Is hospital price transparency the answer?
Matthew Martin 1/01/2014 02:17:00 PM
It turns out that things are not so simple, because many healthcare providers operate not as profit-seeking corporations, but as charitable organizations. Typically, hospitals try to charge as much as they can, and insurers negotiate prices down by threatening not to let their customers get coverage there. In such a situation it would be reasonable to ask a hospital to post fixed, non-negotiable prices, and let insurers decide which hospitals they will let their enrollees go to (that is, insurers will direct patients to the more cost-effective providers). However, that model doesn't work with charitable institutions.
Consider the example of Cincinnati Children's Hospital Medical Center. As a charitable institution and the only pediatric hospital in the metropolitan statistical area, Cincinnati Children's will not refuse care for any children from the metropolitan area, regardless of how or if they are able to pay. As a result, we accept all insurances, regardless of what they pay.
That poses an obstacle for price transparency. We could post prices online, but if those prices are high enough to break even, then there will be many insurers who will not pay, and many individuals who cannot pay, which violates the charitable objectives of our organization. If, on the other hand, we post prices so low that all insurers will pay them and anyone can afford them, then the institution will be loosing money. Thus, whatever prices we end up posting, they will probably continue to be complicated and negotiable.
Of course, none of this is to say that transparent pricing is not a laudable goal. My point is just that the issue will continue to be a complex one.