By KIM BELLARD

Nice try, Wendy’s. During an earnings call last month, President and CEO Kirk Tanner outlined the company’s plan to try a new form of pricing: “Beginning as early as 2025, we will begin testing more enhanced features like dynamic pricing and day-part offerings along with AI-enabled menu changes and suggestive selling.” 

None of the analysts on the call questioned the statement, but the backlash from the public was immediate — and quite negative. As Reuters described it: “the burger chain was scorched on social media sites.”

Less than two weeks later Wendy’s backtracked – err, “clarified” – the statement. “This was misconstrued in some media reports as an intent to raise prices when demand is highest at our restaurants,” a company blog post explained. “We have no plans to do that and would not raise prices when our customers are visiting us most.”

The company was even firmer in an email to CNN: “Wendy’s will not implement surge pricing, which is the practice of raising prices when demand is highest. This was not a change in plans. It was never our plan to raise prices when customers are visiting us the most.”

OK, then. Apology accepted.

At this point it is worth explaining a distinction between dynamic pricing and the more familiar surge pricing. As Omar H. Fares writes in The Conversation: “Although surge pricing and dynamic pricing are often used interchangeably, they have slightly different definitions. Dynamic pricing refers to any pricing model that allows prices to fluctuate, while surge pricing refers to prices that are adjusted upward.”

Uber and other ride sharing services are well known for their surge pricing, whereas airlines’ pricing is more dynamic, figuring out prices by seat by when purchased by who is purchasing, among other factors.

Wendy’s wouldn’t be the first company to use dynamic pricing and it won’t be the last. Drew Patterson, co-founder of restaurant dynamic pricing provider Juicer, told The Wall Street Journal that dozens of restaurant brands used his company’s software. The company’s website doesn’t publicize those brands, of course. Still, he emphasized: “You need to make it clear that prices go up and they go down.” 

Dave & Busters is public about its pricing strategy. “We’re going to have a dynamic pricing model, so we have the right price at the right time to match the peak demand,” Dave & Buster’s CEO Chris Morris said during an investor presentation last year.  On the other hand, Dine Brands (Applebee’s/IHOP) Chief Executive John Peyton said. “We don’t think it’s an appropriate tool to use for our guests at this time.”

The potential revenue benefits are obvious, but there are risks, as Wendy’s quickly found out. Mr. Fares says: “One of the biggest risks associated with dynamic pricing is the potential negative impact on customer perception and trust. If customers feel that prices are unfair or unpredictable, they may lose trust in the brand.”

What Wendy’s tried to announce is not ground-breaking. Catherine Rampell pointed this out in a Washington Post op-ed:

In other words, things will be cheaper when demand is low to draw in more customers when there’s otherwise idle capacity. Lots of restaurants do this, including other burger chains. It’s usually called “happy hour.” Or the “early-bird special.” Non-restaurants do it, too. Think the weekday matinee deals at your local movie theater or cheaper airfares on low-traffic travel days.

Indeed, The Wall Street Journal reported: “An estimated 61% of adults support variable pricing where a restaurant lowers or raises prices based on business, with younger consumers more in favor of the approach than older ones, according to an online survey of 1,000 people by the National Restaurant Association trade group.” 

I wonder what the support would have been if the question had been about healthcare instead of restaurants. 

Like it or not, some form of dynamic pricing will come to healthcare. Want a private room instead of semi-private? Surge pricing. Willing to see a nurse practitioner instead of a physician? Dynamic pricing. Want to buy prescription drugs in the U.S. instead of in Europe? Surge pricing. Want a doctor’s appointment Monday morning instead of Tuesday? Surge pricing. Need an ER visit Saturday night instead of Sunday afternoon? Surge pricing.

Some of these healthcare has been doing for years. Others, and even more insidious ones, are coming.

We have to know that the private equity firms that have invested in healthcare have to be interested. Yashaswini Singh and Christopher Whaley wrote in The Hill: “Over the last decade, private equity firms have spent nearly $1 trillion on close to 8,000 health care deals, snapping up practices that provide care from cradle to grave: fertility clinics, neonatal care, primary care, cardiology, hospices, and everything in between.”

They go on to warn: “Although research remains mixed on how it affects quality of care, there is clear evidence that private equity ownership increases prices. These firms aim to secure high returns on their investments — upwards of 20 percent in just three to five years — which can conflict with the goal of delivering affordable, accessible, high-value health care.”

Dynamic pricing has to look good to these firms. Surge pricing would look even better.              

But one doesn’t have to be owned by private equity to be rapacious in healthcare. Everyone is looking for margins, everyone is looking to maximize revenue, and consumers – A.K.A. patients – grumble about prices but pay them anyway, especially if their health insurance company is paying most of the cost. In today’s healthcare world, if you are a CEO or CFO and you’re not considering dynamic pricing, it’s close to malfeasance.

To me, the scariest part of Wendy’s plan wasn’t the dynamic pricing but the “AI-enabled menu changes and suggestive selling.” Upcoding has been a problem in healthcare for as long as there has been coding, but when we get an AI-enabled menu of treatment options and suggested selling (aka treatments), well, we haven’t seen anything yet.

Maximize away.  

Look, I’m not going to Wendy’s even if they pay me, but I take my wife out on Valentine’s Day even though I know the restaurant has surged the hell out of its prices. Some things you pay for, and, when it comes to healthcare pricing, every day is Valentine’s Day.

I’m resigned to the fact that dynamic pricing has a toehold in healthcare already, but I’m holding out hope that we can use AI to help us make those recommendations and set those prices to deliver the most effective, efficient care, not just to maximize profits.

Wait Till Health Care Tries Dynamic Pricing

Nice try, Wendy’s. During an earnings call last month, President and CEO Kirk Tanner outlined the company’s plan to try a new form of pricing: “Beginning as early as 2025, we will begin testing more enhanced features like dynamic pricing and day-part offerings along with AI-enabled menu changes and suggestive selling.” 

None of the analysts on the call questioned the statement, but the backlash from the public was immediate — and quite negative. As Reuters described it: “the burger chain was scorched on social media sites.”

Less than two weeks later Wendy’s backtracked – err, “clarified” – the statement. “This was misconstrued in some media reports as an intent to raise prices when demand is highest at our restaurants,” a company blog post explained. “We have no plans to do that and would not raise prices when our customers are visiting us most.”

The company was even firmer in an email to CNN: “Wendy’s will not implement surge pricing, which is the practice of raising prices when demand is highest. This was not a change in plans. It was never our plan to raise prices when customers are visiting us the most.”

OK, then. Apology accepted.

At this point it is worth explaining a distinction between dynamic pricing and the more familiar surge pricing. As Omar H. Fares writes in The Conversation: “Although surge pricing and dynamic pricing are often used interchangeably, they have slightly different definitions. Dynamic pricing refers to any pricing model that allows prices to fluctuate, while surge pricing refers to prices that are adjusted upward.”

Uber and other ride sharing services are well known for their surge pricing, whereas airlines’ pricing is more dynamic, figuring out prices by seat by when purchased by who is purchasing, among other factors.

Wendy’s wouldn’t be the first company to use dynamic pricing and it won’t be the last. Drew Patterson, co-founder of restaurant dynamic pricing provider Juicer, told The Wall Street Journal that dozens of restaurant brands used his company’s software. The company’s website doesn’t publicize those brands, of course. Still, he emphasized: “You need to make it clear that prices go up and they go down.” 

Dave & Busters is public about its pricing strategy. “We’re going to have a dynamic pricing model, so we have the right price at the right time to match the peak demand,” Dave & Buster’s CEO Chris Morris said during an investor presentation last year.  On the other hand, Dine Brands (Applebee’s/IHOP) Chief Executive John Peyton said. “We don’t think it’s an appropriate tool to use for our guests at this time.”

The potential revenue benefits are obvious, but there are risks, as Wendy’s quickly found out. Mr. Fares says: “One of the biggest risks associated with dynamic pricing is the potential negative impact on customer perception and trust. If customers feel that prices are unfair or unpredictable, they may lose trust in the brand.”

What Wendy’s tried to announce is not ground-breaking. Catherine Rampell pointed this out in a Washington Post op-ed:

In other words, things will be cheaper when demand is low to draw in more customers when there’s otherwise idle capacity. Lots of restaurants do this, including other burger chains. It’s usually called “happy hour.” Or the “early-bird special.” Non-restaurants do it, too. Think the weekday matinee deals at your local movie theater or cheaper airfares on low-traffic travel days.

Indeed, The Wall Street Journal reported: “An estimated 61% of adults support variable pricing where a restaurant lowers or raises prices based on business, with younger consumers more in favor of the approach than older ones, according to an online survey of 1,000 people by the National Restaurant Association trade group.” 

I wonder what the support would have been if the question had been about healthcare instead of restaurants. 

Like it or not, some form of dynamic pricing will come to healthcare. Want a private room instead of semi-private? Surge pricing. Willing to see a nurse practitioner instead of a physician? Dynamic pricing. Want to buy prescription drugs in the U.S. instead of in Europe? Surge pricing. Want a doctor’s appointment Monday morning instead of Tuesday? Surge pricing. Need an ER visit Saturday night instead of Sunday afternoon? Surge pricing.

Some of these healthcare has been doing for years. Others, and even more insidious ones, are coming.

We have to know that the private equity firms that have invested in healthcare have to be interested. Yashaswini Singh and Christopher Whaley wrote in The Hill: “Over the last decade, private equity firms have spent nearly $1 trillion on close to 8,000 health care deals, snapping up practices that provide care from cradle to grave: fertility clinics, neonatal care, primary care, cardiology, hospices, and everything in between.”

They go on to warn: “Although research remains mixed on how it affects quality of care, there is clear evidence that private equity ownership increases prices. These firms aim to secure high returns on their investments — upwards of 20 percent in just three to five years — which can conflict with the goal of delivering affordable, accessible, high-value health care.”

Dynamic pricing has to look good to these firms. Surge pricing would look even better.              

But one doesn’t have to be owned by private equity to be rapacious in healthcare. Everyone is looking for margins, everyone is looking to maximize revenue, and consumers – A.K.A. patients – grumble about prices but pay them anyway, especially if their health insurance company is paying most of the cost. In today’s healthcare world, if you are a CEO or CFO and you’re not considering dynamic pricing, it’s close to malfeasance.

To me, the scariest part of Wendy’s plan wasn’t the dynamic pricing but the “AI-enabled menu changes and suggestive selling.” Upcoding has been a problem in healthcare for as long as there has been coding, but when we get an AI-enabled menu of treatment options and suggested selling (aka treatments), well, we haven’t seen anything yet.

Maximize away.  

Look, I’m not going to Wendy’s even if they pay me, but I take my wife out on Valentine’s Day even though I know the restaurant has surged the hell out of its prices. Some things you pay for, and, when it comes to healthcare pricing, every day is Valentine’s Day.

I’m resigned to the fact that dynamic pricing has a toehold in healthcare already, but I’m holding out hope that we can use AI to help us make those recommendations and set those prices to deliver the most effective, efficient care, not just to maximize profits.

Kim is a former emarketing exec at a major Blues plan, editor of the late & lamented Tincture.io, and now regular THCB contributor

It’s no secret that health care pricing has been out of whack for a very long time. This past week PBMs and pharma manufacturers were in front of congressional committees trying to defend the indefensible–how much drugs cost and why? Hospitals have been required to publish their fictional price lists (their chargemasters) for a few years now and more recently have been instructed to reveal what they actually get from health plans for specific procedures. You would assume that this would move overall pricing pressure down to the “best price” but that effect seems to not be happening. At least not yet. This week also did see the bankruptcy of PE-backed (or should that be PE-toppled) emergency staffing corporation Envision. But that was more because its business model depended on surprise billing and not being in insurer networks.

More typical is the recent dispute in which primary & urgent care chain Carbon Health went public with its fight against Elevance subsidiary Anthem Blue Cross in California. While it was in-network Carbon claims that it received less than Medicare rates from Anthem, while its large delivery system competitors were getting 2-4 times Medicare rates.

This sounds about right to me. Late last year I had two identical telemedicine visits for back pain with specialists. One in a private practice, another with a doctor from UCSF–my local academic medical center. Before you troll me, they were both offered to me last minute, I didn’t know which doctor would be available if I needed a procedure, and it’s always good to get a second opinion. Plus I had blown through my deductible by then so they were free to me!

My insurer paid $795 to UCSF and $219 to the private doctor. So for exactly the same thing one provider got more than 3&½ times what the other did.

There’s still lots of chatter about the growth of value-based care, but even within Medicare Advantage there’s lots of fee-for-service, and it even pops up in places it’s supposed to be dead-–like Geisinger. We are nearly 20 years on from the Bush Administration talking about transparency as the solution to health care costs yet the opacity and confusion around pricing is as bad as it’s ever been. Yes, we know some of the numbers, but the US is a long way from seeing the invisible hand working its magic and making the same thing cost the same amount across health care. The only place where that happens is under the neo-Stalinist central pricing of Medicare. Not that that seems to work well either. 

There’ll be a couple more years while the “new” transparent plays out in the market, but don’t expect too much of a revolution. Then likely we’ll try something else.

Crowdsourcing is engaging a lot of news organizations today. While some journalists are nervous about crowdsourcing — “Yikes, we’d rather talk than listen, and what if they tell us something we don’t want to hear? Or something that we know isn’t true?” — we here at clearhealthcosts.com love crowdsourcing. We find, as journalists, that our communities are smart, energized, truthful and engaged, and happy to join hands in thinking, reporting and helping us make something that’s bigger than the sum of its parts. We learn great things by listening, so … now we’re going to to an experiment crowdsourcing coverage for our blog.

Our current project crowdsourcing health care prices in California, with KQED public radio in San Francisco and KPCC/Southern California public radio in Los Angeles, has been a great success, as was our previous project with WNYC public radio, and we’re looking forward to launching similar projects with other partners.

Our community members have a lot to say. Some of what they say about health care prices we knew (people are upset, and they feel like they’re paying too much, and they have a hard time understanding their bills) — but some of what they say is totally radical: They’re out there negotiating over prices regularly. They’re putting away their insurance cards, choosing to pay cash and saving hundreds and hundreds of dollars.

They want to show us their bills. They want to talk about it.

1. Almost overnight, we have seen an explosion in the number of doctors contacting us to offer support of pricing transparency. Our theory: most docs got into this profession to help people, and they’re appalled by the epidemic of money medicine, and by the simple fact that their treatment decisions are increasingly governed by money — what the insurance company will pay, what the patient can afford, what’s on the formulary. Yes,  there are some bad apples in the bunch. But that is the exception, not the rule. (Hospital bills, on the other hand, are full of errors and overcharges.)

2. There’s a similar explosion in the number of people who want to  talk about “all on Medicare.” The idea of single-payer is still unpalatable to much of the nation, and the term “single-payer” has itself been tainted in the political discourse. But we are hearing from people on the left and the right and in the middle who are saying variations of this: “All on Medicare” to us means something like “Enough is enough. Single payer is the way to go.”

3. The shocking rise in generic drug prices: what happened, and will the congressional investigation that Bernie Sanders is mounting have any effect? Nearly 70 percent of Americans use some prescription drugs, and the skyrocketing prices affect millions of people. Should we blame it all on Big Pharma? What about pharmacy benefit managers?

4. Mergers and acquisitions in health care hit an all-time high. Lists of providers with office addresses, phone numbers and billing contacts are out of date before they are even printed, let alone posted on the web. Will we wind up with one big hospital health care system, named Blue Partners Aetna Cigna Cedars Mayo Cleveland Optum Sutter HCA Tenet Continuum? And how will that differ from “all on Medicare” or single-payer or whatever you want to call it? Oh, right: Blue Partners Aetna Cigna etc. will be a for-profit, with an eye on Wall Street.

5. People are paying cash for health care, as they increasingly realize that putting away their insurance card is good under certain circumstances. A $4 generic at a big-box store rather than a $15 co-pay for a generic under their insurance plan? A $580 charge for a cash MRI rather than an $1850 charge under their insurance plan because they haven’t met their deductible? We may be seeing the beginning of the end of employer-sponsored high-premium insurance. And wait until the Cadillac tax hits fully in 2018; people are already positioning themselves for that, and it’s looking ugly for those who want to preserve a system in which employees pay no premiums and no co-pays or co-insurance or deductibles.

6. Price transparency is huge. Those who embrace it will be rewarded, and laggards may be punished. You may have a great insurance plan, few health problems and low out of pockets. But you’re an exception, rather than the rule. Listen to our community members:

“Thanks for what you’re doing to make healthcare reasonable and fraud-free!”

“From Rapid City South Dakota. I think your effort to establish a list of prices for various medical procedures is great. ”

“I just want to say that your website is amazing. Please don’t stop because you are helping people everyday, many of whom are struggling to make ends meet while others are just looking for a some transparency in a market where there has traditionally been very little.”

7. Insurance plan design is totally not sexy, but it is  the next big frontier. Narrow networks? What does your plan allow, and what does it prohibit? Can you get the kind of insulin you need under your plan’s formulary, or are you only covered for insulin you’re allergic to? Do you have to travel 300 miles for behavioral health coverage? Did your insurance deny treatment that made your illness, injury or condition worse?

8. Medicaid expansion reduces everybody’s private premiums in states where it’s been embraced. This makes sense, but who thought about it in this way? It will be interesting to see how many more states decide to refuse Medicaid expansion, and how many embrace it.

9. Healthcare.gov will not work perfectly during open enrollment. Neither will the states’ individual exchanges. We will probably hear a lot about this, and we’ll probably have to write about it, but this is a sideshow, and the complaints about failed software should be remarked upon and then ignored. Software doesn’t always work; we happen to know. The administration is trying to fix it, but it’s still complicated.

10. Patient engagement is indeed the blockbuster drug. Yes, it’s hard; yes, it’s often unreimbursed. Yes, it can go awry. But it is the future of medicine: let me introduce you to patients and providers joining hands to make a better future: e-Patient Dave deBronkart, Casey Quinlan, Danny Sands, Leslie Kernisan, Gilles Frydman, the Society for Participatory Medicine, and the people at the heart of the Patient-family Engagement Roadmap, prepared by the American Institutes for Research under a grant from the Gordon and Betty Moore Foundation. Even the Institute of Medicine has weighed in on shared decision-making.

11. I am not planning to write about this, but I add it here for the sake of adding it: The ACA didn’t totally fail. The ACA didn’t totally succeed.

So that’s a start on what we’re thinking about. What do you want us to cover?

Tell us your thoughts, either in the comments, by Twitter @chcosts, or by email to info (at) clearhealthcosts (dot) com.

With such  success in those two projects, we decided to try crowdsourcing our coverage: what health cost topics should we cover? We’re looking back  and looking forward — and we’re coming to you, our community, to help guide us. Here are some subjects we plan to write about.

Our ask for you: Please tell us what surprises you. What you want us to cover?

Let us know, in the comments, by Twitter @chcosts, or by email to info (at) clearhealthcosts (dot) com. Or by snailmail to P.O. Box 8124, Pelham, N.Y. 10803. Or by Pony Express…

How much does a colonoscopy cost? Well, that depends.

If you’re uninsured, this is a big question. We’ve learned that cash or self-pay prices can range from $600 to over $5,400, so it pays to ask.

If you’re insured, you may think it doesn’t matter. Routine, preventive screening colonoscopies are to be covered free with no co-insurance or co-payment under the Affordable Care Act.

However, we’re learning that with colonoscopies, as with mammograms, people are being asked to pay sometimes. It’s not clear to us in every case that they should pay, and since we don’t know all the details of these events, we can only offer some general thoughts. We’ve also heard from Medicare enrollees without supplemental Medicare policies that they think they’re responsible for 20 percent of the charged price — so 20 percent of $600 vs. 20 percent of $5,400 is a big deal.

If you’re on a high-deductible plan and the charge to you will be, say, $3,600, you can probably ask around and find a lower rate.

A thorough view of some colonoscopy billing issues is in this article in The New York Times by Libby Rosenthal, who has been covering health costs for the paper. We’ve heard also about in-network providers using out-of-network anesthesiologists, so it pays to pay attention.

Things to watch out for in billing

If you’re planning a colonoscopy, you might want to ask for the price in advance. Make sure that the price quoted to you includes everything: doctor’s fee, anesthesiology, lab tests and facility fee (sometimes but not always) are the main charges. Sometimes the doctor will charge an additional pre-procedure consultation fee, and sometimes the solution for “prep” to clean your system out is included, while sometimes it’s not.

Doctor’s fee. When we survey for prices, often we are quoted only a doctor’s fee, with anesthesiology and facility fee separate. Some doctors do this in their offices; some do it at different sites (a GI clinic, a hospital) and each of those sites can have a different fee. When we’re looking for prices, we always ask what’s included.

Also, make sure your doctor is in network, if you’re insured.

Anesthesiology. Sometimes this is a full general anesthetic, and sometimes it is a light dose of anesthesia resulting in what is called “twilight,” where you’ll be sleepy but able to respond to commands, essentially sedated. Generally with twilight you forget everything immediately.

There is a large body of research suggesting that full general anesthetic is wasteful for procedures like a colonoscopy, but it continues to be offered fairly frequently. A small number of people do it with no anesthesia or sedation.

“Between 2003 and 2009, the proportion of GI procedures involving anesthesia providers doubled, and overall payments for GI anesthesia tripled,”   a recent study by the Rand Corporation found.

Anesthesia can be pricey, and it’s important to be sure that the provider is in network — so make a point of asking, even if you are at an in-network doctor’s office, or other location. We hear a lot of complaints about this.

What happened to me: I asked in advance to make sure the anesthesiologist and everything else would be in network. Then when I arrived in the morning for my appointment, the receptionist gave me a form to sign guaranteeing that I would pay everything that wasn’t covered by insurance, including any out-of-network anesthesiologist or lab fees.  I refused to sign it, saying that I’d checked in advance to make sure everybody and everything was in network. They didn’t insist, and the anesthesiologist (twilight, by the way) was indeed in network. My out of pocket was $30 for anesthesiology, my standard co-pay (before the Affordable Care Act).

Lab tests. The providers generally don’t reveal in advance what lab tests will cost;  they will say that charge depends, often on what they choose to remove for testing during the procedure. We have heard labs estimated in advance to be as low as $50 and as high as “we can’t tell you in advance.”

What happened to me: I had $250 in lab charges, all covered except for a $30 co-pay (before the Affordable Care Act); my girlfriend’s lab charges were $950, about the highest I’ve heard. For her, it was completely covered, but of course that’s not always true.

Facility fee. This is a growing issue: a doctor’s office could be just an office, but it could be a facility. The facility fee is applied by hospitals, gastrointestinal ambulatory surgery centers, and just about anything that feels that it’s a facility.

In my case, there was no facility fee; the procedure took place in a doctor’s office. My girlfriend’s took place at a GI center, not her doctor’s office, and the biggest line item on the bill was $2,700, for the facility fee, of which the insurer paid a bit less than half. She was not asked to pay the balance.

Some insurers will refuse to pay a facility fee from an in-network provider. Some insurers will pay only a part of the facility fee, and depending on your insurance plan or your state’s policies on balance billing, you might be responsible for some or all of that fee.

So it pays to ask up front, “Is there a facility fee? How much is that? Is it covered by my insurance? Does there have to be a facility fee?” When we were collecting prices, we learned that some places would quote us only a facility fee, adding that the doctor fees varied by provider, and so did the anesthesiology fees. Most places said labs were extra and unpredictable.

Pre-procedure consultation. Not every provider charges this. Mine did, and it was $250. I saw a nurse, and got a checklist. My insurance company covered the whole thing, with a $30 co-pay.

Prep stuff. The medication you’re asked to drink to clean out your system is not free. We have heard prices as low as $12.10 over the counter, and as high as $38 — actually, both from the same person, which I wrote about in this blog post.

Insurers’ predictions: A grain of salt

If you’re insured, you could look at the insurance company’s prediction of prices.

My insurance company predicted this: “Estimated Treatment Cost: $1,464-3,609; Plan Responsibility: $1,125-2,952; Member Responsibility: $339-657.” My actual experience:  Bill totaled $2,797; plan paid $2,263.85; my co-pay was $120 ($30 for the consultation, $30 for the doctor, $30 for the anesthesiologist, and $30 for lab fees). I have no records on what the prep stuff cost.

My girlfriend’s experience: Bill totaled $5,544, plan paid $2,750.08, her copay was 0. (She had a different provider and has a different insurance plan; this was also pre-A.C.A.) Also, depending on your plan, under the Affordable Care Act, you should not pay anything for a routine preventive colonoscopy.

Why is it so hard to find the cost of a colonoscopy?

When we survey on colonoscopies, we ask for the following component parts of the procedure:

Doctor’s fee, for the person actually performing the exam.

Anesthesiology.

Facility fee, if any. This is a growing issue: a doctor’s office could be just an office, but it could be a facility. The facility fee is applied by hospitals, gastrointestinal ambulatory surgery centers, and just about anything that feels that it’s a facility. Lab fees.

Consultation.

Any other charges (prep liquid, for example).

In our surveys, often we are told only one or two of these charges: Statements like these are common.

“That’s the facility fee for doing it here; the doctors all charge their own rates.”

“The anesthesiologist can’t predict in advance how much they’ll need or how long they’ll take, so we can’t tell you that.”

“We can’t tell labs in advance.”

“That’s a price for facility fee, doctor and anesthesiologist. Labs run between $50 and $250 usually.”

“We don’t quote prices in advance.”

“That’s the doctor’s fee — there might be a facility fee, depending on where he does it. We don’t know until he tells us.”

We’ve written about this before several times, here and here.

O.K., so how much does a colonoscopy cost?

Here are  colonoscopy price lists for the New York area, and here are colonoscopy price lists for the Los Angeles area.

Here are  colonoscopy price lists for the San Francisco area. And here are Texas cities: colonoscopy price lists for the Houston area, the Dallas-Fort Worth area, the San Antonio area and the Austin area.

A cautionary note: the billed price, as always in the health-care marketplace, can be a price that’s not actually real.

“In Keene, N.H., Matt Meyer’s colonoscopy was billed at $7,563.56,” Rosenthal wrote in her New York Times piece. “Maggie Christ of Chappaqua, N.Y., received $9,142.84 in bills for the procedure. In Durham, N.C., the charges for Curtiss Devereux came to $19,438, which included a polyp removal. While their insurers negotiated down the price, the final tab for each test was more than $3,500.”

The charged price for a medical procedure (often called the Chargemaster price) is seldom the price that is actually paid. What is actually paid is either set by law and administrative rules, in the case of government payers like Medicare and Medicaid, or governed by contracts, in the case of non-government insurance plans like Blue Cross, United HealthCare and so on.

If you ask for a cash or self-pay rate, that will often be considerably lower than the regularly charged price, reflecting cash discounts if they exist, and increasingly they do.

One hesitates to make too much of a single report, but the Altarum Institute’s July Report, “Health Care Price Growth at 20+ Year Low,” certainly commands one’s attention.  According to Altarum’s analysis, the health sector pricing trend ran at a 1.0 percent annual rate in May 2013, lowest since January of 1990.  What is striking about Altarum’s health care pricing trendline is that it has declined for the last three years in spite of an alleged economic recovery.

It also runs parallel to a subsiding utilization trend, suggesting that the health sector has been unable to offset reduced utilization with price increases.  Since the beginning of the recession, pricing has subsided from double the rate of the GDP deflator to parity, and it has closely tracked the deflator with only two deviations for more than eight years. Clearly, something more than the recession is at work here.

These trendlines confirm what this observer sees from his contacts in multiple sectors of the health industry:  a widespread and durable “top line flu”.  The growth in enterprise revenue for most health providers and manufacturers has been static (e.g. very low single digits or actually declining) over the last two years.  Most investor-owned hospitals, pharmaceutical companies, device manufacturers, and physician practices (pretty much everyone except the consultants and IT vendors) have reported both revenue stasis and earnings compression.

My economist friends point to rising consumer copayments as inhibiting price increases.  The Kaiser Family Foundation has reported almost a quadrupling of the number of covered workers in high deductible health plans (from 5 percent to 19 percent) since the end of the recession.  It is also possible that a disinflationary mindset has inhibited providers and suppliers from seeking outsized price increases to compensate for lost sales volume.  For suppliers, the marked decline of “physician preference” marketing has also hurt both sales and margins.

Hospital pricing. Performance of hospital prices will provide more fodder for those concerned about hospital consolidation pushing prices up.  On the one hand, overall hospital prices rose an annualized 1.8 percent for May 2013, fractionally higher than the consumer price index (CPI) at 1.4 percent.  However, when one strips out the “administered price” portion (Medicaid and Medicare), hospital prices to privately insured patients rose 4.8 percent annualized in May, nearly five times rate of health prices as a whole.  Altarum suggests that cost shifting might explain this significant disparity.  However, even this increase to private patients was not enough to raise overall health costs significantly.

Government payment to hospitals has trended lower for multiple reasons.   Many state Medicaid plans have cut hospital rates in the past several years to help balance state budgets.  And in addition to the ACA’s mandated reductions in hospitals’ disproportionate share payments and DRG updates, the sequester took a significant further bite out of DRG payments during the winter.

Since most hospital contracts with private insurers are multi-year, it’s difficult to argue that compensating upward revisions in private health insurance contract rates would yet be reflected in national economic statistics.  Moreover, not all hospitals are part of systems capable of exerting pricing power on private health plans.  Have-not hospitals have had their prices constrained by payer contracts, compensating for the effect of leverage by market hegemons.  We’ll have more evidence in a year to confirm or disconfirm the cost shifting/pricing power hypothesis.

There’s another indicator of a tougher hospital pricing environment.  According to the Advisory Board’s Dan Diamond, hospital employment has actually contracted in one-quarter of the monthly jobs reports from the Bureau of Labor Statistics since January 2009, including a 6000 person force reduction in May, 2013.  On balance, hospital executives would much rather raise rates than lay off staff, so the fact that the nearly unbroken decades-long expansion of hospital headcounts is faltering suggests a very difficult pricing environment for hospital services.

Health insurance premiums. Broad based relief from rising prices across the health sector will put the behavior of health insurance premiums in 2014 into high relief.   Small employers and individuals facing double digit premium renewal increases will legitimately wonder what justifies them if both healthcare prices and utilization are essentially flat.

There is no actuarial roadmap to guide health insurance pricing in an environment where most traditional underwriting strategies have been outlawed by ACA. Guaranteed issue and guaranteed renewal, elimination of lifetime caps, prohibitions on pre-existing conditions restrictions, enrollment of children to age 26 on their parents’ policies all have costs that must be spread across insurers’ risk pools.  Optimism about private insurer pricing in 2014 has given way to watchful waiting and anxiety.

Yet the Altarum Report confirms that if one is to embark on an aggressive program of health insurance expansion and public subsidy, there could hardly be a more propitious time than right now.   Sustained relief from rising health costs could help alleviate fiscal pressure on government budgets and on the broader economy.

Jeff Goldsmith is president of Health Futures Inc, which specializes in corporate strategic planning and forecasting future health care trends.

Goldsmith, Jeff., Health Industry Price Inflation At Historical Low, Health Affairs Blog, 1 August 2013. Copyright ©2013 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.