Transparency in Healthcare Billing

Ronald L. Scott, JD, LLM

Professor Scott is Research Professor at the Health Law and Policy Institute, University of Houston Law Center, Texas.

The interest in consumer-directed health plans has resulted in a push by federal and state legislators to provide consumers with more useful pricing information for healthcare services. When purchasing non?healthcare-related goods and services, consumers ordinarily have access to published price lists, prices charged by competitors, or at least an estimate or quote for the goods or services to be provided before the consumer commits to a purchase. For healthcare services, a patient/consumer currently has almost none of this pricing information. Consumers purchasing high-deductible health insurance plans have a particular need for better pricing information, since they directly bear a greater part of the costs of their care. All consumers can presumably make more cost-effective choices regarding their healthcare if they have access to value-based cost information.

By Executive Order dated August 22, 2006, President Bush directed agencies that administer or sponsor federal health insurance programs to increase transparency in pricing by sharing information with beneficiaries about prices paid to healthcare providers for procedures. The order also directs such agencies to provide beneficiaries with information on the quality of services provided by doctors, hospitals, and other providers. In discussing the issue of transparency, President Bush cited the example of LASIK surgery, noting that the procedure was initially very expensive, and crediting competition and advertising of prices with making the surgery affordable.¹

From 2005 through 2007, several state legislatures considered or enacted laws mandating transparency in pricing by hospitals, healthcare providers, and insurance companies, seeking to provide consumers with better information relating to both quality of care and costs of services.²

For example, a recent bill passed in Texas requires the Department of State Health Services to include a consumer guide to healthcare on its website. The guide will contain information regarding hospital pricing practices, including the relationship between a hospital's "average charge" for various inpatient and outpatient procedures and the actual billed charge for such procedures. Consumers will be advised that the actual billed charge for services may vary from the average charge, depending on factors such as the individual patient's condition and what treatments are ordered by the physician. The guide will also point out that different hospitals or other medical facilities may charge different amounts for the same services, depending on factors such as the facility's cost structure, how frequently the facility provides the particular service, and the facility's payer mix. The law directs the agency to include links on the website that allow consumers to review quality-of-care data.

Healthcare transparency legislation may include provisions requiring facilities and physicians to establish written billing policies, including any discounting allowed uninsured patients, and to advise patients of such policies. Such laws sometimes require facilities and physicians to provide patients with a written estimate of charges for elective inpatient admissions or nonemergency outpatient surgical procedures. The Texas legislation establishes a complaint process, allowing individuals with unresolved billing complaints to file a compliant with the Department of State Health Services.

States are approaching the transparency issue in a variety of ways. Arizona is implementing a reporting system for all hospitals, outpatient surgical centers, and emergency departments that requires reporting of the average charge per patient and the average charge per physician. The state will publish a semiannual comparative report of patient charges, and simplified average charges per confinement, for the most common diagnoses and procedures. California requires hospitals to disclose prices for the 25 most common outpatient services or procedures. Florida requires healthcare facilities to notify each patient of his or her right to receive an itemized bill upon request.²

The recently enacted Texas statute also addresses transparency by health insurers by directing the state's insurance department to collect and disseminate data on health benefit plan reimbursement rates. However, the data will be published on an aggregate basis by geographic regions of the state, without revealing the names of healthcare providers or health benefit plans.

Such data may be most useful to competitor health plans in negotiating reimbursement rates, but could possibly drive down the costs of healthcare in the process.

Although the legislative trend is clearly to increase transparency in pricing, it is not clear that consumers armed with accurate information will necessarily make more cost-effective choices regarding their healthcare.

One author notes the complexity of healthcare decision making, adding that patients depend on their physicians for advice about appropriate services. Also, it will be more difficult to provide consumers with information about the quality of services, as opposed to just an "? la carte" price list of services.³

References

1. President Bush Discusses Health Transparency in Minnesota, August 22, 2006, available at www.whitehouse.gov.
2. National Conference of State Legislators. State Legislation Relating to Disclosure of Hospital and Health Charges; May 2007. Available at www.ncsl.org.
3. Ginsburg PB. Shopping for price in medical care. Health Aff [Millwood]. 2007;26:w208-w216.