Health Care Price Transparency: Meaningful Price Information Is Difficult for Consumers to Obtain Prior to Receiving Care
Released: 2011-10-24T00:00:00

Letter

Background

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.

Health Care Pricing

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.

Health Care Services and Episodes of Care

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.

Importance of Quality and Other Contextual Information

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.

Development and Use of Public and Private Price Transparency Initiatives

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.

Various Health Care and Legal Factors Make Estimates of Consumers’ Complete Costs Difficult to Obtain

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.

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

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.

Researchers and Officials Identify Legal Factors That May Prevent the Disclosure of Negotiated Rates, Which Can Be Used to Estimate Consumers’ Complete Costs

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.

Selected Initiatives Vary in the Information They Make Available, and Few Initiatives Provide Estimates of Consumers’ Complete Costs

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.

Selected Initiatives Vary In the Information They Make Available to Consumers and Other Interested Parties

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.

Few Selected Initiatives Provide Estimates of Complete Costs to Consumers

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.

Conclusions

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.

Recommendations for Executive Action

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.

Agency Comments

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.

Appendix I: Methodology and Results of Contacting Selected Providers for Price Information

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.

Results from Contacting Hospital Representatives

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.)

Appendix II: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

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.