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October 20, 2017

Why a major news outlet wants your patients' ED bills

Daily Briefing

    Read Advisory Board's take on this story.

    To better understand health care pricing in the United States, Vox is calling for readers to send in their hospital bills.

    The project, launched Monday, focuses on a charge commonly called an "emergency facility fee," which is a base fee most hospitals charge for any ED service—but according to Vox, the fees generally are not publicly shared and vary widely by hospital.

    Vox encouraged its readers to submit their bills via a secure system. According to the submission page, the outlet intends "to bring transparency to these extremely common but little-understood fees"—specifically, "[using] these numbers for a year-long project focused on American health care prices."

    Why the spotlight on prices

    In introducing the project, Vox's Sarah Kliff characterizes U.S. medical pricing as "outlandish," noting that the average cost of an MRI is $503 in Switzerland and $215 in Australia, versus $1,119 in the United States.

    Kliff notes that neither the Affordable Care Act nor Republican plans to repeal and replace the law have significantly addressed the underlying issue of high unit prices.

    To support her case that high prices "are the key problem in American health care," Kliff cites a 2003 paper called "It's the Prices, Stupid," which considered—and rejected—an alternate explanation for high U.S. health spending: that Americans simply consume more health services than residents of other countries. The paper concluded, "Higher health spending but lower use of health services adds up to much higher prices in the United States than in any other [Organization for Economic Co-operation and Development] country."

    In the 14 years since that paper was published, the pattern of high spending and low utilization has continued, Kliff argues. According to Commonwealth Foundation data, U.S. residents visit the doctor four times annually. In comparison, the average number of annual doctor visits is about eight among Dutch residents, 10 among Germans, and nearly 13 among Japanese residents.

    Robin Osborn, who directs the Commonwealth Fund’s international health policy program, said, "With all the specialists and everything, you'd think [Americans] use twice as much health care as everyone. But it's actually just not the case."

    Why Vox is highlighting the emergency facility fee

    Kliff reports that her team chose the emergency facility fee to spotlight the U.S. health care industry's high medical prices because it's charged nearly universally in EDs but at prices that vary significantly and are usually not publicly available. Bills that listeners of a Vox podcast have submitted for review have ED facility fees that range from $533 to $3,170.

    Hospitals say the fee is necessary for covering ED overhead. Ryan Stanton, an ED physician and spokesperson for the American College of Emergency Physicians, said, "We have to prepare for the sickest of the sick." He added, "So if you come in with a stubbed toe, I still have to be prepared and staffed for the acute heart attack or the gunshot wound, or whatever is coming in."

    Renee Hsia, a professor at University of California-San Francisco who studies emergency billing, said she "see[s] both sides" when it comes to ED fees.

    "I think there are going to be facility charges regardless of the actual service that will always be part of ED care," Hsia said. However, citing a $629 hospital bill submitted to Vox that included $7 in charges for a Band-Aid and $622 for the facility fee, Hsia added, "But where this [submitter] has a reasonable point is that when you look at the cost of the Band-Aid and the proportional overhead, it just feels really crazy" (Kliff, Vox, 10/16).

    Advisory Board's take

    Megan Tooley

    Alicia Daugherty, Market Innovation Center and Service Line Strategy Advisor

    Many patients are asking providers to help them make smart choices by sharing prices upfront. This is extremely tough for providers to do, but it's also a reasonable request. You wouldn't book a flight or buy a car without knowing the price in advance, and for many patients, "health" includes financial health.

    Sharing estimated prices in advance doesn't just have benefits for patients—it has four benefits for providers, too. It:

    1. Positions the health system as the patient's ally in helping them make the best care decisions for them;
    2. Attracts patients for price-sensitive services, assuming prices are competitive;
    3. Prevents a negative patient experience with billing, which can tarnish the patient's view of the entire care experience; and
    4. May help guard against bad debt.

    However, putting price estimate capabilities in place requires significant investment from both the provider and the insurer. Provider organizations also worry that price transparency will create price wars, at a time when median not-for-profit hospital operating margins are 2.7%. And some clinicians fear transparency could discourage patients from seeking care they need.

    Nevertheless, many provider organizations are pushing forward on price transparency initiatives. Baptist Memorial Health Care Corporation and Geisinger are two good examples: They both offer online price estimators. And even providers who don't offer their own estimates are increasingly subject to the effects of transparency, since many insurers now offer their own price estimate and comparison tools.

    It's important to note that transparency may not have the effect of reducing prices, as studies have found that early price transparency initiatives did not result in changes in pricing. However, price transparency does help consumers know what charges to expect so they can factor that into their decisions about if and where to receive care.

    For best practices on how to compete for patients in a cost-conscious market, download our research report, "How to Grow Market Share with Price Transparency."

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