Hospitals in the Bronze Age

Devon Herrick
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Posted: Dec 14, 2015 10:59 AM
Hospitals in the Bronze Age

Medicine during the Bronze Age was not for the faint of heart. Overcrowding, lack of sanitation and communicable diseases were common. Foodborne and waterborne pathogens caused stomach ailments and dysentery killed more than one-third of children before their fifth birthday.

A recent article in Modern Healthcare discussed medicine in the Bronze Age, but not the classical period that ended 3,200 years ago. Rather, it discussed how hospitals are adapting to life when many of their customers are becoming price sensitive, because they have high-deductible health plans (e.g. Bronze plans). The following is an excerpt:

“Some hospitals and health systems are starting to review and revise their prices to make themselves more attractive to individual consumers who increasingly experience sticker shock when they pay for services out of pocket under high-deductible health plans.”

Hallelujah!

The article was enough to send shivers up my spine. Modern Healthcare goes on to say that hospitals are feeling the heat as more and more of their potential customers are asking questions, such as how much does an MRI cost? According to the author:

“These efforts are at least partly driven by the growing prevalence of high-deductible plans, which prod consumers to shop around for the best price. Prices for office visits, diagnostic imaging, obstetric ultrasounds, colonoscopies and physical therapy -- services that consumers increasingly must pay for themselves -- especially are coming under the microscope.”

Of course, hospitals’ standard answer to questions about price are often “Gosh! We won’t know the price until we perform the service and we bill your insurer.” But that response is no longer going to fly with health care consumers. Patients have an increasing array of choices like Health Care Bluebook, Compass Professional Health Services, Vitals and Castlight Health. These firms’ business models involve assisting health plan enrollees to find cheaper prices for health care. Hospitals can no longer easily hide behind third-party payer contracts to shield them from price competition. Firms like Vitals and Compass can tell patients in seconds where the cheap MRI is; what various facilities charge for a colonoscopy and so on.

It’s about time. Free-market heath policy wonks have long touted Health Savings Accounts (HSAs) as a means to lower the cost of health care. Little did they realize it would take an unpopular health care law that made insurance so unaffordable that people had no choice but to accept outrageously high deductibles. Of course, HSAs are a great way to save and pay for health care before a deductible has been met. Then again, so is self-pay. Someone with thousands of dollars in an HSA has options; they can convince themselves medical prices are too difficult to compare and just this one time decide to go ahead and have the service done at the facility of their doctor’s choosing. Absent an HAS, alternatives to shopping for the best price begin to disappear. A $6,000 deductible forces people to shop for care until they’ve gone through $6,000 in spending! When deductibles were only, say, $1,000 or $2,000, many consumers could merely accept high prices knowing they would likely never actually have to ask the price of a given medical service once through their nominal deductible. That is changing. Now that more and more people have deductibles large enough to purchase a used car, maybe hospitals will be compelled to rework their chargemasters so list prices are not a multiple of what private insurers pay. It would also be nice for hospitals to inform all affiliated providers that each needs to communicate with patients prior to performing services, inform them which networks they participate in, and of costs for out-of-network services.

A $4,000 to $6,000 deductible gives most consumers a significant reason to shop. This becomes even more important when entire families face deductibles of $10,000 or more. It’s becoming more common for patients to ask their doctors uncomfortable questions like “what does that cost?” or “do I really need that?” Once this becomes commonplace, doctors will begin to avoid the problem by disclosing prices up front and steering patients to facilities with reasonable prices. It may be as simple as letting patients know that a particular imaging center offers cash discounts or explaining how patients can inquire about the cost of a lab test prior to receiving it.

An important step is for insurers and health plans to implement cost control tools that create transparency. Millions of consumers with access to transparent pricing can do a lot to bring about competition. If we can get patients used to asking about prices, that will encourage more doctors to help patients save on medical bills. That will, in turn, prompt hospitals to be more open about their prices and possibly compete for patients’ business.