Question

In: Economics

In an effort to promote increased price transparency and empower consumers to comparison-shop when seeking care,...

In an effort to promote increased price transparency and empower consumers to comparison-shop when seeking care, beginning in 2019 CMS required hospitals to make their chargemasters publicly available online in a machine-readable format.

a. What is a hospital chargemaster? How useful would posting this information be for patients attempting to determine their out-of-pocket costs for a medical service, and why?

b. In response to this requirement, hospitals complained that providing this information may be misleading to consumers, who might interpret the chargemaster prices as their out-of-pockets expenses for a given service. Do you agree? Why or why not?

c. What additional information could hospitals provide in order to help consumers better understand their out-of-pocket costs for services provided by the hospital? How would this information help?

d. Why might hospitals refrain from providing the useful information you recommended in part c.? Suggest a policy that would address this problem

Solutions

Expert Solution

Introduction:-

Each micro-economic organization requires careful analysis of cost to determine the net profit while consumers consider saving costs as the primary objective. The case here revolves around both patients as consumers and hospitals as producers of a common service which has both a demand and a supply.

With a view of regulating an industry, the government of a country takes numerous steps to ensure that prices charged are reflective of the overall costs and that customers can compare the facilities available across different hospitals to arrive at a conclusive decision respectively.

In this a Charge master can very much help a consumer decide on which facility to choose from respectively.

Case Specifics:-

Q A) What is a hospital chargemaster? How useful would posting this information be for patients attempting to determine their out-of-pocket costs for a medical service, and why?

A hospital charge master refers to a list of services which the patients as consumers can avail and serves as a list to reflect the prices of various goods and services which a hospital charges from the patient or from the health insurance provider in the United States.

It contains a list of all services such as medical tests for specific diseases and list of medicines and prices which are charged during numerous procedures.

A recent regulation mandating that consumers should have access to the list would enable consumers to review expenses of different hospitals on different items thus enabling to have a healthy competitive industry and thereby ensuring that customers are aware of the total expenditure which

Since, in the past customers have been unaware of these expenses and medical treatment is more of a neccessity it has meant that at the last minute they have found themselves unaware of key expenses which may be outside their health cover and would have to be paid out of the pockets.

A list with all such expenses will increase the overall awareness of the customer thus reducing the possible chances of them overspending at a hospital facility.

Further it also creates a healthy market scenario in which customers can compare the cost across different

Question B). In response to this requirement, hospitals complained that providing this information may be misleading to consumers, who might interpret the chargemaster prices as their out-of-pockets expenses for a given service. Do you agree? Why or why not?

Even when the advantages of displaying this has been explained above, there may be certain cases of misinformation being passed to the consumers. The United States has a heavy rate of people that are insured either because of the laws which mandates employees to have some basic minimum insurance or otherwise because of increased awareness and the rise of overall healthcare costs.

Such misinformation may lead to people believing that the expenses would actually incur wheras in reality these could be covered by the insurance companies. People also tend to judge the healthcare which may or may not be provided in real cases and think that these tests or medications may apply to them as well hence making them believe that their overall expenses could shoot up.

That said, this in no way means that the exercise is bad. While implementing changes hurdles may occur which can be solved by increasing consumer awareness and running programs for the same. Therefore even when some cases may occur, this does not justify not preparing a chargemaster respectively.

c. What additional information could hospitals provide in order to help consumers better understand their out-of-pocket costs for services provided by the hospital? How would this information help?

The additional information which can be provided are by what margin the health care providers such as insurance companies provide for the medicines and services mentioned in the charge list.

This can be done by being more informative about the estimated expenses of a disease and displaying the average out of pocket expenses in each case and the highest and minimum amount paid by different customers using actual data respectively.

This information would allow consumers to increase their awareness and stop misjudging every expense and have a holistic view of the services which would be provided.

D) Why might hospitals refrain from providing the useful information you recommended in part c.? Suggest a policy that would address this problem

Hospitals have a lot of expense involved in providing services to the consumers and have to earn sufficient profits to give to their investors and pay off the doctors which they hire.

Providing some information may not prove to be an advantage for the hosptial as they would loose on to customers who would compare different services by hospitals.

Further some cases may need re evaluation which may mean charging the customer more because of increased overall costs.

A policy ensuring that this problem can be resolved is by ensuring that the passage of information is regularly checked and no exemptions are given considering how critical the health care industry is for the nation. Further laws can also be placed at capping the overall expenditure of a procedure to disallow hospitals to go on charging without any reasonable cause.

Please feel free to ask your doubts in the comments section if any.


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