By JOANNE RODRIGUES-CRAIG

Financial well-being, or the state of an individual’s personal monetary affairs, is one of the six core indicators of wellness in the Gallup-Healthways Well-Being Index. Poor financial well-being can lead to a whole host of short and long term mental and physical health issues, including depression, anxiety, troubled relationships and chronic stress.^{[1] [2]}

It is surprising how American hospitals and other health providers have neglected financial well-being when considering their patients’ health. In a recent study by the American Cancer Association, 56% of Americans suffer from hardships related to the cost of care.^[3] Medical costs are the primary cause of 67% of all bankruptcies in the United States.^[4] To think that health care costs are not having a deleterious effect on American’s general well-being is a complete fallacy.

Even as a former health technology data scientist, I was largely in the dark about how health provider pricing works. Finding health provider pricing is like pulling teeth; it’s extremely time0consuming, frustrating (and sometimes painful) to get a health estimate for even the simplest procedures. Having poor or inadequate insurance can feel like a weight holding you down during your most vulnerable time, in the midst of a major health crisis.

In 2018 on a fall evening, I took my daughter to an urgent care clinic thinking she might have the flu. We proceeded to wait late into the night for a simple flu test. The urgent care center sent the flu test to their affiliated hospital to be processed. The hospital refused to process it until they had enough batches, which took until 3 AM. In addition to a negative experience at the urgent care facility, a few months later we received a bill from the hospital for around $800 for the flu test and about $1,800 for the full visit. (A flu test cost about $67 at the 24-hour Walgreens around the block.)

It was around the same time that the Centers for Medicare and Medicaid Services (CMS) finalized a rule that every hospital had to post their chargemaster prices or ‘sticker prices’ on their websites.

The chargemaster price for a service at a hospital is similar to a car MSRP, or an official list price for a hospital service, without an insurer, self-pay or charity care discount. While very few people pay this price, it’s a strong indicator for the eventual cost to the patient. The average insured patient will pay 15 cents more for every dollar increase in the chargemaster price;^[5] chargemaster prices can wildly meaning that shopping around by chargemaster price might save a consumer hundreds to thousands of dollars per major health procedure.

As a data scientist and a member of a high deductible health plan, I could not wait to explore hospital chargemaster prices. For the last year, it’s been my mission to process, clean and collate the chargemaster and public healthcare data into a consumer-friendly, online format to prevent others from large surprise bills. My goal with building Clinic Price Check is to bring price transparency, foster better financial health and mitigate the rising rates of medical bankruptcy in the United States. ClinicPriceCheck.com, currently, has prices for over 9,000 health services at almost all California hospitals and we hope to cover the entire United States by summer 2020. 

After spending a year compiling all this data, a few aspects really stood out to me. Some matched the academic literature on hospital pricing and some belied it. These are the five aspects of hospital pricing that I feel every American should be aware of:

1. Hospital pricing is completely arbitrary and often based on “cockamamie” formulas.^[6] When I first read this, I thought no way could this be true, that hospital pricing was just some set of arbitrary multiples and random formulas. But, this pared out in the data. It became clear to me that this was in fact true. Some hospitals multiply the Medicare reimbursement rates to set their rates. Very few hospitals set rates that are in any way related to the costs of providing services.
2. De facto price discrimination (called ‘cost-shifting’ in health policy circles).^[7] When I first read that hospitals employ a strategy of de facto price discrimination, I thought this might be true, but the difference in payments was probably minimal. De facto pricing discrimination is when consumers pay different amounts for the same service. I thought Americans would revolt at the thought that individuals were paying vastly different amounts for care. This is in fact completely true and the payments could be vastly different. For instance, at one hospital in California the ‘sticker price’ for a basic metabolic panel is $1,201, the average insured patient pays $840, the estimated cash payer price was $132, while the Medicare patient pays $11. All for the same service at the same hospital.
3. Medicare reimbursement rate is too low.^[8] No hospital accepts this rate voluntarily from patients. This I found to be false. There are some hospitals that accept the Medicare rate as their self-pay or cash rate. There are many hospitals that accept less than 1.5 times the Medicare rate as their cash rates. From looking at the data, there was a strong relationship with the number of independent hospitals in a region and the cash rate being less than 2x the Medicare rate.
4. Prices are very high. This is true. Some listing prices, especially for lab work in California similar to my experience, are 100x’s the Medicare Reimbursement rates service. For many common services (in California), the average hospital’s list price is at least 10x the Medicare Reimbursement rates. This means that the average insured patient with the average insurer discount, which is 30% according to FAIR Health, is still paying 7 times what a Medicare patient would pay for the same service.
5. Self-pay is a great option if you have a High Deductible Health Plan (HDHP). There was very little discussion in the academic literature about self-pay. Self-pay or opting out of one’s insurance and paying yourself, is very interesting because it’s closest to a free market situation in healthcare. Self-pay patients can shop around for non-urgent health services and since you generally must pay before you receive the service, prices are transparent. As discussed above, self-pay rates can be as low as the Medicare reimbursement rates, which is usually a pretty good deal. [As a side note, Providers are under no obligation to share self-pay rates with consumers, but if you ask (at least in California) providers must provide you with a ‘good faith estimate’. In addition, according to the California Department of Managed Care (this may hold in other states too), anyone can opt-out of their insurance and pay the self-pay rates, even if a provider explicitly disallows this in their policies.]

While greater price transparency in healthcare can improve consumers’ ability to shop around, it will not solve the central problem of affordability. Health provider consolidation and closure are leading to fewer provider choices. Healthcare is not easily shopped for in emergency situations or during a health crisis. Any changes to the healthcare system, whether it be in a Medicare For All or in some other form, must include some form of price control or price caps to keep healthcare affordable to all Americans.

Joanne Rodrigues is an experienced health technology data scientist, and founder of ClinicPriceCheck.com, with Master’s degrees in Mathematics, Political Science and Demography.

^[1] Weisman, R. “Personal Financial Stress, Depression, and Workplace Performance,” in Financial Stress and Workplace Performance: Developing Employer-Credit Union Partnerships, The Center for Credit Union Innovation and Filene Research Institute, Madison, Wisconsin, 2002.

^[2] Richardson, Thomas, Elliott, Peter and Roberts, Ronald. “The relationship between personal unsecured debt and mental and physical health: a systematic review and meta-analysis.” Clin Psychol Rev. 33 (8), 2017, 1148-1162. doi:10.1016/j.cpr.2013.08.009

^[3]  American Cancer Association (ACA). Medical Costs Create Hardships for More than Half of Americans. Published 2-May-2019.  Accessed on 14-Feb-2020 at http://pressroom.cancer.org/YabroffFinancialHardship.

^[4]  Konish, Lorie. This is the real reason most Americans file for bankruptcy. Published 11-Feb-2019. Accessed on 14-Feb-2020 at https://www.cnbc.com/2019/02/11/this-is-the-real-reason-most-americans-file-for-bankruptcy.html.

^[5] Batty, Michael and Benedict, Ippoito. “Mystery of the Chargemaster: Explaining the Role of HospitalList Prices in What Patients Actually Pay.” Health Affairs. 36 (4), 2017,  689-696.

^[6] Reinhardt, Uwe. “The pricing of US hospital services: chaos behind a veil of secrecy.” Health Aff (Millwood). 25, 2016: 57-69.

^[7] Frakt, Austin. “How Much do Hospitals Cost Shift? A Review of the Evidence.”  The Milbank Quarterly 89(1), 2011.

^[8] Lee, J.S. et al., “Medicare Payment Policy: Does Cost Shifting Matter?” Health Affairs 22, 2003: 480–488, 10.1377/hlthaff.w3.480.