November 2011

  • The cost of an ultrasound: a shopper’s misadventure

    Healthcare Savvy is a blog which collects case studies of comparison shopping for healthcare services.  A recent  entry was: My Ultrasound: Three Tests, Three Pricetags, by Rachel Zimmerman.  Range of ultrasound costs in Boston: $516 to $2,847.

    The following is the meat of the posting:

    My family has Blue Cross Blue Shield of Massachusetts health insurance through MIT, where my husband works. So, the first thing I did was to call the BCBS referral office to find out what my options were for getting an ultrasound.

    I had three choices: Massachusetts General Hospital in Boston; Mount Auburn Hospital in Cambridge; and Diagnostic Ultrasound Associates in the Longwood area. I asked the nice referral lady what the costs were at each. Call billing, she said. At referrals, no one has the prices for services.

    I called each facility, and here are the prices I was quoted for a pelvic ultrasound:

    –Mass. General: $2847 or $2563

    –Mt. Auburn: $971.96

    –Diagnostic Ultrasound Associates: $516

    All three quotes were for the imaging only and did not include professional services or other additional costs, I was told.

    So, is it just me, or is a five-fold difference in price for the same procedure at three greater Boston facilities kind of shocking?

    I called MGH back to make sure I heard right. Weirdly, on Wednesday, the ultrasound price was $2,847, but on Thursday it was $2,563.

    OK, I get that pricing isn’t simply about pricing. Hospitals have higher overhead than stand alone imaging clinics, for instance.  But still, from a patient perspective, the choice seems more straightforward: it’s the $2,500 ultrasound vs. the $500 one.

    My comments:

    One excuse for the high costs of the hospital-based care is that many non-profit hospitals tend to charge more on losing services.  This is not sound reasoning.  The fact that they pay no taxes clearly offsets the cost subsidizing of losing projects.

    Now more than ever because of the extra cost of healthcare and the fever pitch of the debate, transparency on costs is essential.  What was discovered in mammography hold true in all services.  The price variability among providers has no logical algorithm other than charging what can be tolerated.

    America does not have a health insurance problem.  The healthcare problem would begin to be resolved if patients were required to know what services cost and that information is readily available.  It would create meaningful competition amongst providers such that it would drive down costs.

    In conclusion, healthcare economics are devoid of laws of consumerism and business.

    0 comment November 11, 2011

  • Which consumers actually compare doctors on quality?

    Who wants comparative information about doctors is the subject of a Robert Wood Foundation study. Nothing very surprising here, but worth thinking about in the context of healthy competition among medical providers.

    The study identified consumers most likely to seek information about providers.

    In today’s world of the internet and social media, there is a great opportunity to evaluate medical providers.  Healthcare is the ultimate service business.- there is much at stake and the care is usually never forgotten. Even though patients, often times, do not know the technical complexities of their care, they do know how they feel.

    I believe that health is defined as a state of wellbeing.  The desired outcome of care is to get patients back to a state of wellbeing and restore function thus patients know how they feel and perform.

    Another factor in quality is the cost of the service as patients are increasingly more responsible for the cost of their care.  That factor influences the perceived satisfaction.  Quality, in the end, is how much did you like the care you received and what did it cost.  These two factors are what matters most to a patient.  This is not any different than a patient’s experience of paying for a vacation or buying a car.  If you look at “Trip Advisor” or “Travelocity” which shed light on tourism, I can foresee in the not too distant future, disclosing patient’s experiences of various healthcare institutions and providers.

    In conclusion, the healthcare industry is a service industry with great similarity of other industries.  I believe it doesn’t have to be complicated to determine quality.

    A study by the Foundation of consumers who actively use the internet for health information reports that consumers are most likely to seek information about comparative quality when:

    • They moved, their insurance changed or it was open enrollment season.
    • Their health status or their diagnosis changed
    • They had a problem with their physician. Examples included a misdiagnosis, no diagnosis, medication error or poor service from the doctor or his/her office staff.
    • They were the type of people who like to share information with others. These are “go to “ people.

    Having said that, the Foundation observes that comparing quality involves a “a monumental paradigm shift” for consumers. Patients “rarely if ever cite the technical quality of care, and never mention compliance with known measures or standards for good care.”

    When the concept of online comparison of quality is mentioned to consumers, they express interest, especially if the comparison site is one by a neutral party.

    “Highly interested” consumers tend to have a high baseline of knowledge about their chronic condition. They are not afraid to demand the “right care .” They often know the common tests they should receive and the indicators/measures their doctor should follow. Some have been “burned” before, and because of what they see as a significantly bad experience with a physician or a medical error in the past, they are now more empowered .

    Those with “low interest” in comparative performance reports were also more likely to say they relied on personal recommendations from others as a means to find quality care . They reported being in a “good place” with their physician . They felt content, satisfied and connected to their health system. They showed no urgency to investigate finding better quality care, even when they admitted to having concerns about their physician’s care/approach.  The interviewers felt these people were “in denial” about the seriousness and potential progression of the condition .

    The study:  Consumer Decision Points of Health Care Information

    Communications research conducted on behalf of the Robert Wood Johnson Foundation. July 2010

    0 comment November 7, 2011

  • Will Medicare finally succeed in introducing provider competition?

    The financial crisis involving healthcare spending might finally result in competitive pricing of healthcare services paid by Medicare, after a dozen past attempts to introduce competition among providers. This may be a game changer in the introduction of constructive competition on quality and cost.

    Competition is a natural checks and balances in keeping price in check.  I have very little faith in the government’s ability to come up with such a program devoid of lobbyist’s pressures.

    If history tells us what the future holds, the government is not the solution.  I believe the government should be the insurer, but I don’t believe the government has the ability to come up with a fee schedule that would fairly compensate providers.

    I believe that the government should deregulate healthcare such that it would encourage competition by leveling the playing field with doctors and hospitals.  Thus, deregulation would be the right prescription for the government to control healthcare costs.

    An article appeared this summer which examines the sorry history of Medicare and competitive pricing, and finds that the politics of Medicare may be changing.

    The authors write, “The only way for competitive pricing to become a more realistic choice is for the politics to change. That is likely to happen only if fiscal exigencies become so deeply felt that Congress connects those problems to the prices Medicare pays and sees competitive pricing as a solution, not simply a problem…..competitive pricing is the only payment method that will remove the subsidies that distort the government’s decisions about the Medicare entitlement benefit package, end political bickering over administratively determined payments, and stabilize payment policy.”

    The authors note, “Officials of CMS and its predecessor, the Health Care Financing Administration (HCFA), have attempted to institute competitive pricing numerous times during the past twenty-five years, for various parts of the Medicare benefit. Unfortunately, those efforts have been fraught with conflict and intense opposition. …..Most providers and politicians now define the boundaries of “practical” or “achievable” reforms for Medicare well short of competitive pricing.

    The authors counted 12 efforts by Medicare over the last 25 years alone to inject price competition in the provision of healthcare services. They write, “The concerns from which these competitive-pricing efforts arose go back to the very beginning of the Medicare program, when providers successfully sought to limit the government’s exercise of its buying power.”

    Medicare was prohibited by law from competitive bidding of durable medical equipment. A GAO report in 1972 said this: “A supplier’s Medicare price for a standard wheelchair was $122. The price for the same wheelchair under the VA contract was about $86, or 30 percent less. A supplier’s Medicare price for a hospital bed having safety sides was $336. The same bed under the VA contract was $270, or 20 percent less.”

    Moving to competitive pricing, say the authors, requires a transformation in how the price of care is set.  Medicare now uses administrative pricing. For any unit of service (e.g., a doctor visit, a hospital admission, an item of equipment from providers, or a monthly capitation payment to health plans), Medicare determines the actual price by performing analytic calculations and adjustments to historical records (e.g., historical claims for payment). Medicare currently uses this method to set prices for virtually all types of services.

    Then there is competitive pricing. For health plan premiums and other plausible items or bundles of health care services, the government creates a competitive-bidding arrangement to elicit information about the underlying costs of providing a good or service; then it sets the price based on that information. All competitive-bidding systems must have some incentive for suppliers to be not only efficient but also to submit bids that are close to their own costs.

    Demonstration projects by Medicare have been promising – but never turned into actual policy.  “All competitive pricing attempts to date for existing Medicare benefits, with existing administrative pricing arrangements in place, have failed to replace those administrative-pricing mechanisms….. These results have occurred even though all of the competitive-pricing demonstrations that reached the point of bid evaluation — even those using bidding models that were watered down under provider pressure, as many were — demonstrated that they would save substantial amounts of money.

    The only large scale instance of competitive pricing in Medicare today is Part D (drug benefits).   Even here, competition was limited by Congress: “As in other Medicare competitive-pricing attempts, political pressure played a substantial role in the Part D bidding design. Partly because of the pharmaceutical industry’s lobbying efforts, Part D is restricted to private plans, and the government is prohibited from negotiating drug prices.”

    The authors note that  “Provider resistance to competitive bidding remains a formidable obstacle to implementation. The alternative proposals put forward by providers are one measure of the intensity of that resistance. In at least three of the demonstrations (the first DME demonstration, the first HMO demonstration, and the second clinical laboratory demonstration), supplier and health plan representatives stated a preference for flat cuts in reimbursement as an alternative to competitive bidding.”

    They say that competitive pricing, rather than compromising quality as if often feared, will do the opposite: “rather than harming beneficiaries, competitive bidding arrangements provide a natural administrative platform for maintaining and enhancing competition and quality.”

    The article: Robert F. Coulam, Roger D. Feldman and Bryan E. Dowd,  Competitive pricing and the challenge of cost control in Medicare.  Journal of Health Politics, Policy and Law July 5, 2011

    2 comments November 3, 2011