Medicare to post prices for common physician services

Washington -- Medicare patients who always wanted to know what their doctors are paid for providing them medical services soon will get their chance.

The Bush administration has started what it hopes will be a new trend by posting on the Internet what the federal government pays for 30 of the most common elective procedures that Medicare beneficiaries receive at hospitals. It also will list payment for 11 of the most common types of nonelective services performed at the inpatient level.

The Centers for Medicare & Medicaid Services plans to expand the effort starting this summer to include procedures received at ambulatory surgery centers and beginning this fall to include physician offices.

President Bush said the initiative would allow Medicare enrollees and other health consumers to become more savvy about where they seek their care. Coupling these data with publicly available quality-of-care information, patients can seek out the best care at a lower price, he said.

"If you're worried about increasing costs, it makes sense to have price options available for patients," Bush told an American Hospital Assn. audience in a recent address. "That's what happens in a lot of our society. It should happen in health care as well."

The payment information CMS released at the beginning of June lists the range of what Medicare pays hospitals in a given county for such procedures as hip and knee replacements, cardiac defibrillator implantations and operations related to heart failure. The agency also lists the national average charge for each procedure based on what the hospitals list as the "walk-in" price. No hospital-specific payment or charge figures are included in the release, which is based on data from the fiscal year ending September 2005.

For example, the national average payment that Medicare made to hospitals for heart valve operations last year was $38,528, while the average charge that hospitals listed for the procedure was $115,221. Hospitals in Florida's Alachua County falling between the 25th and 75th percentile for payments received between $41,089 and $41,366 from Medicare for each operation, while those in Palm Beach County received between $29,101 and $29,759.

Although the financial information for each individual hospital is not listed, Medicare does report how many of each type of operation a hospital performed during the year. CMS Administrator Mark McClellan, MD, PhD, said the agency included this information for consumers who anticipate that they will receive higher quality care at a facility that performs a procedure more frequently.

Useful to consumers?

Medicare and non-Medicare patients alike will find the hospital information -- as well as the ASC and physician data coming out later this year -- to be a powerful tool, Dr. McClellan said.

Privately insured, uninsured and self-pay patients or the groups that support them, for instance, could use what Medicare pays for a particular service as a point of negotiation with hospitals and doctors over what the final bill would be. The knowledge that actual bills are often much less than what is initially listed as the charge for the procedure could be helpful in attaining a discount rate, he said.

Dr. McClellan said the newest effort would dovetail well with demonstration projects, including a six-state pilot supported by the Ambulatory Care Quality Alliance, that provide more comprehensive cost and quality information to Medicare beneficiaries.

The American Medical Association described the CMS effort as a step toward a more transparent health care system. The AMA already has policy calling on physicians, hospitals and others to post their fees for patients to access.

But the type of information that the agency made public earlier this month, as well as the physician data this fall, will be of little use to health care consumers unless insurers join Medicare in publicizing what they pay for medical services, said outgoing AMA President J. Edward Hill, MD. Doctors play much less of a role in the pricing process than they used to.

"Gone are the days when a doctor posts fees and patients pay the doctor directly. Now, it's third-party payers -- insurers and the government -- who set prices," he said.

"If we want patients to become more prudent purchasers of health care, they need to be in greater control of their own health care choices and need true price transparency from all insurers, not just the federal government."

In some cases, Dr. Hill said, health plans pay as little as 30 cents on the dollar of what a physician otherwise would charge. In such cases, the negotiation simply amounts to the insurer paying as little as it possibly can, he said.

Health insurers and employer groups welcomed Medicare's transparency initiative, saying that the move will take a lot of the guesswork out of obtaining and paying for health care.

"Unfortunately, today's consumer is completely unaware of the cost of their health care until they receive a bill in the mail," said John J. Castellani, president of the Washington- based Business Roundtable. "By making cost information available, consumers will be better informed on pricing and better able to make educated health care decisions."

Some shortcomings

Limitations exist in the public data.

Unlike hospitals, all physicians in the same county receive the same Medicare rate for a given medical service, Dr. McClellan said. This means that a patient unable to travel to a different county might not be able to shop around or negotiate for a lower price. People needing more urgent care also might not have the time or ability to compare prices or negotiate.

In addition, because hospital-specific price information is not part of the initial public release, some beneficiaries would need to estimate how much they would pay at a given facility by determining ahead of time their deductible and co-payment amounts.

The Bush administration is pushing private health insurers to start releasing their pricing information publicly. The BlueCross BlueShield Assn. unveiled its own pricing transparency effort earlier this month. Bush said these types of efforts, when linked with initiatives to assess the quality of health care in different offices and facilities, especially would benefit health savings account holders and other patients who are taking more control over when, where and how they purchase care.