Experts: Hospital pricing transparency a step toward lowering health care costs

May 4—LEWISBURG — Given the rate increase of hospital pricing over the past 10-to-50 years, if the prices of food rose at the same rate as they have risen in health care, you'd be paying $160 for a gallon of milk, said Jim Jusko, president and founder of FireLight Health.

Jusko was one of four health care experts testifying in a two-hour Pennsylvania House Republican Policy Committee Hearing on hospital pricing transparency held Thursday morning at the Open Discourse, in Lewisburg.

"That's amazing. And it is a good way for people to understand how hospital prices have soared," said Pa. State Rep. David Rowe, R-85, Lewisburg, policy committee deputy chair, who hosted the hearing, which was intended to cast a light on how pricing transparency could be the first step in lowering hospital costs.

Also on the hearing panel were House Republican Reps. Stephanie Borowicz, District 76, Joanne Stehr of the 107th, Robert Ledbeter, 109th, and Josh Kail, 15th, policy committee chair.

Health care is the only industry where people don't see a good price estimate upfront before they get the service, said Dean Clancy, senior health policy fellow, Americans for Prosperity. "You have to buy the service before you find out how much it costs. This is crazy. It's a result of patients not being the true customer in health care. The true customers are insurers, employers and other third-party payers. who are arranging discounts and negotiating rates."

As a result, people don't see the price of care, Clancy continued. "It doesn't make sense to show them the price. I hope that will change. In our polling, 40 percent of people said the cost of health care today is a crisis. And voters generally list the cost of health care as one of their top three concerns, along with inflation and jobs."

Since 2000, the share of the median household income devoted to health care has doubled from 13 percent of a family's income to 26 percent, Clancy explained.

"It is squeezing out other family necessities, like food, education, and housing," he said. "These facts stem from markets that don't function."

In recent years, he testified, there have been two movements to control prices: government price controls and a more price transparency.

Compliance necessary

In 2018, the Trump administration proposed that virtually all of America's 6,000 hospitals must publish their standard charges for their list price, their cash pay discount price, and their actually negotiated price with specific payers. They also have to publish the lowest rates they've given anybody.

"The idea was that by making all that information public it would drive down prices," Clancy said. "This would have to be published in consumer-friendly format. The hope is that consumers would use it to find the best price. The rule took effect in 2021.

"Unfortunately, only 14 percent of hospitals were in compliance at that point. Compliance has been improving and is up to 25 percent," he said.

The medicare agency, CMS, supports this rule and claims it is 70 percent of hospitals that are fully compliant. But Clancy doubts it is at 70 percent of compliance.

Why are hospitals not complying? "Well, for one thing, the list price could be embarrassing," Clancy said. "And the negotiating rate they want to keep private because if it is disclosed it reduces their leverage in future negotiations."

There are penalties for non-compliance but Clancy said he is skeptical about enforcement and the subsequent rate of compliance.

Groups such as Americans for Prosperity, however, think price transparency is essential.

"People would be fascinated to learn that knee replacement could cost $30,000 in one place, $70,000 in another hospital, with no difference in quality," Jusko said.

One thing that can be fixed in Pennsylvania, Jusko said, "is to think about mandating administrative enforcement and full transparency to really deliver prices to consumers and businesses to use them to lower health care costs."

"Many well-meaning participants in the industry — the entities they work for all benefit from rising health care prices. I'm talking about brokers who sell insurance insurers themselves, and hospitals. They all benefit from price rises, financially. They don't have financial incentives to charge fair market prices," Jusko said of the need for price transparency. "Employer plans, for example, have to start asking, 'what are we actually buying?' Price transparency helps us know that, both at an individual and employer level."

To make it clear, Jusko said, "you may drive cross town for buying a car or refrigerator because we can get a 10 or 20 percent discount. Difference seen in hospital prices can be 500 or 700 percent discounts.

"We simply do not have a functional market in health care," Jusko said. "In other markets we know what functional competitive prices are, and there is no excuse for anyone in those markets not to share prices. In the U.S. health care prices are higher than anywhere else in the world. We spend twice as much and have little to show for it. It is astounding, the amount of waste in health care. It's larger than the entire Russian economy."

To close, Jusko said, "We do have other problems in our society: violence and fraud we denounce. But price gouging and profiteering in health care? That's wrongdoing our country has come to accept.

"I can't guarantee that price transparency can fix every problem in health care," Jusko added. "But I can assure you that transparency is an essential part of any functional market. Without it, no system with reasonable prices is possible. With it, we'll take one giant leap on the pathway to fair prices in health care."

Jusko then implored the panel to support the "90 percent of the population that polls show support price transparency. Let's put it into law in Pennsylvania."