Cost Transparency in Healthcare - Emerging Nurse Leader

By Rose O. Sherman, EdD, RN, FAAN

A friend of mine recently lost her job and her health benefits quickly expired. The cost of a cobra policy was too expensive. She figured she was very healthy. She could take the risk, and wait until the insurance health exchanges (part of the Affordable Care Act) are available in October. Her luck did not hold out. She injured her knee in a fall. She saw an orthopedic doctor in an emergency room who told her that she would probably need surgery depending on the findings of an MRI. “What will this cost”?, she asked. No one at the hospital beginning with the physician would even attempt to give her an estimate. She was advised that her costs would be higher because she had no insurance.

There is no other area in our life where we are expected to buy a service without first knowing what it will cost. Health Care has been the notable exception. Even health care providers are stunned at the costs, when they review their own health care bills. Last week, the Centers for Medicare and Medicaid released a report that indicated that the costs of care even within the same city can could have considerable variation. The treatment of an average pneumonia in Dallas hospitals varied from $14,610 to $38,000. At a recent urological conference, data was presented to indicate that up to 2 billion dollars a year could be saved in the US health care system if routine UTIs were treated in outpatient clinic settings instead of the emergency room. It is little wonder that in the new era of health reform, there will be a focus on value and on cost transparency.

Determining Real Costs

To effectively determine costs and outcomes and price these services, providers and hospitals need data. In 2009, the Economic Stimulus Bill (ARRA) included 3 billion dollars to be directed toward helping to fund the widespread implementation of electronic medical records. The first stage of the process has been the implementation of the EMR in hospitals and provider offices. We are now moving into stages 2 and 3 that have meaningful use requirements described in a previous blog. These meaningful use requirements are designed to help organizations and providers have the data that they need to help make decisions about costs. They will also assist the government and other watch dog agencies to study the variations in costs and care. Some of this type of data is already available to consumers. An interesting site to visit is healthcare blue book. This site featured on NPR and a variety of other shows was launched in January of 2013 and is designed to help consumers like my friend who pay cash to find fair market prices for services in their area. The site also has contract downloads that consumers can bring into billing departments and has offers consumers tips on negotiating price.

From Volume to Value-based Care

A key feature of the Affordable Care Act is the movement of reimbursement toward a system that changes the focus of care from quantity of services delivered to streamlining care to achieve the best outcomes. Part of the goal in focusing on value is determining the true costs of care. A value-based purchasing model will usually involve bundled payments for an episode of care usually 30, 60 or 90 days. Under this bundled payment, hospitals and other providers assume the financial risk for delivering all care for one price. In a value-based model, providers are accountable for the quality and costs of health services. There are usually predetermined performance measures. The system is designed to eliminate costly, inappropriate or unnecessary care such as frequent trips to emergency departments.

It will be interesting to see how health care evolves with health reform. My prediction is that within the next ten years, health care will move to pricing models used in other industries. We will have a much better sense of what things should and do cost. Negotiation will become much more common even at the level of the average consumer. Consumers will visit sites like health care blue book or medibid in the same way they look at sites like true car to research the price of what a car should cost. The answer to the question “What will it cost?” will not be met with quizzical looks but rather with a projected cost (most likely bundled for an episode of care without complications).