Medical care cost estimations found to cut costs

It’s a common occurrence: a patient receives a care recommendation from his or her provider and asks how much the treatment or procedure costs – only to have a stumped physician wonder the same thing. Many times, physicians do not have the pricing information needed to provide this type of information, with a recent study of 503 physicians finding attending physicians correctly guessed the prices of implantable medical devices only 21 percent of the time and resident physicians only 17 percent of the time. Bloomberg Businessweek noted the physicians participating in the study, which was published in the journal Health Affairs, were orthopedists at well-known institutions, such as Harvard, Stanford and the Mayo Clinic, and even though they knew prices differ between hospitals, the majority felt cost was a significant factor in care decision-making.

Physicians are ill-equipped to handle patient questions about medical care costs, and as more hospitals transition to patient-focused care, it is more important than ever before for physicians to have the ability to simply focus on delivering high-quality care. It is up to hospitals to provide cost estimations to patients, and a long-term experiment from the California Public Employees’ Retirement System (CalPERS) and Anthem Blue Cross of California shows just how important price transparency is to patient satisfaction and patients’ ability to provide timely payments.

The CalPERS and Anthem Blue Cross reference pricing experiment
CalPERS and Anthem Blue Cross developed a reference pricing program in 2011 for hip and knee replacement surgeries, and found that communication about costs between hospitals, payers and patients allows patients to compare prices, leading to greater cost savings. According to Kaiser Health News, the initiative helped enrollees find health systems where these procedures were less than $30,000, which Kaiser notes are not dependent to an out-of-pocket maximum. The initiative saved CalPERS $2.8 million and $300,000 in patients’ cost sharing.

While the initiative approached the problem of high health care prices through insurers, the study found price transparency directly impacted patient satisfaction with their care. By giving patients more information about their cost of care, they were better able to choose hospitals and health centers within their pricing budgets, leading to higher satisfaction levels and increased the chances that they would be able to provide timely payments for the care they received.

Yet it’s common for hospitals to be hesitant to disclose treatment and device prices to patients for fear that patients will choose the cheaper – and, subsequently, lower quality – options. However, some hospitals have started to adopt price transparency and have seen great success in doing so. In fact, it may be mandatory in the future for hospitals to provide cost estimations to patients.

Trend toward cost estimations in health care
Numerous hospitals have already gotten on board with price transparency by presenting patients with cost estimations. The Miami Herald reported executives at Miami Children’s Hospital recently decided to provide services to reliably estimate patients’ out-of-pocket expenses. The hospital is not revealing prices per se, but has revised its pricing and is working on developing fixed prices for common services to assist patients in understanding their medical payments.

“We need to re-craft how we talk about what we charge,” Tim Birkenstock, chief financial officer for the hospital, told the newspaper, “and we need to do it in a way that people who use our facility understand what they have to pay.”

However, it is difficult for patients to receive needed cost estimations without set hospital pricing. A new experiment happening in Massachusetts regarding price transparency recently found it can be a frustrating process for patients to call hospitals to determine the costs of certain procedures, leading to not only numerous challenges for patients but also decreased patient satisfaction with those health providers.

Hospitals need to give patients the pricing and medical payments information they need to responsibly choose providers. Cost estimations can make a singular difference in patient satisfaction rates in hospitals that take the initiative.