A far-reaching effort to establish a national standard for healthcare prices is likely to put additional pressure on hospitals and other providers to “come clean” about what they charge.

The pricing initiative is the brainchild of Dr. David Newman, executive director of the Health Care Cost Institute (HCCI), a non-partisan, non-profit organization supported by several major health insurers including Aetna, Humana, Kaiser Permanente and UnitedHealthcare. The institute’s mission is “improving the U.S. health system by creating comprehensive data infrastructure and analytics.” Since 2007, HCCI has held the annual claims data for 50 million Americans.

Speaking at the Healthcare Financial Management Association’s Annual National Institute conference this week in Orlando, the statistician cited a West Health Policy Center/Rand Corporation study that found that “Providing patients, physicians, employers and policymakers more information on healthcare prices could reduce U.S. healthcare spending by an estimated $100 billion over the next decade.”

Newman, a self-described “geeky data guy,” observed that while true price transparency can promote comparison shopping and provider competition, purchasing healthcare services is not like filling up at the gas station. There are some 8,000 CPT codes, 12,000 ICD-9 codes and over one million providers with pricing structures that vary across 44,000 zip codes, and purchase decisions are often made under life and death circumstances, when there’s no time to evaluate data and compare prices.

To counter this complexity, HCCI is working to create a common consumer experience that will be the private sector equivalent to www.medicare.gov, by providing healthcare buyers with intelligible information on cost and care quality.

Also See: CMS Releases 2013 Hospital, Physician Data

“If you want consumers to make informed healthcare decisions,” Newman noted, “you have to provide them with pricing information that they can actually use.”

The centerpiece of HCCI’s undertaking is a website that it launched this past February—www.Guroo.com. Underlying the user-friendly site is a statistically-driven cost calculator that provides average national and regional charges for common medical procedures that can be planned for in advance, like childbirth and knee replacements.

The procedures are grouped together as “care bundles,” which are meant to represent a typical consumer experience around a set of services such as maternity care. Currently, the site provides pricing for 78 care bundles and is working to expand the number to more than 300. Which procedures to include in care bundles was determined by mining claims data for the most commonly used CPT codes.

Along with pricing, HCCI is also working to provide standard quality measures for these care bundles based on reported outcomes and consumer surveys conducted through the Guroo.com site.

While an obvious boon to consumers and insurers, who stand to gain if they can direct insureds to providers who deliver the same quality of care at a lower cost, HCCI’s pricing initiative represents a threat to many hospitals.

“Most hospitals don’t really know what their costs or utilization rates are,” Newman argues. “They’re a lot like Macy’s. They need to keep their doors open 24 by 7; they operate under a hell of a lot of uncertainty, and they’re all hoping for a really good Christmas season.”

Some hospitals, the HCCI executive notes, charge 300 or 400 percent more than what Medicare pays for a give procedure, while others charge at a discount to Medicare rates. Those hospitals, he expects, will embrace pricing standards because they are willing to compete on price in order to increase their patient volumes, while the high-priced providers are more likely to resist transparency by arguing that price comparisons fail to take into account differences in outcomes and care quality.

But Newman thinks the quality of care argument is a straw man, since it’s not borne out by statistics. With pricing transparency, he says, “If you’re the high-cost provider and there’s no real justification for your high cost – you’re in trouble.”

Steve Rose, the chief financial officer for the Conway Regional Health System, agrees with Newman that “Price transparency is coming whether we’re on board or not.”

Conway, which includes a 154 bed medical center and a 26 bed rehab facility, is currently the only hospital in Faulkner County Arkansas. But the health system faces competition from hospitals in Little Rock, which is only a half-hour away by car. So its standard charges are a blend of Medicare and local market rates.

Does this mean Conway will support efforts to secure standardized pricing standards? Rose says this hasn’t been discussed by Conway’s board, but as its CFO he feels the health system is competitive and would be willing to openly share its pricing.

“We’ve got to do a better job of providing transparent price information for the consumer,” he agrees. In fact, “We’re trying to do that now.”

Rose says Conway has recently deployed an add-on to its Meditech HIS. The new system uses CPT codes and negotiated insurance rates to provide patients with estimates for common procedures.

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