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Uwe Reinhardt: The Year of Hospital Pricing Transparency (Part 2)

December 20, 2013
by Gabriel Perna
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Uwe Reinhardt, Ph.D.

This is part two of a two-part Q&A with Uwe Reinhardt, Ph.D., one of the leading voices in the U.S. on healthcare economics.

In part one, Dr. Reinhardt discussed with Senior Editor Gabriel Perna why this was the year of hospital pricing transparency. He talked about how the movement, more than ever, has reached a fever pitch. He said, the “Barbarians are at the Gate,” and the door of the hospitals’ “secure castle” with “complete price opacity has been beaten in.”

“Pretty soon [the hospitals] will be fully transparent,” said Reinhardt.

The renowned author, contributor to NPR’s “All Things Considered,” PBS’ “Frontline,” blogger to The New York Times Economix Blog, and government advisor, then went on to talk about IT’s role in the pricing transparency movement. He said creating this transparency can’t be done without IT because the chaos in pricing is so huge.

“You need big, big databases, from employers that the IT people can milk the data out of on pricing,” said Reinhardt.

In part two, Reinhardt discusses what kind of blowback he expects hospitals to give, against this transparency. He also looks into a crystal ball and makes predictions on who will release pricing data in 2014. Below are excerpts from the interview.

Perna: As you mentioned in your article, there will be a backlash to against the move to more transparent hospital prices. What kind of resistance will hospital organizations offer?

Reinhardt: Obviously, they’ll give you a thousand reasons why this is damaging. They’ll say, “Our prices are our high because we give a lot of charity care, we need this money to keep modern equipment, etc.”

That’s always been their excuse. I think it’s too late, the gates have been bashed in. These people will usually claim, when they give public speeches, they’re all for transparency. But in fact, secretly they’ll make every effort not to have it. It’s not in their interest for people to know the prices. Imagine a cozy business, where customers come and shop and only after they leave, they find out the prices of what they took home. And they can’t bring the merchandise back. It’s paradise. Obviously, they’ll resist. They won’t admit that, but they’ll resist with everything they have.

Imagine a cozy business, where customers come and shop and only after they leave, they find out the prices of what they took home. And they can’t bring the merchandise back. It’s paradise. Obviously, they’ll resist.

Perna: To get these databases working, you really need to rely on private insurers’ data, don’t you?

Reinhardt: You do and the employers behind them. The private insurers, they’re only the agents of the employers. The key is the employer. The private insurers and the providers are in some ways in cahoots to keep prices private. They have these nondisclosure clauses in their contracts that people couldn’t reveal prices. So for instance, Aetna would make a deal with Columbia Presbyterian and then each party agreed to not disclose these prices, because if United Healthcare found out what Aetna paid, they’d want the same price [if it was lower]. There was a kind of conspiracy between insurance companies. What I heard in Washington, a lot of insurance companies are resisting releasing this data. They are not in favor of that. It’s the employers who are the movers behind it.

The employers, I think, went with these start-ups Castlight, Blue Book, out of desperation that these private insurance companies were not doing enough bargaining on their behalf. I argue, it wasn’t their [the payers] fault, they weren’t able to do enough. There are so many of them and in many places, so few provider organizations, like in California, Sutter Health, where you can’t write insurance without them in it.

Perna: Where do you see this all headed in 2014—can we expect more transparency in terms of healthcare pricing, from Medicare and from private insurers? Will the movement start to get the needle to move?

Reinhardt: I think so. CMS [releasing the charge data], this was a good thing under Obama. The Bush administration had talked about it but they were a little bit like drunken lovers at a bar, lots of big talk but little action. The Obama administration was serious and they spent time and money, first to make inpatient charges known. Those are charges, not what’s paid, but it was enough to embarrass the hospital industry. Then you have outpatient, they revealed what Medicare actually paid, and no one knew that before. Now you can look it up.  So that was big initiative, and I expect in 2014, a lot of more information on private prices to come out.

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