driven healthcare when consumers can't understand a hospital bill?

For realistic comparison shopping between hospitals, consumers would need to know in advance what the sticker price would be for an all-inclusive bill, including hospital and physician fees.

This would be particularly important for costly elective procedures, such as knee replacements, cardiac procedures, hysterectomies, or breast biopsies, for which patients have time, discretion, and information to compare prices and outcomes in different hospitals. Elective procedures often comprise a significant portion of hospitals income stream.

At this point, nobody knows how consumer driven health plans (CDHPs) will affect hospitals. The data isn't there. These plans are just hitting the market - with a 2-3 percent share right now. But some analysts project these new plans will grab 25 percent share by the end of 2006. Major insurers - including Aetna , United, WellPoint, Humana and even HMO giant Kaiser have products on the market. Jeffrey Hogan, a broker with the Rodgers Benefit Group, a nationwide brokerage firm in Farmington, Conn., says many mid-sized companies, with 50 to 500 employees, are fully replacing HMOs and PPOs with CDHPs. Insurers are either buying banks or striking deals with banks to facilitate HSA spread. A Hewitt Associates survey of 600 companies says more than half are considering offering consumer-driven plan options. A new survey by Watson Wyatt and the National Business Group on Health finds 8 percent of 555 large employers surveyed now offer health savings accounts and another 18 percent plan to offer them next year, with 47 percent considering them. Most accounts purchased so far have been by individuals rather than companies, but that will change soon as more employers enter the market.

The eventual goal is for savvy healthcare consumers to shop comparative prices. But the "apples to apples" comparison that consumers use to make choices at the grocery store or the car lot is useless when a four-page hospital bill comes in the mail. Consumer Reports recently surveyed 21,000 consumers for satisfaction with hospitals, and 11,000 complained about incomprehensibility of hospital bills. Five percent of those complaining found major hospital billing errors, including inaccurate dates of service, incorrect or duplicate charges, overstatements of operating time, and fraudulent claims. Surely a better way must exist for hospitals to bill.

Friendly billing

One healthcare leader person who personally dealt with the Byzantine complexity of hospital bills was Richard Clarke, CEO and president of the Healthcare Management Financing Association. Clarke, perhaps uniquely qualified to understand hospital billing statements, was bewildered by his 84-year-old mother's hospital bill in Boca Roton , Fla. He was so upset that in 2001, he created a HFMA project called Patient-Friendly Billing. This project is a nationwide initiative to make financial communications clear, concise, and correct. HFMA is working with the American Hospital Association on the project and is focusing on issues surrounding discounting and collection practices for patients with a limited ability to pay.

Few substantiated reports of CDHPs' impact on hospitals are around,, One such report, an Aetna study of 13,000 CDHP members, found the following: a 3 percent drop in emergency room visits, a 14 percent decline in outpatient hospital visits, and a 5 percent drop in hospital admissions. This sort of skimpy data doesn't help hospital planners much as they keep to prepare CDHPs should catch on in a big way. Many planners are unaware of how much of their income stream can be traced to elective procedures, those most likely to be used for comparative shopping.

Now, to increase hospitals' uncertainties and anxieties, the Bush administration is talking of the ownership society, health savings accounts, consumer-driven health plans, transparency, hospital/physician joint ventures, and electronic medical records.

The ownership society concept assumes if you have your own skin in the game - in IRAs, flexible savings accounts, Social Security accounts, or HSAs, you will act prudently. You might even make your own healthcare decisions. And you may complain and switch vendors, including hospitals, if things go wrong.

Transparency: A powerful word

"Transparency" is a popular buzzword of the new healthcare consumer lexicon. "Transparency" is "accountability" in drag. For hospitals, transparency is a very dangerous game. It says: reveal your finances, your outcomes, your quality and your safety measures to the world. One California businessman says once transparency is achieved, government should post an A, B, C, D, F rating every hospital and clinic door, This is surely not a goal most hospitals would endorse.

To help achieve transparency, California has passed a law saying all hospitals must publicly reveal their "chargemaster" accounts, the retail prices they charge non-HMO and non-Medicare consumers. A Dec. 17, 2004 front page piece in the Wall Street Journal bore this headline: "Medical Markup. California Hospitals Open Books, Showing Huge Price Differences. "

Consumer driven health plans may force hospitals and doctors, both hurting financially, to cooperate to build facilities and programs to please demanding consumers. This is happening in some markets as hospitals and doctor partners mobilize to construct Big MACCs (multispecialty ambulatory care centers), and as doctors, hospitals, and real estate firms work together build ambulatory centers.

What do all these converging events forbode for hospitals? In the near term, the most contentious issue may come on the billing side. Major insurers are encouraging consumer plan members to comparison shop for price. Their "transparent" Web sites contain some information on comparative prices for hospital procedures, but it is sketchy and does not usually include physician fees.

Integrated bills?

One factor glossed over in these Web sites is that hospital prices usually consists of a multitude of separate hospital and doctors fees for common diseases or procedures. This sequence of separate bills for isolated services results in a bewildering bill. This bill may list scores to hundreds of separate items. The main hospital bill is followed by bills from attending physicians, anesthesiologists, pathologists, radiologists, and individual specialists who may be called in for consultations should complications occur. Many of these bills come from doctors the patient has never seen. Medicare, of course, has partially addressed this bewilderment on its own through DRGs, but DRGs are arcane and irrelevant to most consumers.

Michael Blau, a senior partner at the McDermott, Will, and Emery law firm, believes consumer demands for simplified and understandable billing may lead to some form of a clinically integrated bill. One of the main reasons of this integration might be to address consumer complaints by producing a packaged or bundled bill listing in advance all hospital and doctor components, which could be an ideal instrument for comparison-shopping. This has been done, of course, for cardiovascular procedures at such places as the Texas Heart Institute and for other major procedures by other integrated health institutions. But packaging or bundling of hospital and doctor bills is rare at most of America 's 5,000 community hospitals and even at major academic medical centers because of the fee-for-service environment in which most faction.

Most attempts at forming organizations dealing with functional clinical integration, such as physician hospital organizations, have a spotty track record. Recent data indicates the number of hospital sponsored physician organizations has declined from 6,043 to 4,659, a decline of 33 percent. On the human level, the basic problem of these organizations, from the physician point of view, has been that PHOs become HPOs, with hospitals controlling and leading the enterprises.

One way around this very human leadership dilemma is to have the hospital leadership and various physician groups meet separately and then together to decide what would be acceptable fees, and to arrive at a hospital discount (usually in 10 percent range), and physician discount (usually 3 to 5 percent), and contract with a reinsurance firm should there be an expensive outlier case. This process, of course, must not violate Stark Rules, but that is possible if the hospitals and physicians arrive at their fees independently before pooling the results.

About 10 years ago, I was working with the PHO in a 200-bed community hospital in Oklahoma on a project to create 150 bundled bills for common disease episodes and procedures. At the time, other Oklahoma hospitals and health plans rejected the concept, preferring to deal separately with each other and with health plans. But for the hospital and its constituent physician groups, creating the bundled bill proved to be workable and acceptable to the hospital administration and to various specialists. Packaged or bundled bills was simply an idea before its time, and an idea that I believe will be workable and useful in this new era in which consumers are demanding more accountability, transparency and simplicity. For comparison-shopping purposes.

Richard L. Reece, M.D., is a pathologist, writer and editor. He is the author of a new book Hello Health Consumer: The Transformation of the Doctor-Patient Relationship. (www.practicesupport.com). He also serves as editor of Physician Practice Options and The Quality Indicator, two nationally distributed newsletters for physicians. He lives in Old Saybrook, Conn. , with his wife, Loretta, and Paris, a French bulldog of impeccable heritage. He may be reached at 860-395-1501 or rreece1500@aol.com