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    Friday, August 19, 2005

    Pricing Doctors: Aetna is publishing the fees they pay doctors in hopes of bringing down the cost of medicine.

    I'm all for measures that make patients more responsible for the portion of healthcare dollars they consume, but I'm not sure this is the way to do it. The fees Aetna pays are negotiated discounts. Doctors and hospitals make deals with them out of fear that they'll lose patients in their area if they aren't a part of Aetna. You'll likely see lower fees in areas where Aetna has a large market share of the insurance market, and higher fees where its market is small. Maybe that will inspire other insurers to demand the same discounts Aetna is getting, which would lower the cost of healthcare to insurance companies anyways - but only in the areas of high-Aetna market share.
    And, of course, it won't change the cost of providing that care.

    UPDATE: From a reader:

    No, Sydney, Aetna's pricing strategy won't lower the costs of
    producing healthcare, directly. Or, better said, it won't explicitly
    tell doctors how to lower their costs. But when prices are clear, and
    consumers (patients) choose accordingly, those who serve their clients
    better and more cheaply will win the day.

    Again, what Aetna is publishing is not the cost of care, it's the cost to Aetna. The two are not necessarily the same. Suppose you live in an area with one major employer - say, General Motors, or Ford, or a large university. Just about everyone in town works for that one employer. If the dominant business decides that they're only going to offer health insurance from Aetna, then Aetna has a definite edge in negotiating their prices. Doctors and hospitals will bow to below-market prices just so they won't lose patients. (Doctors are prohibited by law from discussing their fees with one another - or their deals with insurance companies. It's considered price fixing. Unfortunately, in a community of independent and free standing physician practices, it makes them vulnerable to large insurance companies.) In those communities, Aetna's prices will be unfairily low - and other people without Aetna insurance will be paying more.

    Or, consider the opposite situation, which happens routinely here in my community. In our city, there is one hospital that specializies in pediatrics. None of the other major hospitals treat children at all. Some of the smaller hospitals do, but they get so few pediatric patients that most people avoid them. The Children's hospital has a definite monopoly on pediatric hospital care. Every couple of years a major insurance forgets this. It's always a different company, but the result is the same. Their negotiations for discounts with the pediatric hospital breaks down. The hospital feels their compensation is below par. The hospital sends out a letter notifying everyone that as of a certain date, they will no longer be accepting the insurance. Then, miraculously, as the date closes in, they send out a letter saying that negotiations have concluded satisfactorily and all is well. Usually it means the insurance company was reminded by their customers that there is no other choice around here for quality pediatric hospital care. I dare say, in that case, Aetna's prices would be higher than in other regions with more than one hospital catering to pediatrics.

    And that's the point. The prices Aetna pays for service does not reflect what it actually costs to provide them. I'm all for transparency, but I just can't see that this move will do much to change the cost of healthcare.

    (And by the way, if you want to know the price of a doctor's visit or a procedure, all you have to do is call the place and ask.)

    posted by Sydney on 8/19/2005 08:56:00 AM 0 comments


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