Q&A: Why don't hospitals display rates?

Q: Why aren't hospitals and doctors made to display their rates for each specific procedure and service they perform? This would allow people to compare prices and give them more information when trying to determine where they wish to have a procedure performed.

— James Cole, Canton, Ga.

Answered by internist and health policy expert Dr. Ashish Jha:

A: The simple answer is that they don’t have to.

But there’s more to it than that.

The question assumes that hospitals and doctors use a rational system to come up with prices for procedures and services. They don't.

The fact is, we usually don't know what the prices are for most things. And, I don't think most hospitals even know. I think they make educated guesses when they negotiate with insurance companies.

The system we have right now is crazy. There are charges and there are costs and no logical connection between them.

The prices charged don't depend on costs or on the market.

Let's take a hypothetical example of a hip surgery that would cost the hospital $3,000. They'll bill for $10,000 but take $3,500 from one patient’s insurance company as full payment and $4,000 from another patient’s insurer as full payment, depending on what they've negotiated.   

The good news is that this may be changing. The biggest purchaser of health care services, Medicare, is increasingly asking doctors and hospitals to make price and quality data available to everyone online and in other places so that the average person will know what things cost. I think that's terrific. The surest way to add more rationality and transparency to our system is if consumers demand more information to make informed, rational choices about their health care.

*****

Q: In the U.K., the government spends about $3,400 per year per person on health care. In the U.S., state, local, and federal outlays for health care were 44 percent of total health care expenses. At a per capita expenditure of $6,000-plus in the U.S., that means the U.S. government pays at least $2,600 per person already for health care. Why is it that the health services we receive from the government are so dramatically less for health care compared to countries with universal heal care when we are already paying such a large part of the health care cost in taxes?

— Tom, Boston

Answered by economist Karen Davis, president of The Commonwealth Fund:

A: The U.S. spends more than twice as much per capita on health care than the average of other industrialized countries.  So why shouldn’t we expect to have the best, highest-performing health care system in the world?

One important reason we fall short is our fragmented health care system, which contributes to uncoordinated care, waste, and inefficiency. More than one quarter (26%) of U.S. adults and more than one-third (36%) of uninsured U.S. adults went to an emergency room for a condition that could have been treated by a regular doctor in 2005. This is two and three times the rate reported by British respondents (12%) and four and six times the rate reported by Germans (6%).

This is not surprising, as the U.K. has been a leader in health information systems to enhance the ability of physicians to monitor chronic conditions and medication use. The U.S. spends far less on health information technology—just 43 cents per capita, compared with about $192 per capita in the U.K.

Another important reason for our poor showing on many measures is that payment systems for health care in the U.S. reward providers for giving more care — not better quality or more efficient care. We need to realign our payment systems to reward efficient, high-quality, well-coordinated, and patient-centered care.

The U.S. is the only country that does not provide universal coverage. This makes our health system much more inefficient, and creates barriers to care because of cost. Countries that do well tend to have strong primary care systems, universal health insurance coverage with comprehensive benefits, and increasingly the better countries have good health information technology systems—and both the U.S. and Canada lag way behind on health IT.

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