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Are Hospitals Intentionally Hiding Prices?

Or are they just unprepared to deal with the transition to patients, rather than insurance companies, as the payer?

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This article was published in Scientific American’s former blog network and reflects the views of the author, not necessarily those of Scientific American


In an unprecedented move, the Centers for Medicare & Medicaid Services recently proposed that hospitals must disclose their negotiated rates with insurers for certain services. The rule comes on the heels of a Trump administration executive order that proposes hospitals post their standard list of charges online and provide patients with estimates of their out-of-pocket costs prior to scheduling a procedure.

Aside from the fact that no other service industry is required to reveal their contractual business negotiations—indeed, it is currently illegal for hospitals to disclose to other hospitals their negotiated rates with insurers—the requirement to give preservice cost estimates to patients is meant to give timely, practical insight into the cost of care.

So why haven’t more hospitals provided this information to date? Given the above policy proposals, it would be easy to assume that hospitals deliberately complicate pricing in order to grossly inflate the cost of care. Yet if we take a moment to examine what is behind the heightened calls for price transparency, a different perspective comes into focus.


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The reality is that for hospitals, communicating with patients about payment—especially up-front collections—is a relatively new development. Previously, payment discussions occurred mostly with the insurance companies who paid for the vast bulk of care. As such, hospitals designed most of their staff training and payment infrastructure around communicating directly with insurers about reimbursement.

In recent years, however, the cost burden has significantly shifted to patients through health plans with exorbitant deductibles and coinsurance. According to the Centers for Disease Control and Prevention, by 2017 about 43 percent of privately insured Americans under 65 were in high-deductible health plans.

Calls for more price transparency have escalated in parallel with the advent of these plans—along with warnings that the plans are having an adverse impact on both patient and hospital finances. In a survey of hospital leaders, a majority of respondents—59 percent—asserted that high-deductible, high-coinsurance plans are driving bad patient debt. As for collecting on this debt, 50 percent of respondents stated they expected to collect on less than 10 percent of it.

These aren’t unwarranted concerns. A widely cited joint study by the Kaiser Family Foundation and the New York Times made this startling revelation: “62 percent of those who had medical bill problems say the bills were incurred by someone who had health coverage at the time (most often through an employer).”

To reiterate, these people are struggling to pay medical bills despite being insured.

Not every hospital’s response to this sharp change in reimbursement has been admirable. Some have reacted by going after recovering patients with aggressive litigation, while others likely have overpriced certain services to make up the difference. But while it’s hard to defend such tactics, it is equally difficult to predict what any of us would resort to if our main sources of income suddenly changed to a new, not very reliable source.

However, more hospitals than not strive to make payment assistance options available. And a growing number are catching up with the shift to patient-as-payer. These hospitals are retraining staff to have conversations with patients about their cost of care, while implementing systems and processes that facilitate patient payments prior to service, with options for payment assistance.

One primary example is making it easy for patients to generate cost-of-care estimates themselves. My company has developed AI-powered pricing calculators that some hospitals embed on their websites to provide price transparency at scale—which, given how prices vary depending on a patient’s unique insurance coverage, would otherwise be difficult to do.  Using these calculators, patients enter a few pieces of demographic data, their health care insurance plan policy number and the procedural code. In under a minute, an estimate is generated that shows the patient’s portion of the cost of care, based on the patient’s real-time insurance benefits.

The speed is enabled by robotic process automation or “bots”—the workhorse of AI technologies—that retrieve the patient’s insurance plan details directly from the health insurer’s website. From there, a rules engine compares the patient’s coverage to the hospital’s own negotiated rates and generates the estimate. The calculator can also prompt patients of available payment assistance programs—which are increasingly needed. A similar calculator used by hospital staff at time of registration can also alert of options for financial help.

Beyond online calculators, hospitals are deploying additional technology to facilitate patient payment. These span from machine learning and predictive analytics that assess a patient’s propensity to pay, to tools that can quickly look up appropriate charity care and other programs that might relieve some or all of the financial burden from patients.

Is it unsettling that hospitals, historically places where care and recovery are prioritized over a patient’s ability to pay, are taking so many concerted measures to get paid? Perhaps so. But the motivation is need, not greed. As health care insurers continue to increase deductibles, shrink benefits and delay payments, we all will have to adjust to this new reality where the patient is the payer. At the moment, hospitals are doing what they can to help us make the transition.

Jay Deady is CEO of Recondo Technology, a company that develops automation for the health care revenue cycle. Deady has close to three decades of health care technology leadership at some of the most well-known companies in the industry, including McKesson and Cerner Corporation.

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