Guest Columnist James D. Veltmeyer: Hospital Price Transparency: A Necessary First Step
Hospital Price Transparency: A Necessary First Step
Would you purchase a new automobile without knowing the price? Would you purchase a new home that way? Or would you purchase any product in the supermarket without knowing the cost? For a slim slice of America – Silicon Valley zillionaires and Hollywood celebrities – that might be possible. There are always those with so much money, the price of anything is a mere afterthought.
However, for the vast majority of people, cost is the determining factor of most life events, whether it is the cost of a new car, a possible vacation, or a college education for the high school graduate. And, indeed, the pricing mechanism is the key component of our free market economic system. That’s the process by which buyers and sellers conduct transactions. That’s how we determine value. It’s the basis of supply and demand. When government tries to intervene by imposing price controls, it distorts the free market by artificially stimulating demand and restricting supply, thus leading to shortages plus explosive inflation when the controls are eventually lifted.
In January of 2021, a revolutionary development took place in the completely cost-distorted health care market in the United States. Thanks to an Executive Order signed by President Trump in 2019, hospitals are now required to post the price schedules of more than 300 common “shoppable services” in a consumer-friendly format. These “shoppable services” are those that can be scheduled in advance by a health care consumer, such as x-rays, outpatient visits, imaging and laboratory tests or bundled services like a caesarean delivery, including pre-and post-delivery care. They are also be required to disclose public payer-specific negotiated charges and the amount the hospital is willing to accept in cash from a patient.
The importance of this new regulation cannot be underestimated or diminished. We know that hospital care is the greatest cost-driver in American health care today. At $1.3 trillion, hospital care – provided mostly by a small number of gigantic oligopolistic chains ( as a result of mergers and consolidation in the industry ) – gobbles up one-third of all health care dollars in the U.S. The average cost of a one-day stay in the hospital is over $4,000 with the average stay clocking in at nearly $16,000. Hospital profits are also much higher than either the insurance or pharmacy industries. It is indisputable that health care costs can never be brought to heel without addressing the cost of overpriced, inflated hospital care.
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