Health Care Price Transparency: Meaningful Price Information Is Difficult for Consumers to Obtain Prior to Receiving Care
Published: 2011-09-23T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In recent years, consumers have become responsible for a growing proportion of the costs of their health care. Health care price information that is transparent--available before consumers receive care--may help consumers anticipate these costs. Research identifies meaningful types of health care price information, such as estimates of what the complete cost will be to the consumer for a service. GAO defines an estimate of a consumer's complete health care cost as price information on a service that identifies a consumer's out-of-pocket cost, including any negotiated discounts, and all costs associated with a service or services. GAO examined (1) how various factors affect the availability of health care price information for consumers and (2) the information selected public and private health care price transparency initiatives make available to consumers. To do this work, GAO reviewed price transparency literature; interviewed experts; and examined a total of eight selected federal, state, and private insurance company health care price transparency initiatives. In addition, GAO anonymously contacted providers and requested the price of selected services to gain a consumer's perspective.
section_title: What GAO Found
paragraphs: Several health care and legal factors may make it difficult for consumers to obtain price information for the health care services they receive, particularly estimates of what their complete costs will be. The health care factors include the difficulty of predicting health care services in advance, billing from multiple providers, and the variety of insurance benefit structures. For example, when GAO contacted physicians' offices to obtain information on the price of a diabetes screening, several representatives said the patient needs to be seen by a physician before the physician could determine which screening tests the patient would need. According to provider association officials, consumers may have difficulty obtaining complete cost estimates from providers because providers have to know the status of insured consumers' cost sharing under health benefit plans, such as how much consumers have spent towards their deductible at any given time. In addition to the health care factors, researchers and officials identified several legal factors that may prevent the disclosure of negotiated rates between insurers and providers, which may be used to estimate consumers' complete costs. For example, several insurance company officials GAO interviewed said that contractual obligations with providers may prohibit the sharing of negotiated rates with the insurer's members on their price transparency initiatives' websites. Similarly, some officials and researchers told GAO that providers and insurers may be concerned with sharing negotiated rates due to the proprietary nature of the information and because of antitrust law concerns. The eight public and private price transparency initiatives GAO examined, selected in part because they provide price information on a specific health care service by provider, vary in the price information they make available to consumers. These initiatives include one administered by HHS, which is also expected to expand its price transparency efforts in the future. The price information made available by the selected initiatives ranges from hospitals' billed charges, which are the amounts hospitals bill for services before any discounts are applied, to prices based on insurance companies' contractually negotiated rates with providers, to prices based on claims data that report payments made to a provider for that service. The price information varies, in large part, due to limits reported by the initiatives in their access or authority to collect certain price data. In addition to price information, most of the selected initiatives also provide a variety of nonprice information, such as quality data on providers, for consumers to consider along with price when making decisions about a provider. Lastly, GAO found that two of the selected initiatives--one publicly available with information only for a particular state and one available to members of a health insurance plan--are able to provide an estimate of a consumer's complete cost. The two initiatives are able to provide this information in part because of the type of data to which they have access--claims data and negotiated rates, respectively. For the remaining initiatives, they either do not use more meaningful price data or are constrained by other factors, including concerns about disclosing what providers may consider proprietary information. As HHS continues and expands its price transparency efforts, it has opportunities to promote more complete cost estimates for consumers.
section_title: What GAO Recommends
paragraphs: GAO recommends that the Department of Health and Human Services (HHS) determine the feasibility of making estimates of complete costs of health care services available to consumers, and, as appropriate, identify next steps. HHS reviewed a draft of this report and provided technical comments, which GAO incorporated as appropriate.

section_title: Letter
paragraphs: Health care spending increased in recent years by an average of nearly   7 percent per year, from $1.4 trillion in 2000 to $2.5 trillion in 2009.  Consumers are becoming responsible for a growing proportion of this  spending, such as in the case of those with insurance who face increased  use of high-deductible health plans and other forms of cost sharing. For  example, from 2006 to 2010, the percentage of covered workers enrolled  in high-deductible health plans increased from 4 percent to 13 percent,  and the percentage of covered workers with a deductible of $1,000 or  more for single coverage almost tripled, from 10 percent to 27 percent.  Depending upon the insurance plan, insured consumers are generally  responsible for the cost of health care services until their deductible has  been met. Even after reaching their deductibles, consumers may face  significant out-of-pocket costs, such as fees associated with care  received from a physician, laboratory, or hospital that are outside of an  insurance network and may also bill for their services separately.  Consumers without health insurance are also responsible for the cost of  their care, and without a third party to negotiate on their behalf these  consumers are generally responsible for paying what the provider  charges, minus any agreed-to discounts, rather than discounted rates  negotiated between the insurer and provider.
Consumers generally learn of their health care costs after receiving care,  such as when they receive a bill from their provider or an explanation of  benefits from their insurer. In contrast, information on health care prices is  considered transparent when this information is available to consumers  before they receive health care services. Transparent health care price  information may help consumers anticipate their health care costs and  reduce the possibility of unexpected expenses. When accompanied by  information on the quality of care, transparent price information may also  help consumers make more informed choices about their care.  Specifically, research suggests that health care price transparency is  most relevant for consumers who are having services that can be planned  for in advance. Researchers have identified characteristics of the most  meaningful types of transparent price information, such as information  that includes estimates of what the complete cost will be to a consumer  for a service or services. Based on this research, we define an estimate  of a consumer’s complete health care cost as price information on a  health care service or services that (1) reflects any negotiated discounts;  (2) is inclusive of all costs to the consumer associated with a service or  services, including hospital, physician, and lab fees; and (3) identifies a  consumer’s out-of-pocket cost.
In recent years various federal, state, and private sector efforts have been  initiated to make health care price information available to consumers.  Federal efforts include various price transparency initiatives administered  by the Department of Health and Human Services (HHS) and Centers for  Medicare and Medicaid Services (CMS) that provide price information on  health care services, prescription drugs, and health insurance plans. For  example, HHS provides price information on insurance plans, such as the  amount of cost-sharing and premium rates for specific plans, through its  healthcare.gov website. In addition, CMS’s Medicare Plan Finder  provides information on prescription drug prices, and CMS’s Health Care  Consumer Initiatives provide information on the price Medicare pays for  common health care services by various geographic areas. At the state  level, the National Conference of State Legislatures reports that at least  30 states have proposed or enacted some form of price transparency  legislation, and a report by America’s Health Insurance Plans, an  industry group, states that at least 25 states have price transparency  initiatives that provide publicly accessible websites with health care price  information. Additionally, with the enactment of the Patient Protection  and Affordable Care Act (PPACA) in 2010, hospitals operating in the  United States are required annually to make public and update a list of  their hospital’s standard charges for items and services provided by the  hospital.
In addition to existing price transparency initiatives, more efforts are  planned that may increase the amount of health care price information  available to consumers. For example, under PPACA, Health Insurance  Exchanges for each state must be developed by January 1, 2014, to  facilitate the purchase of qualified health plans and assist small  employers in facilitating enrollment of their employees in these health  plans. The Exchanges must require participating health plans to permit  individuals to learn through a website or other means the amount of cost  sharing, such as deductibles and copayments, for which they would be  responsible when receiving specific health care services if covered under  each company’s insurance plan.
In light of consumers’ increased responsibility for paying the costs of their  health care and efforts aimed at making price information transparent,  you asked us to study the extent to which health care price information  actually is available to consumers and other interested parties. This report  describes (1) how various factors affect the availability of health care  price information for consumers and (2) the information selected public  and private health care price transparency initiatives make available to  consumers and other interested parties.
To describe how various factors affect the availability of health care price  information for consumers, we reviewed relevant literature, such as  reports from the Congressional Budget Office and the Center for Studying  Health System Change. In addition to reviewing relevant literature, we  interviewed researchers who have expertise in health care price  transparency; a selection of hospital, physician, and insurer  associations; officials from two of the largest insurance companies by  enrollment; and officials from the selected public and private price  transparency initiatives in our review (see below for information on how  we selected these initiatives). In our review of relevant literature and  interviews with officials, we focused on identifying factors that affect the  availability of health care price information, including estimates of  complete costs to consumers. To provide illustrative examples of how the  factors we identified may affect the availability of health care price  information, including estimates of consumers’ complete costs, and to  gain the perspective of consumers on this issue, we anonymously  contacted representatives from 39 providers—19 hospitals and 20  primary care physician offices. From these providers we requested price  information on two selected health care services: full knee replacement  surgery and diabetes screening. We randomly selected these hospitals  and physicians from a health care market in Colorado, which requires  certain providers to make price information on selected services available  to consumers upon request. We did not assess the accuracy of the  price information provided by these selected providers, nor did we  evaluate the effectiveness of Colorado’s law. (See app. I for more  information about our methodology for selecting and contacting hospitals  and physicians and the information we obtained.)
To describe the information selected public and private price  transparency initiatives make available to consumers and other interested  parties, we judgmentally selected a total of eight price transparency  initiatives that met our definition of a price transparency initiative— initiatives that make provider-specific price information on a specific  health care service available to consumers and other interested parties.
Specifically, our eight selected initiatives include: one federal price  transparency initiative, which was the only federal price transparency  initiative we identified that met our definition; five state initiatives,  which we selected based on input from researchers with subject-matter  expertise and on the initiatives’ geographic variation; and two private  initiatives, which we selected from among those provided by the top 10  insurance companies by enrollment in 2009 and based upon input from  researchers with subject-matter expertise. See table 1 for a summary of  the eight public and private initiatives that we selected.
For each of the eight initiatives we selected, we interviewed officials and  reviewed documentation to identify the types of health care price and  other information these initiatives make available—including the extent to  which the initiatives make available price information that includes  estimates of consumers’ complete costs for health care services. As part  of this documentation review, we also reviewed the information available  to consumers on the selected initiatives’ websites.
We conducted this performance audit from November 2010 to September  2011, in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Research indicates that making price and other contextual information  available is important for consumers to be able to anticipate the costs of  their care and also to make informed health care decisions. In recent  years, many public and private price transparency initiatives have been  initiated to provide consumers with information about the price of their  health care services.
subsections: section_title: Health Care Pricing
paragraphs: Determining the price of a health care service often involves coordination  between providers, insurers, and consumers. Providers, such as hospitals  or physicians, charge consumers fees for the services they receive, which  are known as billed charges. Payers, such as insurance companies, often  have contractual agreements with providers under which the payers  negotiate lower payment rates for a service on behalf of their members or  beneficiaries. These rates are known as negotiated rates. In the case of  Medicare specifically, CMS sets the program’s payment rates for  providers based on a formula that includes several factors, such as  geographic location.
For consumers with health insurance, their out-of-pocket costs for a  health care service is determined by the amount of cost sharing specified  in the benefits of their health insurance plan for services covered by the  insurer. For consumers who lack health insurance, they are often billed  for the full amount charged by the provider, such as a billed charge from a  hospital. The estimated out-of-pocket cost for an uninsured consumer will  typically be the billed charge for a health care service minus any charity  care or discounts that may be applied by the provider.
section_title: Health Care Services and Episodes of Care
paragraphs: Providers and payers often price health care services using the various  codes used by health care professionals. For example, physicians may  bill for their services based on Current Procedural Terminology (CPT)  codes developed by the American Medical Association. Individual health  care services, such as those referred to by individual CPT codes, can be  grouped or bundled together into an episode of care, which refers to a  group of health care services associated with a patient’s condition over a  defined period of time. An episode of care for a knee replacement, for  example, includes multiple services such as those provided during the  actual surgery, as well as preoperation and postoperation consultations.
The episode of care would also include services provided by various  providers who typically bill separately, such as a hospital, surgeon, and  anesthesiologist. PPACA requires HHS to develop a national pilot  program, which may include bundled payments for episodes of care  surrounding certain hospitalizations, in order to improve the coordination,  quality, and efficiency of health care services.
section_title: Importance of Quality and Other Contextual Information
paragraphs: According to researchers, it is important for consumers to have access to  quality of care and other information to provide context to the price  information and help consumers in their decision making. For example,  according to the Agency for Healthcare Research and Quality (AHRQ),  appropriate quality of care information for consumers may include the  mortality rates for a specific procedure, the percentage of patients with  surgical complications or postoperative infections, or the average length  of stay, among other measures. By combining quality and price  information, some researchers argue that consumers can then use this  information to choose providers with the highest quality and the lowest  price—thereby obtaining the greatest value when purchasing care.  Furthermore, some research suggests that information on volume (the  number of services performed) may be used as an indication of quality for  certain procedures. This assumes a positive association between the  number of times a provider administers a service and the quality of the  service provided. Information about previous patients’ satisfaction with a  provider’s service can also help consumers make decisions about their  health care.
section_title: Development and Use of Public and Private Price Transparency Initiatives
paragraphs: Public price transparency initiatives often began in response to laws or  orders requiring an agency or organization to make price information  available to consumers, while private sector initiatives started primarily  through voluntary efforts. For example, in response to a 2006 federal  executive order to promote quality and efficiency in federal health care  programs, federal agencies that administer or sponsor a health care  program were directed, among other things, to make available to  enrollees the prices paid for health care services. In response, agencies  including HHS (including its component agencies such as CMS and  AHRQ) and OPM began to make health care price information available.  Similarly, over 30 states have proposed or enacted some type of price  transparency legislation, though what is actually required varies greatly  across the states. For example, some states, such as Colorado and  South Dakota, require hospitals to disclose, upon request, the expected  or average price for the treatment requested. In contrast, some states,  such as Maine and Minnesota, require that certain health care price  information be made publicly available through an Internet website.  While many public price transparency initiatives began as a result of  legislation, private sector price transparency initiatives, such as insurance  company initiatives, were established voluntarily for various reasons. For  example, insurance officials that we spoke with said their price  transparency initiatives started for reasons such as increased interest  from employers to curb costs, to gain a competitive edge over other  insurance companies without price transparency initiatives, and to help  their members become better health care consumers. Other private price  transparency initiatives, such as Health Care Blue Book and PriceDoc,  were started to help consumers find and negotiate fair prices for health  care services.
Though both public and private price transparency initiatives have  become more widespread in the last 5 years, some research suggests  that even if consumers have access to price information, such as price  information made available by these initiatives, they may not use such  information in their decision making. For example, insured consumers  may be less sensitive to prices, since the financial costs of selecting one  provider over another may be borne by the insurer, not the consumer.  Despite these concerns, some research indicates that consumers want  access to price information before they receive health care services and  have tried to use price information to some degree to inform their decision  making. Furthermore, research states that incentives may be helpful to  further consumers’ use of transparent price information. Specifically,  financial incentives may include insurers providing lower out-of-pocket  costs for their members if they select low-price, high-quality providers.
section_title: Various Health Care and Legal Factors Make Estimates of Consumers’ Complete Costs Difficult to Obtain
paragraphs: Several health care and legal factors can make it difficult for consumers  to obtain price information—in particular, estimates of their complete  costs—for health care services before the services are provided. The  health care factors include the difficulty of predicting in advance all the  services that will be provided for an episode of care and billing services  from multiple providers separately. In addition, according to researchers  and officials we interviewed, legal factors, such as contractual obligations,  may prevent insurers and providers from making available their  negotiated rates, which can be used to estimate consumers’ complete  costs.
subsections: section_title: Various Factors, Such as the Difficulty of Predicting Health Care Services in Advance, Billing from Multiple Providers, and the Variety of Insurance Benefit Structures, Can Make Estimates of Consumers’ Complete Costs Difficult to Obtain
paragraphs: One factor that may make it difficult for consumers to obtain estimates of  their complete costs for a health care service is that it may be difficult for  providers to predict which services a patient will need in advance.  Specifically, physicians often do not decide what services their patients  will need until after examining them. Researchers and officials we spoke  with commented that health care services are not standardized across all  patients because of each patient’s unique circumstances, which influence  the specific services a physician would recommend. For example, when  we anonymously contacted 20 physicians’ offices to obtain information on  the price of a diabetes screening, several representatives said the patient  needs to be seen by a physician before the physician would know what  tests the patient would need.
In addition, even after identifying what health care service or services a  patient may need, additional aspects associated with the delivery of a  service may be difficult to predict in advance, such as the length of time a  patient stays in a hospital. This factor can make it challenging for  providers to estimate consumers’ complete costs in advance. For  example, when we anonymously contacted 19 hospitals to obtain  information on the price of a full knee replacement surgery, several  hospital representatives quoted a range of prices, from about $33,000 to  about $101,000. The representatives explained that the price for the  procedure could vary based on a variety of factors, such as the time the  patient will be in the operating room and the type of anesthetic the patient  may receive, and some noted that they would need to know this  information if they were to provide a more specific price estimate.
Several hospital and physician office representatives we spoke with  recommended that insured consumers contact their insurer for complete  cost information; however, the inability to predict which health care  services will be needed in advance also makes it challenging for insurers  to provide complete cost estimates. Officials from an insurer association  commented that, if asked by their members for cost estimates, insurance  company representatives may require more information—such as the  CPT codes for the services a patient will receive—before the insurers can  provide a cost estimate. However, in the instances when providers cannot  predict in advance the codes for which they will bill, consumers will be  unable to provide the respective codes to insurers and obtain complete  cost estimates from them.
Another factor is that many services included in one episode of care may  be provided by multiple providers, such as a hospital and surgeon, who  bill for their services separately. This makes obtaining complete cost  information challenging because, in these cases, consumers may have to  contact multiple providers to obtain estimates of their complete costs.  Many providers can only give price estimates in advance for the services  that they provide, and are often unaware of the prices for services  performed by other providers. For example, when we contacted hospitals  anonymously for the price of a full knee replacement, none were able to  provide information on the complete cost to consumers for this service.  The hospital representatives we contacted who could provide price  information were only able to provide us with the hospital’s estimated  charges or a Medicare deductible amount for the service and could not  provide us with the charges associated with the other providers involved  in the service, such as a surgeon or anesthesiologist. Charges from these  providers are typically billed separately from the hospital’s charges, even  though some of these services are provided in the hospital. Similarly,  when we called physicians’ offices to obtain information on the price of a  diabetes screening, most representatives could not tell us how much the  associated lab fees would cost and some noted that this was because the  lab fees are billed separately. Several hospital and physician office  representatives we spoke with suggested we contact the other providers,  such as a surgeon or lab, separately in order to obtain information on the  price of these services. However, officials from a provider association  questioned how consumers would even know which providers to contact  to get price information if the consumers do not know all of the different  providers who are involved in an episode of care in advance.
Lastly, consumers may have difficulty obtaining complete cost estimates  from providers because providers are often unaware of these costs due to  the variety of insured consumers’ health benefit structures. For example,  according to officials from a provider association, physicians may have  difficulty accessing insured consumers’ health benefit plan information,  and thus may not be able to provide estimates of consumers’ out-of- pocket costs under their specific benefit plans. For example, officials  stated that for physicians to inform a patient about the price of a health  care service in advance they have to know the status of consumers’ cost  sharing under their specific health benefit plan, such as how much  consumers have spent in out-of-pocket costs or towards their deductible  at any given time. Without this information, physicians may have difficulty  providing accurate out-of-pocket estimates for insured consumers. In  addition, different consumers may have out-of-pocket costs that vary  within the same benefit plan, which adds to the variety of potential costs a  patient could have, and creates complexity for providers in providing  complete cost estimates to consumers.
Officials from provider associations commented that insurers should be  responsible for providing complete cost information to their insured  customers because insurers can provide price information specific to  insured consumers’ situations. However, insurers may also have difficulty  estimating consumers’ complete costs. Specifically, according to a 2007  report by the Healthcare Financial Management Association, many  insurers do not have data systems that are capable of calculating real- time estimates of complete costs for their members prior to receiving a  service. As a result, insurers may have difficulty maintaining real-time  data on how much their members have paid towards their deductibles,  which could affect an estimate of the complete cost.
Additionally, according to officials from an insurance company, it is  difficult for insurers to estimate complete costs when insured customers  receive services from providers that are outside of the insurer’s network.  These estimates may be difficult to provide because insurers have not  negotiated a rate with providers out of the insurer’s network, and thus  may be unaware of these providers’ billed charges before a service is  given. Officials from an insurance company explained that this concern is  especially a problem for their members who go to an in-network hospital  and are seen by a nonparticipating physician within that hospital during  their visit. The officials explained that this can occur without the patient’s  knowledge because patients often do not choose certain providers, such  as radiologists or anesthesiologists, and consumers may be faced with  significant out-of-pocket costs.
section_title: Researchers and Officials Identify Legal Factors That May Prevent the Disclosure of Negotiated Rates, Which Can Be Used to Estimate Consumers’ Complete Costs
paragraphs: Researchers and officials we interviewed identified several legal factors  that may prevent providers and insurers from sharing negotiated rates,  which can be used to estimate consumers’ complete costs. First, some  officials stated that some contractual obligations between insurers and  providers prohibit the disclosure of negotiated rates with anyone outside  of the contracting entities, such as an insurer’s members. Specifically,  most officials representing insurance companies have reported that some  hospitals have included contractual obligations in their agreements with  insurers that restrict insurers from disclosing negotiated rates to their  members. For example, some insurance company officials we  interviewed told us that these contractual obligations prohibited the  sharing of specific information on negotiated rates between providers and  insurers on their price transparency initiatives’ websites. Officials from  one insurance company said that they generally accept these contractual  obligations, particularly in the case of hospitals that have significant  market leverage, because they do not want to exclude these hospitals  from their networks.
Second, some of the officials and researchers we spoke with reported  that providers and insurers may be concerned with sharing their  negotiated rates, considered proprietary information, which may be  protected by law from unauthorized disclosure. Some officials and  researchers we spoke with suggest that without these rates, it could be  more difficult for consumers to obtain complete cost estimates. According  to officials from an insurer association, proprietary information such as  negotiated rates may be prohibited from being shared under the Uniform  Trade Secrets Act, which many states have adopted to protect the  competitive advantage of the entities involved. These laws are designed  to protect against the wrongful disclosure or wrongful appropriation of  trade secrets, which may include negotiated rates. For example, if a  hospital was aware that another hospital negotiated a higher rate with the  same insurance company, then the lower-priced hospital could seek out  higher negotiated rates which may eliminate the first hospital’s  competitive advantage. Conversely, if officials from an insurance  company were aware that another insurer paid the same hospital a lower  rate for a given service, the higher-paying insurer may try to negotiate  lower payment rates with that hospital.
Lastly, some researchers and officials noted that antitrust law concerns  may discourage providers and insurers from making negotiated rates  public. For example, some insurance company officials we spoke with  expressed concerns that sharing negotiated rates publicly would give  multiple competing providers access to each other’s rates, and therefore  could lead to collusion in price negotiations between providers and  insurers. According to the Federal Trade Commission (FTC) and the  Department of Justice (DOJ)—the principal federal agencies enforcing  the antitrust laws—antitrust laws aim to protect and promote competition  by preventing businesses from acting together in ways that can limit  competition. Joint guidance from FTC and DOJ indicates that without  appropriate safeguards, exchanges of price information—which insurance  company officials told us could include negotiated rates—among  competing providers may present the risk that competing providers  communicate with each other regarding a mutually acceptable level of  prices for health care services or compensation for employees.
Although some officials and researchers noted that antitrust laws may  discourage making negotiated rates public, the FTC and DOJ guidance  also identifies circumstances in which exchanges of health care price  information—that could include negotiated rates—are unlikely to raise  significant antitrust concerns. These circumstances require the collecting  of price information by a third-party entity and ensuring that any  information disseminated is aggregated such that it would not allow  recipients to identify the prices charged by an individual provider. Under  these circumstances, consumers may not be hindered in their ability to  have information that will allow them to make informed decisions about  their health care.
section_title: Selected Initiatives Vary in the Information They Make Available, and Few Initiatives Provide Estimates of Consumers’ Complete Costs
paragraphs: The price information made available to consumers by the eight selected  price transparency initiatives varies, in large part due to differences in the  price data available to each initiative. Additionally, we found that few of  the selected initiatives are able to provide estimates of consumers’  complete costs, primarily due to limitations of the price data that they use  and other obstacles.
subsections: section_title: Selected Initiatives Vary In the Information They Make Available to Consumers and Other Interested Parties
paragraphs: The eight public and private price transparency initiatives that we  examined vary in the price information they make available to consumers.  (See table 2.) Three public initiatives in California, Florida, and Wisconsin  make information available on hospitals’ billed charges, which are  typically the amounts hospitals bill payers and patients for services before  any negotiated or reduced payment discounts are applied. In general,  hospitals’ billed charges do not reflect the amount most payers and  patients ultimately pay for the service. Two private initiatives administered  by Aetna and Anthem provide their members with price information based  on their contracts with providers, and this information reflects the insurer’s  negotiated discounts. Similarly, the federal initiative provides price  information based on Medicare payment rates. Initiatives in  Massachusetts and New Hampshire provide price information, based on  payments made to providers, using claims data, and these prices reflect  any negotiated discounts or other reductions off the billed charges.  Despite differences in the types of price information they provide, the  selected initiatives are generally similar in the types of services for which  they provided price information, with most providing price information  only for a limited set of hospital or surgical services that are common,  comparable, or planned in advance, such as a knee replacement or a  diagnostic test.
Various factors help explain the differences in the types of price  information made available by the selected initiatives. In some cases, the  initiatives provide certain types of price information because of the price  data available to them, generally through state law. For example, the  Wisconsin initiative provides price information based on hospitals’ billed  charges because the state contracted with the Wisconsin Hospital  Association (WHA) to collect and disseminate hospital information,  including hospitals’ billed charges, when the state privatized hospital data  collection. WHA saw this as an opportunity to develop a price  transparency initiative that reported billed charges for consumers. In  both California and Florida, initiative officials said that state laws enabled  the state to collect and make hospitals’ billed charges public and this  gave the states the authority to make this information available to  consumers. In Massachusetts, officials said that 2006 state health  reform legislation provided the state with the necessary authority to  collect claims data for the price transparency initiative.
In other cases, the price information the initiatives provide reflects choices  made by initiative officials regarding the types of information that they  considered would be most helpful to consumers. For example, in  developing Hospital Compare, CMS officials chose to provide price  information based on Medicare payment rates to hospitals because,  according to officials, this information would be more helpful than  hospitals’ retrospective billed charges for Medicare patients. The officials  explained that hospitals’ billed charges are too divergent from what  Medicare and insurance companies actually pay for the same service,  and CMS officials reasoned that Medicare rates could give consumers,  particularly those without insurance, a point of comparison from which  they may be able to negotiate lower prices with providers. In New  Hampshire, officials said they successfully sought legislation to get  access to claims data from all payers in the state to establish an All Payer  Claims Database (APCD) for their initiative. Based on an earlier  experience with posting billed charges and feedback from consumers,  New Hampshire officials were convinced that billed charges were not  useful for insured consumers.
Additionally, some factors that may limit access to certain price data also  limit how the price information is presented to consumers. For example,  some of the selected initiatives, such as Florida and Anthem, present  price information as a range, which avoids providing a specific price that  providers may consider proprietary. Anthem officials further noted that  the primary reason the initiative provides price information as a range is  so that the price information can better reflect for consumers the billing  variation and differences in treatment decisions that occur when health  care services are delivered to different patients. In Massachusetts, the  initiative combines the claims, or prices paid, by commercial insurers for  that specific hospital service and reports a provider’s median price as well  as a range of prices paid for that service. Officials explained that they  present aggregated price information across all health plans to avoid  disclosing prices that may raise proprietary concerns among providers  and insurers. In another approach, the two initiatives by New Hampshire  and Aetna bundle multiple services typically performed at the same time  into the price presented, such as bundling all associated costs for a hip  replacement surgery. By doing so, New Hampshire officials said that they  are able to mask the specific rates paid for individual items, and avoid  proprietary concerns, while providing an easily understandable estimate  for the total health care service. Lastly, officials from the Aetna and  Anthem initiatives cited provider resistance as limiting the extent to which  they can make price information available to their members for all  providers in the insurers’ networks—with provider-imposed contractual  obligations requiring the Aetna and Anthem initiatives to omit price  information for certain providers in the initiatives’ websites’ search results.
In addition to providing the price of a service, most selected initiatives  also provide a wide range of nonprice information, such as information on  quality of care measures or patient volume. Five of the eight selected  initiatives provide quality information for consumers to consider along with  price when making decisions about a provider. (See table 3.) In addition  to providing quality and volume measures, initiatives also shared  information, such as resources for understanding and using price  information, including explanations of the source and limitations of the  price data, glossaries, and medical encyclopedias. Initiatives also  provided a range of supplementary financial information to give context to  the price information provided. For example, Massachusetts’ initiative  presents symbols ($, $$, $$$) to indicate how the provider’s price  compares to the state median for that service in an effort to provide what  officials described as more easily understood price information for  consumers who are familiar with graphical ratings systems. Additionally,  Wisconsin’s initiative provides pie charts representing the percentage  different payer types—such as private insurers, Medicare, and  Medicaid—paid to a specific hospital in relation to the total billed charges,  which indicates at an aggregate level the extent of discounts given by  payer category.
Some officials expressed reservations about how consumers may use  price and quality information together. Insurance company officials we  spoke with see linking price to quality information as a means for  consumers to identify high-value providers and for the company to create  more cost-efficient provider networks. In Hospital Compare, however,  quality data and price data are not linked. CMS officials said that while  quality data are featured prominently on Hospital Compare, price  information is featured less prominently. CMS officials explained that  promoting price information to consumers, in the absence of greater  consumer education about how to understand price information in relation  to quality, could lead consumers to select high-priced providers due to an  assumption that price is indicative of quality. Due to similar concerns that  consumers may assume that a higher price is a sign of higher quality,  Aetna’s initiative provides information to educate consumers that high  quality and low price are not mutually exclusive.
Lastly, in addition to the variety of price and other information made  available by the selected initiatives, the initiatives also vary in terms of  who has access to the initiatives’ websites and in terms of their expected  audiences. For example, the price information provided by the federal  initiative we selected is available to all consumers through a publicly  available website. CMS officials said the expected audience of this  initiative includes insured and uninsured consumers, researchers,  Medicare beneficiaries, and providers. Like the federal initiative, all of the  selected state initiatives’ websites are publicly available, although they  include price information only for their particular state. In contrast, the  price information provided by the two selected insurance company  initiatives’ websites are accessible to their members, but not to the  general public.
section_title: Few Selected Initiatives Provide Estimates of Complete Costs to Consumers
paragraphs: Few of the selected initiatives provide estimates of consumers’ complete  costs, which is price information that incorporates any negotiated  discounts; is inclusive of all costs associated with a particular health care  service, such as hospital, physician, and lab fees; and identifies  consumers’ out-of-pocket costs. (See table 4.) Specifically, of our eight  selected initiatives, only the Aetna and New Hampshire initiatives provide  estimates of a consumer’s complete cost. The two initiatives are able to  provide this information in part because they have access to and use  price data—negotiated rates and claims data, respectively—that allow  them to provide consumers with a price for the service by each provider  that is inclusive of any negotiated discounts or reduced payments made  to the billed charge. Specifically, Aetna bases its price data on its  contractual rates with providers, which include negotiated discounts. New  Hampshire provides price information based on its records of closed  claims of particular providers for particular services under a consumer’s  specific health insurance plan. Both initiatives use claims data to identify  all of the hospital, physician, and lab fees associated with the services for  which they provide price information. For calculating estimated out-of- pocket costs, Aetna links member data to its price transparency website,  which automatically updates and calculates the member’s estimated out- of-pocket costs in real-time based on the provider and service reported,  and the member’s partially exhausted deductibles. In contrast, to  calculate out-of-pocket costs, insured users of New Hampshire’s  initiative’s website enter their insurance plan, their deductible amount,  and their percentage rate of co-insurance. New Hampshire’s Health Cost  website then uses that information to calculate an out-of-pocket cost,  along with a total cost for the service by provider. Both initiatives  demonstrate that while providing complete cost information presents  challenges, it can be done—either as undertaken by Aetna for its  members or as carried out by New Hampshire, which makes complete  cost information available through publicly accessible means.
As table 4 shows, six of the eight initiatives that we reviewed do not  provide estimates of consumers’ complete costs. The reasons for this  vary by initiative, but are primarily due to the limitations of the price data  that each initiative uses. For example, initiatives in California, Florida, and  Wisconsin provide price information based on billed charges from  hospitals, which do not reflect discounts negotiated by payers and  providers, all associated costs (such as physician fees), and out-of-pocket  costs. An official representing Wisconsin’s initiative said that WHA  commonly receives requests from consumers to include physician fees in  the price estimate, but the initiative does not have access to these price  data, as they are part of a separate billing process and the hospitals do  not have these data to submit. California officials said that collecting  claims data from insurers would require additional legal authority, raise  proprietary concerns, and pose resource challenges. Florida officials  acknowledged that providing a billed charge is not as meaningful for  consumers as other types of price data, such as claims data. However,  while Florida officials have the authority to collect claims data, they said  that at this time they are limited from pursuing such information due to the  expected financial costs of collecting and storing the data and the  challenges of overcoming the proprietary concerns of providers and  insurers. Florida officials characterized their initiative’s inability to report  out-of-pocket costs as a major limitation. The federal initiative provides  price information that reflects what Medicare pays to hospitals for a given  service but does not reflect what consumers, including Medicare  beneficiaries, would pay out-of-pocket. CMS officials said that providing  out-of-pocket costs was too complicated to calculate in advance due to  consumers’ medical variation and technological limitations.
In contrast, other initiatives have access to data that may enable the  initiatives to provide more complete cost estimates to consumers, but  certain factors limit the extent to which this type of information is made  available. For example, the Massachusetts initiative has access to claims  data that could be used to provide more complete cost estimates to  consumers, such as negotiated discounts for commercial insurers.  However, it presents price information that aggregates the prices paid by  commercial insurers for particular services, in part due to insurers’ and  providers’ concerns about the initiative disclosing price information by  insurer. As a result, consumers are unable to see an estimate for a  particular provider that is specific to their insurance company or to  calculate their out-of pocket costs based on their specific plan. The  officials noted that providers’ and insurers’ resistance to publicly reporting  payments made by insurers may also be a challenge for states seeking  access to more meaningful price information for their initiatives, such as  claims data. Lastly, Anthem’s initiative does provide a price inclusive of all  associated fees and negotiated discounts, but currently does not use the  specific details of consumers’ insurance plan benefits, such as their  deductible, copayment, or coinsurance, to estimate consumers’ out-of- pocket costs.
section_title: Conclusions
paragraphs: Transparent health care price information—especially estimates of  consumers’ complete costs—can be difficult for consumers to obtain prior  to receiving care. For example, when we contacted hospitals and  physicians to obtain price information for two common services, we  generally received only incomplete estimates, which are insufficient for  helping consumers to anticipate all of the costs associated with these  services or to make more informed decisions about their health care. Our  review identified various health care and legal factors that can make it  difficult for consumers to obtain meaningful health care price information,  such as estimates of consumers’ complete costs, in advance of receiving  services. This lack of health care price transparency presents a serious  challenge for consumers who are increasingly being asked to pay a  greater share of their health care costs.
Despite the complexities of doing so, two of the eight price transparency  initiatives we examined were able to make complete cost estimates  available to consumers. Making meaningful health care price information  available to consumers is important, and the fact that two initiatives have  been able to do it suggests that this is an attainable goal. To promote  health care price transparency, HHS is currently supporting various  efforts to make price information available to consumers—including the  CMS initiative in our review—and the agency is expected to do more in  this area in the future. We note in our review, for example, that HHS  provides price information on insurance plans through its healthcare.gov  website. Similarly, CMS’s web-based Medicare Part D Plan Finder also  provides information on prescription drug prices and CMS’s Health Care  Consumer Initiatives provide information on the price Medicare pays for  common health care services at the county and state levels. In the near  future, HHS’s price transparency efforts are expected to expand. For  example, PPACA requires HHS to provide oversight and guidance for the  Exchanges that are expected to provide certain price information for  consumers through participating insurers. PPACA also directs HHS to  develop a pilot program which may include bundled payments, providing  another possible opportunity for price transparency. In total, HHS has  several opportunities to promote greater health care price transparency  for consumers.
section_title: Recommendations for Executive Action
paragraphs: As HHS implements its current and forthcoming efforts to make  transparent price information available to consumers, we recommend that  HHS take the following two actions:    Determine the feasibility of making estimates of complete costs of  health care services available to consumers through any of these  efforts.    Determine, as appropriate, the next steps for making estimates of  complete costs of health care services available to consumers.
section_title: Agency Comments
paragraphs: HHS reviewed a draft of this report and provided technical comments,  which we incorporated as appropriate.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  Secretary of Health and Human Services and other interested parties. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or kohnl@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix II.
section_title: Appendix I: Methodology and Results of Contacting Selected Providers for Price Information
paragraphs: To obtain illustrative examples of factors that influence the availability of  health care price information for consumers, we anonymously contacted  hospitals and primary care physicians with zip codes located in the  Denver, Colorado, health care market. We requested the price of a full  knee replacement from hospitals and the price of a diabetes screening  from primary care physicians. We requested these prices for patients  without insurance and for patients with Medicare (without supplemental  health insurance). Specifically, we called 19 hospitals and 20 primary  care physicians between February 28 and March 10, 2011, and contacted  each provider up to three times in an attempt to get a response. We  determined that we obtained a response from representatives if they  answered the phone or they transferred us to a price quote voice mail  message that requested specific information from us about the requested  service so representatives could call back with cost estimates. In cases  where we were asked to provide more information, such as in the case of  receiving a price quote voice mail, we did not provide such information in  order to help maintain our anonymity. We considered hospitals and  physicians nonresponsive if no one answered the phone, or if we  received a voice mail message that did not indicate what we needed to  provide in order to receive price information, in all three attempts.
subsections: section_title: Results from Contacting Hospital Representatives
paragraphs: We received a response from representatives at 17 of the 19 hospitals we  contacted. Of the 17 hospital representatives that responded, 10 did not  provide any type of price information. None of the hospital representatives  could provide a complete cost estimate for a full knee replacement,  meaning the price given was not reflective of any negotiated discounts,  was not inclusive of all associated costs, and did not identify consumers’  out-of-pocket costs. Almost all of the hospital representatives that  responded (14 of 17) required more information from us to provide a  complete cost estimate, such as current procedural terminology (CPT)  codes, the length of time in the operating room, the model of knee used,  or what kind of anesthetic would be provided, which we did not provide.  Of the 7 hospital representatives that were able to provide some price  information, 5 provided billed charges in either a range, such as between  $32,974.73 and $100,676.50 or an average charge, such as $82,390,  which is typically reflective of what an uninsured consumer would pay.  (See table 5 for more information.)
We received a response from 18 of the 20 representatives we contacted.  Of the physician representatives that responded, most could provide  some type of price information (14 of 18), but only 4 out of 18  representatives who responded could provide a complete cost estimate  for a diabetes screening. Most representatives who responded (13 of 18)  required more information from us to provide a complete cost estimate,  such as a diagnosis from a physician and the amount the laboratory  would charge, which we did not provide. Additionally, almost half (8 of 18)  of representatives who responded said the patient needs to be seen by a  physician before determining a complete cost estimate. All 14 physician  representatives who were able to provide some type of price information  provided price information based on billed charges. (See table 6 for more  information.)
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Will Simerl, Assistant Director;  Rebecca Hendrickson; Giselle Hicks; Krister Friday; Martha Kelly; Julian  Klazkin; Monica Perez-Nelson; Rebecca Rust; and Amy Shefrin made  key contributions to this report.