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Price Transparency Comes to Northern California


A recent lawsuit settlement in Northern California could be a major turning point in the fight for price transparency in health care. Sutter Health is a hospital chain that runs 24 hospitals throughout the region. As the LA Times reports, a billing auditing company sued the chain for double-charging patients for anesthesia, and now, right before the trial was set to start, the chain agreed to settle.

The terms of the settlement, however, went beyond financial restitution:

As part of the agreement, Sutter agreed to disclose its actual costs and prices for each part of its anesthesia billing.

The nonprofit health system also agreed to permit insurers to more readily contest its bills and to charge for anesthesia on a flat-fee basis going forward.

“This settlement represents a groundbreaking step in opening up hospital billing to public scrutiny,” Jones said. “This new transparency should lead to lower prices and point the way to similar billing reforms for all types of hospital services.”

Bringing the same transparency to health care that is standard in the rest of the US economy would be a big step toward combatting rising costs. When hospitals publish their prices, different providers are finally pushed to compete, making the whole system cheaper and more efficient. In no other sector of the economy are prices routinely and systematically hidden from the consumer—with predictably abysmal results—and no health care reform will work unless that transparency gap is closed.

[Photo of stethoscope and money courtesy of Shutterstock.]

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  • Reticulator

    “charge for anesthesia on a flat-fee basis going forward”

    Not sure what this means. A standard rate for anesthesia regardless of complications? For all customers?

    (My medical history should be titled, “Adventures in Anesthesia.” There’s something different each time.)

  • Anthony

    Again, serious issue for public policy discussion remains the “selling of health care”.

  • ljgude

    The US healthcare system routinely overcharges a minimum of 5% of GDP . That is about $750 billion. Switzerland, the second most expensive healthcare system after the US runs at 11% of GDP. Most OECD countries around 9%-10% of GDP. The ACA capps US expenditure to 17.5% of GDP by 2017. So the iceberg of double spending on medicine was already buried deep in the bowels of the US economy before Obama. Adding another 1.5% of GDP to the superstructure of this Titanic boondoggle only increases the likelihood of capsizing. This case is important because much of the looting is based on hospitals undisclosed list of arbitrarily high list prices called “The Chargemaster”. Just Google Bitter Pill to read the PDF Time Magazine published earlier this year.

  • qet

    While I agree with Via Meadia that disaggregated price information is vital to shifting more of the responsibility for health care purchasing to individual consumers, I would think that the current payors–insurance companies–have vast quantities of actual price data from all medical providers, so that the actual pricing is and has been fully known to them for some time. Yet possession of that knowledge has not resulted in reduction of costs.
    And in reply to Anthony–medicine in the US is and has always been a for-profit business, The formal organization of a firm as a “non-profit” entity is meaningless. As in all for-profit businesses, products are vigorously marketed and sold by salesmen, and differential pricing is always a key component of success. We can deplore that until the cows come home, but the alternative is the UK’s NHS. I mean, the actual cost of that suit Via Meadia just bought at Nieman’s is probably $50 or less, yet Via Meadia willingly paid $2,500 for it. I, however, bought the same suit at TJ Maxx for $150. Transparent pricing did nothing to prevent Via Meadia from spending an excessive amount, but you can’t mandate the elimination of Nieman’s and require all suits to be sold by TJ Maxx. TJ Maxx gets its suits from Nieman’s unsold inventory, so you can’t sell the suit for $150 unless someone else is willing to buy it for $2,500.

    • Anthony

      Capitalism inheres profitability (inter alia) and medicine/health care part of capitalist framework ergo… However as health care policy currently discussed focuses on providers, attention to sellers is generally not part of overall policy discussion (Avik Roy has done research on why paying attention to how health care is sold may be worth a policy look if you’re interested). Thanks.

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