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Clear As Mud

Apr
21
2006

The White House in its wisdom has decided that one of the initiatives on which it’s going to squander what’s left of its dwindling domestic political capital is getting America’s health care providers to reveal their prices and report their quality. That will lead to a fight from doctors which will make the managed care backlash of the 1990s look pretty tame. Because, utlimately, a fight about pricing leads to a fight about quality of care (for the price).
And that’s not the kind of clear, transparent review process doctors are likely to accept. So, the Bush folks have stuck a rather vibrant guy from Indiana called Allan Hubbard on the case.
Now, Hubbard has deep connections to an insurer, called Golden Rule, which sells high-deductible health plan (HDHP) products. Now part of giant UnitedHealth Group, Golden Rule’s former owner Patrick “loony” Rooney is essentially the guy who got health savings accounts (HSA) into the health policy language by washing loads of cash over the gills of Newt and Tom Delay.
Nonetheless, Hubbard’s been touring the country (or at least better hotel conference ballrooms of the District of Columbia) and having public fights with health care providers. He’s telling them that if they won’t reveal their pricing structure, then Congress will force them to do so.
Why is he doing this? Well, as with pretty much everything connected with conversations about health care policy, it’s complicated. And before we’re all done, it’s going to get ugly.
Interestingly, a couple of weeks back he had a big to-do with a Tenet Healthcare vice-president, and just yesterday I was at a conference where he went after some doctors on the pricing issue. It was good fun, even if I think the doctors won on points. At least we know – or think we do – that Hubbard’s sincere.
Actually there is a good reason the Bush folks have selected this issue. It fits neatly into the Administration’s wisdom—or lack of it—over HSAs, and HDHPs. In this vision, the consumer is better than third party insurer at controlling  health spending.
Now, being a health-care consumer, there are many reasons why you may not buy into this – literally. As Republican (even if he’s one only Democrats love) David Durenberger said at the World Health Care Congress Wednesday: Hubbard’s logic breaks down because there’s a difference between what you want (Lasik surgery so you don’t need glasses) and what you need (emergency heart by-pass surgery because your eyes are fine but your arteries are clogged).
But suspend disbelief for the moment and accept that health care shopping can be like grocery shopping. So, the theory goes, if you make consumers spend actual cash, they’ll spend it appropriately. So what’s next? You need to get the second part of the equation: everyone has to know what stuff – procedures, tests, examinations, x-rays – cost. And you need to know – or should – what you get for your money.
Now, let’s be clear. Anyone who has ever sent or received a hospital or doctor’s bill knows that they don’t tell your their prices. What you may not know: They can’t. Recent research form the California Health Care Foundation exhaustively proved that no one in a hospital has a clue what they charge for anything.
Their bills are fiction. Unlike the collections’ agent calls to beleagured consumers. So the problem is obvious. How do you be a sensible consumer when you don’t know what things cost? The Bush Administration has sent Hubbard to play an entertaining role in the NY Times and beat up on providers, demanding that they answer questions about cost transparency.


Unfortunately, the real problem is not just identifying the costs. If you buy a Toyota Corolla you can judge roughly what you’re getting for the money in terms both of the price/performance ratio, and its likely propensity to break down. Similar for a Hyundai in the same class, or a BMW costing twice as much.
Most health care in the US is bought per service (a doctor’s visit, a prescription), per episode of care (a single hospital admission), or per day. And each of the people who contribute to that care send in a separate bill. It’s beyond baffling. So Dave Durenberger can tell a story about his secretary getting a bill for her emergency heart surgery which the insurer wouldn’t pay because the anesthesiologist was “out of network”—not exactly something over which she had much consumer choice!
It gets worse. Even if clear prices per service were established, how would you as a consumer – not a doctor – know whether you needed one “service”, three “services” (lab tests et al) or a hospital admission? And even if you got that far, how would you be an active price shopper? I got bills from six separate entities for a recent surgery (surgeon, hospital, imaging company, equipment vendor, anesthesiologist, physical therapist). How would you bargain with six different entities by yourself? That’s the role your insurance company – which has no interest in making what they do for you any clearer than mud – typically plays. That’s if you have one.
There are some discrete surgeries that may make sense for bundled pricing (Lasik et al) but the vast majority of care is far more complicated. It’s routine care of the chronically ill, and there are many factors that go into making it work well. If, for instance, a diabetic is coached and cared for well, they’ll often do well. If not, they may end up going blind or having a foot amputated. Very little is known about how to manage that care process well and consistently. And nothing is known about how to encourage that type of care if integrated provider systems, with incentives aligned with insurers worried about future costs, aren’t in place. If we, instead as the Bush Administration is doing, insist on prices per service, but don’t give incentives to the existing system to look after people overall, we’ll have diabetics going blind. Of course, they’ll get the right to bargain for the cheapest foot amputation!
There is a way out of this. It’s called pre-payment via integrated systems (similar to Kaiser Permanente’s model) which gives a fixed amount to a provider group to look after a pre-defined population. Then the provider group would internally sort out its operations and cost structures, without them having to be visible to the patient. Toyota does this now. You buy a Corolla, not an engine, chassis, seats, windshield and thousands of other parts separately. But until the health care system is changed—and only government can make this change—so that purchasers buy at the level of the car not the parts, just telling patients the price is pretty much useless.

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