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Indiana's health care transparency laws get failing grade

April 1, 2013

Indiana’s laws requiring hospitals to release price information are woefully inadequate, according to a report by two health insurance reform groups.

Indiana was among 29 states to receive an ‘F’ grade in an analysis of all 50 state statutes by Catalyst for Payment Reform, a California-based employers group, and the Health Care Incentives Improvement Institute, a Connecticut-based group formed by employers, doctors and health plans promoting new ways to pay for health care.

The report, issued in March, is yet another stinging criticism of hospital prices. In February, Time magazine published the longest article in its 90-year-history, detailing a series of cases in which hospitals pushed “aggressive markups” onto patients—charging $1.50 for one Tylenol pill, $8 for a box of tissues, and $283 for what is normally a $20 chest X-ray.

High hospital prices are increasingly borne by consumers as the percentage of them with high-deductible health plans rises every year.

“In this environment, it is only fair and logical to ensure that consumers have the necessary quality and price information to make informed decisions about where to seek health care,” wrote Suzanne Delbanco and Francois de Brantes, the respective executive directors of the two employer groups, in an introduction to their report.

The report gave only two A's—to Massachusetts and New Hampshire—in part because those states require hospital information to be reported on a public website, not just in reports to a state agency, as is the case in Indiana.

Some Indiana hospitals report their “chargemaster” rates on their own websites, but these are of marginal use to consumers, since, as the Time article demonstrated, the charged rates bear little relationship to the cost of those services or even to the prices charged to health insurers.

For years, hospitals raised their chargemaster rates annually in an effort to win higher reimbursement rates from health insurers. But the practice fell hard on uninsured patients because most hospitals gave no more than a 20-percent discount to the uninsured.

Beginning last year, IU Health began offering 40-percent discounts to uninsured patients in order to comply with new rules that were part of the 2010 Patient Protection & Affordable Care Act.

Still, huge numbers of patients pay much larger bills than their insured peers or pay nothing and risk having their credit records damaged when the hospital turns over their accounts to collection agencies.

There is little legal pressure at this point on Indiana hospitals to disclose more information. In December, the Indiana Supreme Court sided with Clarian Health—now called Indiana University Health—in a case against it by two uninsured patients who received care at the IU North Hospital in Carmel.

Abby Allen and Walter Moore complained that IU Health billed them for its chargemaster rates simply because they signed a contract pledging to pay reasonable prices for the care they were about to receive. The contract did not include a specific reference to a price.

But the Indiana Supreme Court said the contract’s language was sufficient.

“Many courts have addressed contracts similar to those of patients’ and most have held that price terms in these contracts, while imprecise, are not sufficiently indefinite to justify imposition of a ‘reasonable’ price standard,” Justice Robert Rucker wrote in the case titled Abby Allen and Walter Moore v. Clarian Health Partners Inc.

The American Hospital Association, in response to the Time article, said its prices on any individual item—like a Tylenol pill—include costs for all the staff and facilities needed to provide those services. It also called for greater transparency to fix the “broken system” of incentives created by government and private insurance plans.

“It’s important to keep in mind that what is charged and what is eventually paid are two different numbers,” wrote Rich Umbdenstock, CEO of the American Hospital Association. "Because nearly all of a hospital’s payments are set either by government, which pays less than the cost of caring for patients, or through negotiations with private insurance companies, the vast majority of patients do not pay what is listed on the hospital bill – which is why one in four hospitals operate in the red.

"What is most important and relevant to patients is how much they will pay out of pocket. Because insurers determine how high their customers’ out-of-pocket rates will be, customers need insurers to provide real-time information.”

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