Shopping for Your Health Care: Can You Tell if the Price Is Right?

I believe in a tomorrow with more transparency and greater consumer awareness; one with troves of information at our fingertips; one where we can make health decisions with our eyes open. So for all of their limitations, the most recent Medicare releases are steps in the right direction.
07/31/2014 03:26pm ET | Updated September 30, 2014
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A picture of a piggy bank, a stethoscope and a wad of bank notes.

By now, many people know that our country's health care costs are unsustainably high, and rising. But the component details -- the prices for testing, medications, procedures and hospital stays -- have remained arbitrary and opaque even to most health care leaders and physicians, not to mention patients.

Of the many drivers behind our high health care costs, low transparency and consumer awareness are particularly intriguing ones. The idea is straightforward: Without accurate, usable knowledge about how much health care services cost, patients can't make choices that satisfy both their health needs and their pocketbooks, like they could if they were purchasing cars or refrigerators. For decades, patients have received care without really knowing what it costs.

Access to more information, on the other hand, could allow people to make the economically sensible decisions that drive prices down to more competitive, market-dictated levels. For example, patients needing knee surgery could compare prices from multiple hospitals and choose the highest value option, while providers would have to increase quality and reduce cost to compete for business. The movement towards added transparency and awareness create the potential for patients to shop for their care in ways that have never before been possible.

Some believe that we have made strides over the last few years. Medicare released nationwide information about what prices hospitals and clinics charge, and actually get paid, for everything from joint replacement surgeries to hospitalizations for pneumonia or heart attacks. It then upped the ante by publishing information about what individual doctors charge medicare for their services. With these two releases, anyone can now go to the Medicare website, pull information for a number of doctors or hospitals, and compare their charges against each other.

At least for now, however, shopping thoughtfully for your health care will remain far more difficult than the click of a few buttons. The first issue is that most bills are negotiated and therefore don't equal what insurance companies or patients pay out of pocket. The other is that additional costs are frequently baked into bills, including those around "case mix adjustment" (added costs for hospitals caring for sicker patients) and education (added costs for hospitals that sponsor new, young doctors in residency training). The medical community are split on how helpful all this new data really is.

Also, there's no simple answer for whether a hospital is better because it cares for sicker patients or employees young, resident physicians. Issues of costs and physician experience certainly exist. However, the benefits -- added expertise of doctors who care for sicker, more complex patients; more minds thinking about a diagnosis and accessing new data -- are not captured in pricing data. It's probably no surprise, but amid all of this uncertainty, hospitals are charging wildly different prices for the same thing.

So what's a value conscious person to do with all of this new information? For now, unfortunately, the answer appears to be "not much." Data is good, but using what we have now to shop for health care is still premature for a few reasons.

First, pricing information needs to be adjusted to represent out of pocket costs and presented in a user-friendly way. With the complexities of negotiated prices, multiple payers, and emerging reform, this will continue to be challenging. But if the vision is ultimately to deliver helpful information to end-users, we will need simple ways to compare true consumer prices. It's a stretch to some, but formats like those used for travel/hotel websites (think Kayak for hospitals) come to mind.

Second, prices have to reflect bundled services when possible. Knowing how much your knee surgery will cost is good. Knowing how much the knee surgery, post-operation hospital stay, and subsequent rehab fees will be is better. We aren't at the point of providing this level of cost information, but it's where we should be headed.

Third, information should eventually include more than prices. As with almost every other service or good, there's more to value than just price. Using the car analogy, many of us buy vehicles only partially based on price, often also taking brand and dependability (which are tangible but sometimes less concrete than price) into account. Likewise, we will need information about hospital and clinic "brand." It already exists somewhat in the form of national news rankings, word-of-mouth, and marketing. But we could do a much better job strengthening that information by adding aspects like satisfaction scores, patient-reported outcomes, and other physician and hospital quality measures.

Fourth, pricing data must accommodate challenges that arise from different types of care. Asking people to be economic about colonoscopies and knee surgeries, relatively straightforward procedures with low mortality risks, is appropriate. Asking the same of them in intensive-care settings -- where patients are extremely sick, clear data is often limited, and the lives of loved ones often hang in the balance -- is probably not. Our models for consumer awareness will need to recognize and accommodate these challenges.

Ultimately, I believe in a tomorrow with more transparency and greater consumer awareness; one with troves of information at our fingertips; one where we can make health decisions with our eyes open. So for all of their limitations, the most recent Medicare releases are steps in the right direction.

But the price just isn't right yet for using that data in any meaningful way. Because in the future I envision, new challenges await all of us, tough choices that we've never had to face head on, choices about what we value, and we're really willing to pay for it.