Health Law and Regulation

Uninsured patients in California are unable to successfully obtain information about the cost of medical care at hospitals despite recent state legislation intended to improve price transparency, according to a new study.

To make it easier for patients to shop for care and to prevent price gouging of the uninsured, more than 30 states have enacted price transparency legislation. Under California law, an uninsured patient has the right to contact hospitals and receive a price estimate. The law also states that if a patient is low-income the price estimate cannot exceed what the hospital is paid for the procedure by Medicare or Medi-Cal (California's version of Medicaid).

Posing as low-income uninsured patients, researchers received price estimates from less than one-third of the hospitals they approached and the estimates received often were much higher than those allowed under California law, according to the findings published online by the Journal of General Internal Medicine. The researchers sent letters to 353 California acute-care hospitals from a fictional uninsured patient requesting an estimate for one of three common elective procedures: laparoscopic removal of the gallbladder, a hysterectomy and a routine screening colonoscopy. Only 28 percent of the hospitals responded as required by state law and the responses varied widely in content and price. Most included a price quote for hospital services only, the remainder included both hospital and physician costs or did not specify what was covered.

While California law says the uninsured cannot be charged more than a hospital is paid by a government health plan, two-thirds of the price quotes exceeded the median price that Medicare reimburses hospitals for each of the procedures in California. This finding suggests that most hospitals provided estimates higher than what they are allowed to charge under state law. Also, the individual prices for procedures varied widely. For example, estimates for a hysterectomy ranged from $5,569 to $15,950, while the estimates for a colonoscopy varied from $216 to $1,748. Many hospitals also offered discounts for actions such as payment in full at the time of care.

State officials recently created a Web-based contact list that includes an individual at each hospital who is responsible for providing price quotes. Researchers say officials should also consider creating a standard price-request form and develop standards for what services should be included in any estimate. One additional measure to consider is imposing financial penalties on hospitals that fail to comply with transparency rules. Some patient advocates have suggested that instead of having patients shop for care by contacting the hospital themselves, states should mandate that hospitals list their prices online. Researchers say additional work will be needed to examine whether this strategy is more effective than California's approach.

Source: RAND Corporation, December 1, 2009

Toward Transparency in Healthcare: Competing for Quality and Consumers

In this special report, experts discuss the challenges of incorporating public reporting as part of an integrated strategy, collaborating with providers, and developing objective metrics and reliable data. This report also includes details on furthering the transparency agenda with healthcare report cards, responding to data validity and reliability issues, evaluating internal vs. external reporting mechanisms, communicating quality and performance data to employees, patients and members; and building a quality-based specialty provider network.

Toward Transparency in Healthcare: Competing for Quality and Consumers is available from the Healthcare Intelligence Network for $157 by visiting our Online Bookstore or by calling toll-free (888) 446-3530.