Many California hospitals may be skirting state laws that require them to disclose prices of procedures when requested by patients, according to a new study by Rand Health.
"Our findings raise questions about the effectiveness of California laws that are designed to help uninsured patients shop for medical care and protect themselves from being charged excessive prices," wrote the author of the paper, Ateev Mehrotra, MD, an assistant professor of medicine at the University of Pittsburgh School of Medicine and a Rand policy analyst.
"Current California legislation fails to meet its objective of enabling uninsured patients to compare prices for hospital-based healthcare services," the authors concluded.
The researchers conducted their study by posing as a fictional, uninsured, low-income patient who sent letters requesting price quotes from 353 acute care hospitals for one of three common elective procedures. However, the authors said they received responses from less than one-third. The procedures were a laparoscopic gallbladder removal, a hysterectomy, and a routine screening colonography.
"Just 28% of the hospitals responded . . . and the responses varied widely in content and price," the authors said in a statement. "Most included a price quote for hospital services only, the remainder included both hospital and physician costs or did not specify what was covered."
Mehrotra wrote in an e-mail yesterday that "the hospitals that did not respond were breaking the law."
Of the 98 responses, 15 did not provide a quote and instead asked for more information, such as the billing code; 55 provided a price estimate for hospital services only; 10 included both physician and hospital services; and 18 did not specify what was covered, the researchers wrote.
Two-thirds of the prices quoted by those hospitals exceeded the median price that Medicare reimburses hospitals for each of these procedures.
Mehrotra said the study is the first peer-reviewed effort to review the state's price transparency law, adding the findings have implications for more than 30 other states that have similar laws requiring hospital price transparency to avoid "price gouging" the uninsured.
Brown University contributed to the report, which is published online in the Journal of General Internal Medicine. Rand Health is a division of the Rand Corp.
Jan Emerson, spokeswoman for the California Hospital Association, heatedly disputes the findings, saying the study "is deeply flawed" because the authors have incorrectly interpreted the law.
"The law is geared to address a specific patient's financial situation and the patient must first apply for the program and provide the hospital with documented evidence of their financial situation," she says "AB 1045 does require hospitals upon request to provide an estimate of costs for a specific procedure or service, but that estimate is based on the hospital's chargemaster.
"Hospitals do not provide estimates based on discounted fees because the discounts are only applicable to patients who meet specific financial criteria," she said.
Emerson adds the study unfairly criticizes hospitals for not including physician fees in their estimates. "But hospitals don't bill for physician services—this is prohibited under state law."
Mehrotra responded in an e-mail by referencing language on the Office of Statewide Health Planning and Development's Web site:
"(The law) requires each hospital to provide upon request a written estimate of the amount the hospital will require an uninsured person to pay for hospital services that are reasonably expected to be provided, based on average length of stay and services provided by the person's diagnosis . . .
"Each hospital is also required to provide information about the hospital's financial assistance and charity care policies to uninsured patients, along with contact information for a hospital representative, to obtain more information about these policies."
The Rand research referenced two laws, AB 1045, which took effect in January 2006, requiring hospitals' written responses to price inquiries, and a second, AB 774, that the study authors said "limits the price estimate for patients earning less than 350% of the federal poverty line."
The researchers did not name the hospitals they believe did not comply with state law.
The authors acknowledged study limitations. Letters were addressed to "To Whom It May Concern," and sent to the billing department, and may have been misdirected. Also, letters were mailed from the San Francisco area, but indicated the patient would be willing to travel "to save some money."
Also, state law does not specify the time in which a hospital must respond.
Possible transparency improvements
The authors suggested several changes to the law that would improve price transparency. The amendment would require:
- Each hospital to publicly list a contact person to handle requests.
- The state could develop a standard patient information form that would preclude hospitals from asking patients to provide a CPT code, which is not readily available to the patient.
- The state could standardize which services need to be included in the price estimate.
The project was launched because of concerns that many hospitals charge uninsured, low-income patients more than they charge private insurers and government payers, and many are fighting related charges in class-action lawsuits.
Other authors of the study included lead author Kate Stockwell Farrell, MD, of the University of Pittsburgh School of Medicine; Leonard J. Finocchio of the California HealthCare Foundation; and Amal N. Rivedi, MD, of the Warren Alpert Medical School of Brown University, Providence, RI.