Transparency—Will It Lead Us Back to the Future?

Abstract

Both Sandy Lutz and Richard Clarke make strong arguments that transparency is here to stay. Meaningful information needs to be provided, and hospitals and providers should take the lead in this effort. It is hard to argue with their conclusions. QUALITY TRANSPARENCY-Is THIS ACHIEVABLE? As we know, most payers have their own quality measurement indicators. Several have proprietary systems to determine the quality ratings of providers and hospitals. These nontransparent systems create distrust between the payer and provider. The numerous nonpayer proprietary quality websites just add to the confusion. Payers and providers need to come together at a national level and agree on a common quality measurement data set. Such an initiative would go a long way to reducing consumer confusion regarding the myriad quality measures available. With the initiation of pay-for-performance programs by Medicare and other payers, each using their own measurement goals, focus becomes difficult, if not impossible, for an organization. Agreement on common measurements would eliminate the black box used by some payers to measure quality, increase trust among the parties, facilitate quality improvement and pay-for-performance initiatives, and provide meaningful quality information to the consumer. PRICE TRANSPARENCY-BACK TO THE FUTURE As Richard Clarke pointed out, hospitals need rational, defensible pricing systems. These systems need to be understandable by patients and easy to administer. The addition of personnel and other overhead costs to facilitate price transparency needs to be avoided. When discounts, case rates, per diem arrangements, and the like were originally negotiated, most markets had surplus capacity and were willing to price to meet the payers' needs to move volume. Networks did not indude everyone. Benefit designs directed business to a narrow network of hospitals and doctors. Times have changed. Today many markets have a shortage of bed capacity. Most health plans have almost all providers in their networks; thus, the various HMOs, PPO, POS plans provide no real direction for business. Add to this the overwhelming desire for price transparency and the desire for the uninsured/underinsured to pay no more than the large insurers, and the time is right for a return to using charges as the pricing methodology for hospitals. Hospitals could take the risk associated with establishing fixed prices for all nonemergency outpatient procedures and for inpatient cases without complication or comorbidity. All other cases, including emergency cases, would be paid based on the charges billed. Hospital charges could be reduced to realistic rates needed to generate a reasonable operating margin and could be posted on the Internet for all to see. This approach of using charges as our real prices has several advantages: I. Using charges as real prices would permit total transparency of prices for any prospective patient, with fixed prices on those services that would likely be price shopped, without any additional overhead costs other than keeping the price list on the website current. This would facilitate a reallocation of resources within hospitals from the managed care and business office functions to staff the new emerging processes needed to obtain the necessary information and collect payment on the front end of the billing process. 2. If hospitals chose not to give discounts in this model, insurance plans would have to compete based on the services they offered. This would permit other insurers to enter the market, since health plans would no longer be competing on the volume-based discounts they could get from the hospital but rather on the services the health plan offered. Opening up the market would increase the health insurance options available for employers and other purchasers of healthcare and would slow the consolidation of the health insurance industry. …