It has always amazed me that while big hospital systems continue to claim that it is impossible for them to display their prices for medical services, insurance carriers know in advance what they are going to pay these same hospitals for these very same services.  Even the central planners running the socialized medicine programs in this country know in advance what they are going to pay for much if not most of the services provided by these hospitals.  

Even more amazing to me is what passes for “price transparency” these days. Here is a link to an article wherein the largest insurance carrier in North Carolina is reported to have revealed the charges of local hospitals, having rolled out their “treatment cost estimator.” If you read the article carefully, however, you will see the inconsistency of this sentence:  

“The cost estimates are based on the company’s Blue Advantage and Blue Value plans.” 

Revealed here are not the prices charged by any particular hospital, but rather the amounts paid to these facilities by the insurance carrier!  A review of the origin of pricing and what it means is in order, I think.

In almost all industries (other than healthcare), the seller of the product or service displays or advertises their price, inviting the judgement of the buyers in the marketplace to determine whether the proposition (product or service) seems “win-win.”  The price signal dance must begin somewhere and I believe it is incumbent on the seller to provide the initial signal.  This allows the buyer to deliberately ascertain whether the offer represents a value or not.  This is not how most healthcare is valued in this country, as everyone knows.  If the buyer issues a price that is “wrong,” not enough of the service is available (price too low) or resources are squandered (too high).  The only thing, of course, that is worse than the buyer dictating the seller’s price, is for neither the buyer or seller to agree on a price in the beginning, precisely the economics of healthcare in this country.

I have said many times that I don’t know if the surgical prices on my website are “right,” or not.  And I won’t know until healthcare price competition becomes more widespread, as true market (market-clearing) prices emerge from the competitive process-they are never simply imposed from top-down. When multiple healthcare facilities openly display all-inclusive pricing for all to see, those buying these services will ascertain value and act accordingly, sending appropriate signals both to those chosen and those rejected.  

This dynamic serves the interests of the consumer on the quality front, as well, as many in the industry will choose to more heavily weight their value on quality, rather than on price.  Those who do both will win the confidence of the patients and consumers and provide an example for all others to follow.

Insurance carriers or Medicare revealing what they pay to facilities is not price transparency.  That many confuse this with price transparency is an indication of how dysfunctional not only the health care system is in this country, but how poorly prices as the signals of all human exchange are understood.

G. Keith Smith, M.D.