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Healthcare Costs 'An Abomination' Says Senate Finance Committee Chair

 |  By Margaret@example.com  
   June 19, 2013

A Senate committee session in which expert witnesses discussed healthcare costs, hospital prices, and data transparency ended with a plea from the chair, Sen. Max Baucus, for "specific recommendations" from "anyone."

The Senate Finance Committee spent more than two hours Wednesday discussing the relationship between healthcare costs and transparency with a panel of witnesses that included Steven Brill, the author of a March 2013 Time magazine cover story titled "Bitter Pill: Why Medical Bills Are Killing Us."

Brill proved to be a provocative witness and directed much of the discussion. Throughout his testimony and during the question and answer period, he often took direct aim at the chargemaster, or what some call the "sticker price" for the 100 most common Medicare inpatient diagnostic related groups or DRGs.

"No one can explain anything about … the chargemaster, which all hospitals have but which vary wildly, hospital by hospital, and have absolutely nothing to do with quality. Nor can anyone explain why the chargemaster's sky-high list prices are charged mostly to those least able to pay, the uninsured or the underinsured."


See Also: Kill Your Chargemaster


"And no one can explain why the discounts that insurance companies pay to hospitals and other providers off of the chargemaster vary so wildly, which, of course, affect that co-payments and deductibles paid by patients lucky enough to have insurance."

He cast the chargemaster as a metaphor for the entire healthcare system. "It's irrational; it's completely unaccountable; and the prices are just way too high."

The other three witnesses pressed on and commented on a broad range of pricing and healthcare transparency issues. They were:


How much hospitals charge for the same procedures (source: The New York Times)

  • Suzanne F. Delbanco, PhD, executive director of Catalyst for Payment Reform, a non-profit company that works on behalf of large employers and public healthcare purchasers.
  • Giovanni Colella, MD, CEO of Castlight Health, which provides healthcare cost and quality information to employers.
  • Paul Ginsburg, PhD, president of the Center for Studying Health System Change and research director at the National Institute for Healthcare Reform.

While there was general agreement that price and quality transparency will help consumers more wisely spend their healthcare dollars, there was considerable handwringing over the role transparency can play in resolving the high cost of healthcare.

"I am concerned that policy makers have focused too much concern on the amount of information available rather than the reliability and usefulness of that information," stated Sen. Orrin Hatch (R-UT), ranking member of the committee.


See Also: How Chargemaster Data May Affect Hospital Revenue


The discussion between the panelists and Senate committee members was framed around several broad issues. As is typical of these hearings there were a lot of questions and dearth of specific recommendations:

Can we return the principles of the free market to healthcare pricing?
"I'm not sure we ever started from that place," said Brill. "We certainly have slid far away from it." He pointed to Medicare as a countervailing payer power to the most concentrated healthcare provider. "It does an awfully good job. It's run mostly by the private sector, contracted out, and demonstrates that if you have one really big buyer in the marketplace it can serve to address the accumulated power of the providers."

Should the chargemaster be replaced?
Delbanco stated that the recent public release of chargemaster data was a great education for all about "how much variation there is [among hospitals] in the charges much less what people end up paying. What we need to work toward, and this will take a lot of work and time, is understanding exactly what the underlying costs are of delivering care and what cost it takes to deliver high quality care."

She noted that most hospitals and health systems "really don't know what it takes in terms of cost to deliver a unit of care." Without that knowledge, she said, it would be impossible to arrive at a "rational system to decide how much a procedure should cost."

What about consolidation's effect on pricing?
Sen. John Thune (R-SD) expressed concern that the coordination and integration of healthcare is providing an incentive in the market for consolidation and translates to higher costs. "What areas of anti-trust need to be re-evaluated if this trend continues to help put downward pressure on prices?"

Ginsburg maintained that there are a lot of forces pushing for consolidation, including reforms in provider payments. He said steps need to be taken to make markets more competitive despite consolidation, including revisiting the Federal Trade Commission's safe harbor policy to require a demonstration of patient benefit in a merger or acquisition.

Will CMS release more data?
Delbanco would like the Centers for Medicaid and Medicare Services to release more data and allow it to be used by qualified entities to analyze for quality and payment patterns. Dr. Colello noted that CMS is sitting on so much data and making it accessible will help improve the quality of care. He added that employers should have access to claims data.

Earlier this month, in addition to costs for certain inpatient procedures, CMS made public estimates for average charges for 30 types of hospital outpatient procedures.

Should Medicare have the ability to negotiate drug prices?
"It's completely logical," stated Dr. Colella. "If you're the biggest payer, you have market power and you should be able to negotiate to reduce drug costs."

Sen. Max Baucus (D-MT), committee chair, closed the hearing with a request for specific recommendations from both the witnesses and "anyone watching this hearing. It's an abomination that we pay about 60% more for healthcare in this country than the next most expensive country. Something's not quite right there. Market forces have a tough time in this area."

Brill Senate Finance Committee Testimony

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Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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