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Miami Children’s Hospital Part Of A Trend: Revealing Some Price Information

Jan 19, 2014

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As health insurance companies shift more financial responsibility onto consumers through higher deductibles, co-payments and co-insurance rates, hospital executives are feeling pressure to reveal their most closely-held secret: prices.

Last week, Miami Children’s Hospital became one of the first in South Florida to give consumers more information — but not exactly the prices — they need to estimate their out-of-pocket costs, an increasingly important factor when deciding where to seek medical care.

Hospital executives reduced by 30 percent the theoretical prices on chargemasters, the pricing documents that detail all the related charges a patient runs up for services but not the amounts most people actually pay.

The revised prices, said Tim Birkenstock, chief financial officer, will more accurately reflect what Miami Children’s collects from insurers.

That, in turn, should give consumers a reliable reference to estimate their out-of-pocket costs, which will vary depending on their health plan type, benefits and other factors.

However, the amounts insurers pay to Miami Children’s will not change.

Prices: A Moving Target

Miami Children’s also is in the process of developing fixed prices for about a half-dozen of the hospital’s most common services, such minor dermatological procedures and wound closures, removal of tonsils and circumcisions.

Birkenstock said the changes are part of a broader initiative to educate patients about what services they actually pay for, as opposed to providing a price that may have little relation to their ultimate out-of-pocket costs.

“We need to re-craft how we talk about what we charge,’’ he said, “and we need to do it in a way that people who use our facility understand what they have to pay.’’

Hospital prices can be a moving target, with hospitals in close geographical proximity charging wildly different prices for the same medical procedure, and with insurers paying radically different prices for the same procedure within a hospital.

Medicaid and Medicare, the government health programs for the poor and/or disabled and elderly, pay hospitals rates set by state and federal officials — usually at considerably lower rates than private insurers.

Uninsured patients pay another price altogether, often at a steep discount determined by the hospital.

Even among the insured, different factors can cause wide variance in a patient’s out-of-pocket costs for the same procedure in the same hospital.

Factors include insurance plan type and benefit design, overall health, whether the procedure is performed in a hospital or outpatient clinic, and whether the doctor is employed by the hospital or is independent.

Does Posting Prices Actually Help Consumers?

For years, health insurance consumers paid little attention to hospital prices because they didn’t have to share any of the actual costs for care beyond a co-payment or a relatively low deductible, said Suzanne Delbanco, executive director of the Catalyst for Payment Reform, a California-based nonprofit that works with large employers to increase price transparency.

But health insurance has changed dramatically in the last five years, Delbanco said, as employers seek to reduce their costs for employee health benefits, and as insurers create more policies with low monthly premiums but higher out-of-pocket costs.

“Benefit designs have evolved,’’ she said. “Whereas before almost everyone was insulated from the cost of health care, now benefits are being redesigned so consumers have more skin in the game, so they’re encouraged to make more affordable, higher-value decisions."

“You can’t really ask them to do that,’’ Delbanco added, “if they don’t have information to act on.’’

Delbanco said she was unsure how much Miami Children’s revised prices will help consumers.

“It’s an interesting maneuver,’’ she said, “but I don’t think we have any sense if that resembles reality or not in terms of what people pay.’’

When a patient receives a bill detailing the hospital’s price, those figures are usually divorced from reality.

Insurers don’t pay the chargemaster price unless a member reaches a predetermined catastrophic level of costs. Even then, sometimes the insurer’s costs are capped.

The payment rates insurers negotiate with hospitals can be affected by their members’ usage rates, ages and health status, and other factors, including the hospital’s ability to leverage its size and geographical reach to extract higher reimbursements.

Birkenstock called the pricing methods that some hospitals use “antiquated”, and noted that as insurance evolves so will hospital prices.

Transparency Trend

The movement for price transparency has been growing in private and public sectors over the past five years. More insurance companies, including Cigna and UnitedHealth, have created online calculators to help members estimate out-of-pocket costs for a some medical procedures at in-network providers.

And Florida’s Agency for Health Care Administration, which administers the Medicaid program in the state, recently submitted a legislative funding request of $5 million a year to create and maintain a health insurance claims database that will allow state officials to better evaluate health-care spending and usage.

Delbanco said Miami Children’s appears to be positioning itself to better compete in this changing environment where consumers will demand more information to make educated decisions.

“Combining quality with price, helping people understand what’s their best buy, I think that’s something that’s going to be hotly in demand in the near future,’’ she said.

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