Will Knowing Healthcare Costs Result in Better Care At Lower Costs?

NO!

There has been much grandstanding and praise for the recently passed healthcare legislation requiring hospitals to report pricing.  This does sound like a good idea.  It would be great to know how much something would cost in advance.  Maybe you could shop for that hip replacement or ER visit.

But, in truth, it doesn’t work that way.

  • Problem one: Reporting pricing will cost each hospital hundreds of thousands of dollars, for some, maybe more.  Where is that money coming from?  The answer is they have to hire less clinical staff to take care of patients.   Hospitals spend one out of every three dollars they receive in revenue to cover administrative costs, and this ratio is heading towards one out of every two.  What this means is that money you pay for treatment mostly goes to cover the cost of reporting to the government and compliance with regulations. Reducing regulations would mean that hospitals would have more money to spend on your care.  They would have the money to pay for things like new deep cleaning technologies, which would significantly reduce and could even eliminate hospital-borne infections.   This regulation, reporting costs, simply adds to that burden; which means even less money for care.

  • Problem two:  All Healthcare prices are all negotiable.  No one pays full retail.  The hospitals negotiate contracts with providers and those prices are not what you see.  What you see in these reports is the full retail price.  So, going to a hospital and being told the full retail is like going to a street vendor in a third world country and asking how much is the trinket you want to buy?  When he quotes you a price, he expects you to negotiate.  Insurance companies do it, you should too!

  • Problem three:  The price quoted only includes the hospital portion of costs.  The surgeon, doctors, extra tests, medications, anesthesiologist, and a number of other things are not included. Certain things, like which anesthesiologist you get, you probably won’t get to choose.  And, if there are complications then everything goes out the window.  The pricing is no longer applicable because the cost of managing complications is extra.

  • Problem four:  What you pay is based on the coverage you have so the pricing is not relevant to you. If you have insurance typically you pay 30% of the negotiated rate and the cost is not known until after you leave the hospital.  Once you are in, you do not get to say “Oh, I want a less expensive, less effective drug!” Decisions are made for you.

  • Problem five: . . . you get the idea.

The point is that hospital income is fixed.  It is the result of an agreement made at least one year in advance with insurance companies and prices set by Medicare and Medicaid.   By adding this burden, to report pricing, you take a large chunk of money out of their budget.  That represents an extra nurse on your floor, quicker response time to patients who ring their buzzer, better equipment, newer plant, a nicer bed.  Or, said differently, now you will experience less staff, slower response times, older equipment, the inability of the hospital to purchase the latest, greatest equipment to help diagnose and treat you.

Who thought this was a good idea?  Someone who had no idea of how the system worked and wanted people to think they had the power to shop for their healthcare without thinking through whether this idea would work.

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