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Ending Mystery Health Care Pricing

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Benjamin Kalinkowitz
April 23, 2018

A few times a week the office administrators in my clinic get a call from a potential client who wants to know what we charge for services. This should be a straightforward question. Call almost any other business and they would provide at least an estimate. No one would go to a hair salon, a dry cleaner or a restaurant that refused to reveal prices in advance. So why are Americans forced to accept this ambiguity when seeking medical care? And how can we ever hope to reform the health care system in this country if we can’t even get a straight answer to how much it would cost to get a strep test?

There are layers upon layers of barriers to cost transparency. The hospital I work for has negotiated individual contracts with each insurance company, agreeing to accept sums much less than those printed on any bill, based on variables that remain company secrets. The amount a healthcare provider can collect from an insurer is based purely on negotiation skills and is very rarely tied to that provider’s outcomes. Success in those negotiations is mostly dependent on size: the larger the hospital system, the more power they bring to the negotiation table. The reverse also holds true: for insurance companies, market saturation allows for a better negotiation position. What the patient will pay for any given service therefore depends on what happened in a secret negotiation between their insurance company and a health care system. Rising co-pays, deductibles and co-insurance rates, as well as the consolidation of hospitals and health care systems, means the out of pocket costs for health care consumers continue to be unpredictable.

Even when final prices are revealed on bills and explanations of benefits, they are very rarely final. In U.S. health care, what providers charge has no relation to what something costs; it is merely an opening bid. List prices are so artificially inflated through negotiation, and providers are often eager to get paid anything immediately to offset the costs of chasing down payments. Often, they are willing to negotiate lower prices with clients who pay immediately, pay in cash or merely ask enough times. Figuring out which providers might be willing to offer a discount is not only a matter of luck; social capital plays an important role. When routine prenatal testing resulted in a $4,000 bill for my family, we were fortunate enough to be able to draw on Facebook parents’ groups to poll others who had faced the same situation, discovering that the lab would reduce the bill to a fraction of that total just for asking for a discount. I paid approximately what my insurance would have, had they covered the claim, but only because I knew to ask. This creates another layer of inequality in a byzantine health care system; those who do not have access to good advice or the time to fight over bills are faced with the prospect of paying artificially high rates that insurance companies never intended to pay in the first place.

If we want to have true choice and equity in health care, we need to make it possible for consumers to make informed choices and shop around for health care services. The price of health care procedures should reflect the cost of the service, not be the result of secret negotiations. We must have transparent pricing, including an end to providers overcharging in hopes of collecting pennies on the dollar from insurers and an end to secret out of pocket discounts. Either providers must publish their rates to allow for comparison shopping, or we must consider government rate-setting to lower the stakes of insurance-hospital negotiations. If we are truly interested in fair and cost-effective health care, we must accept these disruptions to what is essentially a monopoly-driven market.


Author: Benjamin Kalinkowitz, PT, DPT, MPA earned his Masters in Physical Therapy from Hunter College-CUNY, his Doctorate in Physical Therapy from the University of Kansas, and his MPA from the University of Nebraska at Omaha. Dr. Kalinkowitz has been a practicing physical therapist for over 10 years, having spent 8 years working at the Department of Veterans Affairs, and currently in practice at a hospital based outpatient clinic in New Jersey. All views expressed are the author’s alone, and do not necessarily represent the views of his current or former employers. Email: [email protected] Twitter @BenKalinkowitz

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The American Society for Public Administration is the largest and most prominent professional association for public administration. It is dedicated to advancing the art, science, teaching and practice of public and non-profit administration.

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