Opaque Transparency

Jeffrey I. Barke, M.D.

During his term in office, President Trump signed several executive orders requiring transparency in hospital pricing. Those orders were supposed to have gone into effect in January 2021. But if they did there is very little evidence that they have been implemented or are now benefiting America’s population.

I am not one to favor government requirements involving the operation of a private business. Generally, free market forces should provide a competitive advantage to health care firms offering the public the greatest amount of transparency. These companies should benefit from increased patient trust and therefore usage of their services.

But, for whatever reason, this has not happened in the medical industry and consumers are being harmed by the opaque pricing practices that continue to govern hospital activities.

I challenge anyone to call up a local hospital and ask about the hospital’s charges to perform any common procedure such as a hernia repair, a gall bladder removal, an appendectomy, or hospitalization for COVID-19. You will likely get a lot of hot air, but nothing that you can easily compare to the same medical procedure at another hospital. 

Try asking for the cost of a visit to the emergency department. You’ll likely become awash in even more words including questions about your insurance coverage, but you won’t get anything helpful that tells you what to budget for the visit. If you were to get any solid information, I would love to know what you learned. Please email me through my website’s contact page.

The Wall Street Journal recently published an editorial titled “Hospitals Hide Pricing Data From Search Results.” Why would hospitals or medical offices hide pricing information from prospective patients? We aren’t sure, but it makes us think of what it would be like to order a main course at a restaurant with absolutely no idea of its cost. It would probably impact our digestion as much as our wallet. Yet this hidden pricing practice is exactly what has been going on in the medical industry for decades. 

The lack of transparency may not be as sinister as it sounds and it may very well be more complicated than just a willful beaurocrat hiding the costs. In part, we know the lack of transparency is due to the fact that the primary payer for most medical services is an anonymous insurance company — a third party who cares little about your health and much more about their bottom line. These insurance companies want to keep prices opaque to avoid questions about their operations and profitability and they, not the hospitals, are the primary culprits in this transparency saga.

Let’s get specific. When I see a patient in my office for an upper respiratory infection, I enter the patient's visit via computer into an electronic medical records system (EMR). This entry includes generating a code for the diagnosis (called an ICD10). In this example, the code for an upper respiratory infection is J06.9. Just in case you are wondering whether the federal coding system is thorough enough, the ICD10 code for injuries sustained from getting sucked into a jet engine is V97.33XA. Unfortunately, you can’t make this stuff up. In addition to the ICD10 code, the EMR system also generates an Evaluation & Management code (E&M) that covers the time spent with the physician and the thoroughness of the visit.

Together, the ICD10 and E&M codes are then sent to the patient’s insurance company. If we are lucky, our office eventually gets paid for the services we provided to the patient within 90 days of the office visit. Not uncommonly, though, the insurance company needs something more and asks for additional documentation before we receive payment. 

Like most medical practices we have a billing specialist, hired to handle all of these issues. If you have ever wondered why U.S. medical costs seem high, the monthly wages and benefits paid to this billing specialist with absolutely nothing to do with patient care or patient well-being is one reason.

While the process I have described is for an  outpatient primary care medical office, imagine the complexity of billing if a medical issue ends up in the Emergency Department of a local hospital. The front line technicians, nurses and doctors working in the ER to solve a medical problem have little idea what the cost or charges for any of these procedures, supplies, or tests will be. What a mess. 

Yet, price transparency is a critical component in the effort to reduce the cost of healthcare. Perhaps a government order insisting on price transparency is necessary. But, I think I have an even better way to accomplish the same goal.

Car repair shops in California are required to provide an estimate of the cost of the total repair before they start the work. Perhaps hospitals and medical offices should also provide an estimate of the final cost of a medical process from initial check-in to ultimate discharge before any service is rendered. But, this will only happen when consumers demand it. 

Consumers got so tired of being ripped off by car repair specialists that they demanded change. They should get equally tired of the payment tensions between medical providers and medical insurance companies as well. More on the impact of third party payments for healthcare costs in a subsequent essay. In the meantime, consumers must demand more basic information about the costs for medical services if the U.S. is to get to a market-based system that is needed to reduce the cost of medical services and improve healthcare quality.