aamc.org does not support this web browser.
  • AAMCNews

    “How much will it really cost?”

    At times, medical prices can be almost impossible for patients to predict or understand. How cutting-edge hospitals are working to change that.


    The parents were understandably worried. Their 5-year-old needed a tonsillectomy and adenoidectomy, but they didn’t have health insurance. Whatever the cost, they were going to have to pay out of pocket. But when they began calling children’s hospitals to request an estimate, they couldn’t always get it.

    “They were put on hold,” says Charlene Wong, MD, assistant professor of pediatrics at Duke University School of Medicine and member of the The Robert J. Margolis, MD, Center for Health Policy at Duke University. “They were transferred from one place to another because many hospital staff didn’t know how to get them an estimate.” Sometimes, it took a couple of days to get a number.

    But in reality, the “parents” were researchers conducting a study on price transparency among pediatric hospitals that Wong and her colleagues published in 2017. In the “secret shopper” segment, only 30 out of 45 hospitals the team contacted provided price estimates. Only 12 of those hospitals offered online price calculators — and because of their different approaches to calculation, those tools yielded prices ranging from $1,200 to $15,360, making it difficult for consumers to compare estimates. “Frankly, the landscape for price transparency was pretty bleak,” says Wong.

    “It remains very difficult for patients to get reliable price information that they can act on.”

    Ateev Mehrotra, MD
    Harvard Medical School

    That was the case even though health care economists, policymakers, and others have been highlighting price transparency’s potential for lowering costs and increasing value. In 2016, the AAMC created an online resource with case studies and key definitions to promote price transparency. Currently, more than half of U.S. states require hospitals to make cost estimates available to patients. And in January, the Centers for Medicare and Medicaid Services (CMS) began requiring hospitals to post their charges online.

    Yet it's no simple matter to provide price information given diverse insurance plans, negotiated discounts, and other variables. “It remains very difficult for patients to get reliable price information that they can act on,” notes Ateev Mehrotra, MD, associate professor of health care policy and medicine at Harvard Medical School and a leading authority on health care economics.

    Still, despite the challenges, a small but growing number of health care systems around the country have undertaken efforts to provide patients with useful and reliable price estimates — ambitious programs that serve as models for those hoping to advance effective price transparency.

    Why is transparency tough?

    Price transparency in health care clearly is gaining momentum. President Trump even highlighted it in his 2019 State of the Union address. Although the push began with health care economists, today it’s increasingly driven by consumers. The growing popularity of less expensive, high-deductible insurance policies means that patients pay more themselves. And many families remain uninsured, so the financial burden falls entirely on them. Transparency can help them choose among providers and plan for upcoming expenses.

    To be sure, many experts note that price transparency is no cure-all. “Research shows that only a small percent of health care spending is sensitive to cost. People are more attuned to out-of-pocket expenses and not total health care spending, according to our research and others’. Also, people don’t tend to shop for prices when seeking major treatment such as cancer care,” says Janis Orlowski, MD, AAMC chief health care officer. “Of course, patients should be able to know what their costs will be, and providers are working to meet that need.”

    “Research shows that only a small percent of health care spending is sensitive to cost. People are more attuned to out-of-pocket expenses and not total health care spending.”

    Janis Orlowski, MD

    Indeed, many doctors report that more patients are asking what a test or procedure will cost. “Frankly, most physicians dread the question,” says Mehrotra. "We can tell patients about the side effects of a drug we’re prescribing. We can explain the results of a test. When they ask what something will cost, we haven’t a clue. It’s embarrassing. And it undermines our relationship with patients.”

    Why is it so tough to pin down a price? Although the new CMS rule requires hospitals to post lists of prices, called chargemasters, in machine-readable language, they aren’t sufficiently helpful. The voluminous lists use complex codes such as “Arthocentesis Aspir&INj Small Jt/Bursa w/o US.” Most consumers can’t decipher those.

    What’s more, chargemasters have little to do with the price patients actually pay. For insured patients, that’s partly because insurers negotiate discounts and partly because only insurers know certain factors, like patients’ remaining deductibles. In addition, hospitals may also provide discounted rates to uninsured, low-income patients.

    “We talk about price transparency, but the question is, what price?” says Mehrotra. “The list price in a chargemaster? The price a hospital negotiates with an insurer? The price a consumer will actually pay out-of-pocket? Creating a useful and reliable way to give patients an estimate of what an episode of health care will cost is enormously challenging.”

    Tackling the transparency challenge

    During a media briefing in January, CMS administrator Seema Verma singled out three health care systems for going beyond the new requirement in efforts to achieve transparency: UCHealth in Colorado, Mayo Clinic, and University of Utah Health.

    In December 2018, UCHealth launched an online patient portal, mobile app, and call center to provide consumers price estimates for numerous services, from obstetric deliveries to cataract removal. Instead of simply listing standard charges, the platform calculates estimates based on a patient’s own insurance plan.

    Developers spent a year building the system, inputting prices from UCHealth’s contracts with various insurers and enabling the system to connect with insurance companies for such information as a patient’s remaining deductible. “That way, we’re able to provide an accurate estimate not only of what our hospitals charge for a service but what patients are actually going to have to pay,” says Dan Weaver, a UCHealth spokesperson.

    University of Utah Health developed a similar tool. There, enrolled patients can use their online patient portal to obtain an estimate based on their individual insurance benefits, explains Kathy Delis, administrative director of revenue cycle support services. Patients outside the system have two options. They can work with a member of the system’s financial advocate team to get an estimate or they can access a new online tool that uses aggregated data from previous patients to create an estimate. “The tool does a 6-month look-back at historic cases meeting similar insurance information to calculate patient out-of-pocket costs,” explains Delis.

    “We’re able to provide an accurate estimate not only of what our hospitals charge for a service but what patients are actually going to have to pay.”

    Dan Weaver

    Likewise, Mayo Clinic’s online price estimation tool relies largely on aggregated data from prior patients. “Each patient has unique services specific to their individual needs, so compiling estimates from many different patients is required to determine estimated charge ranges,” explains Mark Norby, Mayo Clinic’s revenue cycle chairman.

    Making price transparency work

    All three systems offer similar takeaways from their transparency efforts. For one, they realized they needed to translate complex medical terminology into patient-friendly language. They also all elected to offer both online tools and dedicated price estimate phone numbers. So far, in fact, the call line at UCHealth has received the bulk of patient requests, with hundreds of calls each week.

    In addition, creating price estimation tools required a group effort, note leaders at all three systems. “Involving everyone from patients to physicians is critical,” says Delis. At her institution, for example, representatives of clinical departments were enlisted to help decide which procedures to include. And focus groups with patients helped identify what information users wanted — and how they wanted it presented.

    What’s more, all three started out with relatively modest programs and built them over time. When the Colorado program went live, for example, it included only five of the system’s 10 hospitals and a limited number of services. More procedures are being added every month, says Weaver, and he expects that the tool will soon cover all UCHealth hospitals.

    The price estimator tools are already looking quite successful. UCHealth leaders who have been tracking how patients’ actual costs line up with the provided predictions say the tool’s accuracy is already over 90%. And all three systems report that growing numbers of patients are using the tools. Mayo Clinic’s, for example, draws over 5,000 unique users each month.

    Health economists hope that price transparency initiatives like these will help rein in health care costs and improve value. But there are other benefits that may be equally important, say advocates for transparency. “Even if patients don’t end up price shopping, providing them with an estimate of what they’ll have to pay bolsters a sense of caring and trust,” notes Mehrotra. “And that’s really what good medicine is about.”