With mounting pressure from Washington, hospital associations, and consumer groups, providers will be expected to embark on transparent pricing initiatives during 2007. To help ease this transition, the American Hospital Association (AHA) is offering providers a roadmap to help them avoid the rough spots they're likely to encounter throughout the year.
Admittedly, the road to transparent pricing isn't expected to be a walk in the park. The potential obstacles reflect the current patchwork approach to America's healthcare delivery, service pricing and reimbursement policies.
Reiterating its belief that consumers deserve helpful information about the price of their hospital care, the AHA "statement for the record" cautions that individual hospital care is unique, and therefore sharing meaningful pricing information is challenging. The association cites, for example, that "a gall bladder operation for one person may be relatively simple, but for another patient could be fraught with unforeseen complications, making any 'up front' pricing of limited value."
Another obstacle limiting hospitals from arriving at transparent pricing is that hospital prices do not include the cost of physician care. Consumers generally receive separate bills from physicians who provide services to patients who are hospitalized.
Still another complication is how much a patient's insurance company will actually pay. This is because the gross charges billed by hospitals are required to be uniform. In other words, a lab test with a charge of $40.00 is billed to all payors, (i.e., Medicare, Medicaid, Blue Cross, Aetna, or Self Pay), however, the actual payment made for that $40.00 lab test will vary based on the carrier’s contract terms. The actual balance due from the patient will vary even further based on whether or not they are self-pay or are required to make a co-payment.
Simply put, posting charges will be limited and misleading for consumers, because the price posted will not be the amount due from the consumer.
With that in mind, hospital financial leaders must focus on what type of consumer information is going to be most useful. To help them sort through these issues, AHA reports that consumers with traditional insurance are likely to want information about what their personal out of pocket costs would be if they were to receive care at one hospital versus another.
Consumers with HMO insurance have agreed to use physicians and hospitals participating in the plan and are not likely to have additional cost for care beyond their premium and applicable deductibles and co-payments.
On the other hand, consumers with high deductible or Health Savings Account (HSA) insurance are likely to have more of an interest, not only in hospital prices, but also in physician and ambulatory care prices, because a typical plan of this type might have a deductible of $2,500.
In an effort to foster uniformity in what's reported, the AHA Board of Trustees last year approved a policy that stated pricing information should be presented in a way that.
AHA has also identified a four-part road map to pricing. It includes:
As hospitals and healthcare organizations rush to comply with the new pressures of pricing transparency, setting guidelines for standardized reporting will be increasingly important. One example is the AHA leadership role in taking these initial proactive steps, realizing that further clarity of any posted prices for the consumer is still required.
Hospitals working with insurers should continue to improve their reporting systems and provide consumers with both estimated charges and expected payment at time of registration. Any standardized approach to pricing transparency that keeps the consumer as its focus will result in meaningful pricing information, giving them the ability to make informed choices.
Hospital financial officers should carefully analyze their current chargemasters and consider the following in preparation of posting charges publicly:
Using the above steps as a guideline, financial officers can properly analyze their chargemasters prior to any public posting, providing them with a more defensible position.
Kevin D. Pleasant, Director of Research and Development
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