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Lifting the Cloud of Secrecy over Healthcare Prices

July 16, 2013
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Secret societies. Price-fixing. A nation’s healthcare system hanging in the balance.

There is a lot to love about a recent feature in Washington Monthly from Haley Sweetland Edwards about how practitioners are reimbursed by Medicare for medical procedures. From top to bottom, Edwards writes a compelling tale, and I couldn’t put the article down.

The article extensively covers the Specialty Society Relative Value Scale Update Committee (RUC), which is put together by the American Medical Association (AMA). RUC, which is comprised of 31 members who represent various medical specialties, makes recommendations to the Centers for Medicare & Medicaid Services (CMS) on what various services should cost. It determines how much specialists and primary care physicians should be paid for procedures.

According to Edwards, 90 percent of the RUC’s recommended values are accepted directly by the CMS, thus making it extremely influential. Since private insurance companies use CMS’ costs as a baseline for negotiating with hospitals and providers, she argues, the impact of this little society is far-reaching.  

The article is fascinating. It’s another in-depth look into the mysterious world of healthcare prices. We had Steven Brill’s piece from earlier this year in Time, which garnered mentions at HIMSS13. Now, we have this.  In between, CMS has released data on hospital outpatient charges and Medicare spending and utilization.

All these efforts are all essentially trying to figure out the answer to the same question: Why are healthcare prices so high in this country? Is it the government? Is it healthcare providers? Is it payers? What about consumers? Is it maybe a little bit of all of the above?

 It’s hard to reach a consensus. Brill’s article looked at hospital pricing through the charge master, Edwards’ looked at providers and the government, and if you read my interview with Robin Gelburd, president of Fair Health, a non-profit organization that has a database on healthcare charge information, you’ll see that, according to a settlement in New York, insurance companies may not be completely innocent either.

The interview with Gelburd discusses how Fair Health came to be, out of a settlement between the State of New York and various insurance companies. According to Gelburd, then-New York State Attorney General, Andrew Cuomo (now Governor of N.Y.) charged that it was a conflict-of-interest for payers to determine “usual, customary and reasonable” (UCR) charges for out-of-network services on the basis of data compiled and controlled by the industry.

In the settlement, the insurers agreed to fund an independent database of healthcare charge information. That is Fair Health, which has collected data on more than 16 billion billed medical and dental services covering 129 million lives from 60 different contributors.

The main thing I’ve taken away from all of this is that the cloud of secrecy is starting to be lifted. We’re starting to see what costs what and where. We’re starting to understand why medical bills are the main reason people in America become bankrupt (62 percent of all bankruptcies related to medical bills, according to a study featured in The American Journal of Medicine).

 But is it enough? As healthcare consumers, we can understand prices better, but as Gelburd said to me, we have to understand what we’re looking at. “Just making data available can actually create more confusion if you’re not comparing the right elements, and properly contextualized,” says Gelburd.

The onus is on us (see what I did there?). The government, and organizations like Fair Health, can increase transparency and release data on prices—but we have to better educate ourselves to make informed decisions.

Of course, even then, that would only be a start, as Brill and others argued recently in front of the U.S. Senate Committee on Finance, as reported by MedCityNews. I think the other thing that is worth mentioning, which Edwards features prominently in her article, is the importance of value-based care. This kind of care, paying providers for how well they did, while isn’t flaw-proof, it would go a long way in helping fix the cost of healthcare.

What are your thoughts? Feel free to leave comments below or respond to me on Twitter by following me at @HCI_GPerna.