Bargain Hunters: Hospital Edition | Institute for Health Policy Leadership

Surprised office people looking at laptop screen

By IHPL - December 16, 2019

I. The Vision

Consider this scenario: you injure your knee during your annual family Thanksgiving football game. After talking with a doctor, you find out you need knee surgery. So what do you do next? Well, you go online and shop, not only for the best orthopod, but also for the cheapest knee replacement. In the end, thanks to each hospital’s listed surgery prices and your bargain-hunting skills, you are able to save thousands of dollars on your surgery.

Does this sound foreign and too good to be true? Possibly, but this imaginary scenario could soon become a reality, at least in theory, due to regulatory action by the Trump administration and the Centers for Medicare & Medicaid Services (CMS).

II. The Regulation

On June 24, 2019, President Trump issued an executive order pushing for the Director of Health and Human Services and other government officials to release guildelines and recommendations that would encourage increased price transparency and competition within America’s healthcare system.¹ A few weeks ago, CMS announced that on January 1, 2021, they would implement two regulations to meet the Trump administration’s healthcare policy goals.² The first regulation requires hospitals to disclose the prices they have negotiated with insurance companies for services and procedures. It also requires hospitals to disclose the prices they charge patients without insurance and to create a price list of 300 common elective services. The second regulation requires hospitals to give an out-of-pocket price estimate to patients for procedures and services.^3,4

III. The Controversy

To better understand, let’s consider the arguments for and against these two regulations.

A. Support

Experts have stated that because of patients’ ability to seek out lower cost healthcare, overall healthcare costs will trend downward. Zach Brown, a researcher from the University of Michigan, showed in one study that publishing prices for MRIs at various medical practices did lead to an overall price decrease of about 22 percent.⁵ In addition to consumer benefits, experts in support of these proposed regulations claim that the additional data would open the door for the government to enact powerful, new legislation to battle exorbitant prices throughout the healthcare system in far more specific and useful ways.⁶

B. Opposition

While this new legislation may seem like wonderful news for many, hospitals, insurers, and healthcare policy experts are warning that these new regulations may have unintended consequences. First, hospitals claim that these new guidelines will increase their bureaucratic costs, force them to reveal proprietary pricing information, and allow insurers to collude on pricing. Second, experts claim that medical practices who initially were charging less might increase their prices both to match their competition and to capture patients who associate high cost with high quality.

In addition to these arguments, Caroline Pearson, senior fellow at NORC-University of Chicago, explains why transparent hospital pricing data may not actually change healthcare costs. She emphasizes that many patients enter the hospital in an emergency, without time to shop for the best price. She also states that insurance gets in the way of true price shopping and that patients value quality doctor-patient relationships over finding the cheapest doctor.⁷

IV. Conclusion

The potential decrease in healthcare costs that the Trump administration is looking to bring about seems achievable but unlikely. Currently, CMS is facing a lawsuit from the American Hospital Association, the Association of American Medical Colleges, the Children's Hospital Association, and three individual hospitals claiming that CMS has overstepped its boundaries.⁸ However, if the proposed regulations can survive this lawsuit, Rebecca Davison, a director at consulting firm ADVI Health, makes the point that, "What everyone can agree on is that a hospital's patients [should] understand what they're going to be responsible for paying."⁹ If the Trump administration can induce our healthcare system to publish more pricing data, many patients will undoubtedly have more information at their fingertips than ever before. The question is how will patients, along with hospitals, insurance companies, and government entities, respond to this additional information? We may soon find out.

Author bio:

Caleb McKinney

Caleb McKinney is a 1st year medical student at Loma Linda University School of Medicine. He graduated from Southern Adventist University in December with a degree in finance and a minor in chemistry. Caleb is passionate not only about the science of medicine, but also about the financial, political, and social aspects of medicine that make this field so unique. In his free time, he enjoys spending time with his lovely wife of one year and six months, working out, playing/watching sports, and finding great vegan food in Southern California.