One Man’s Descent into Healthcare Price Opacity

In theory, Americans could control runaway healthcare costs if they shopped around for the best deal on big-ticket medical procedures. But in practice, there are limits to a patient’s willingness to compare doctors and hospitals when he’s clutching his chest while medical technicians slap an oxygen mask to his face and trundle him into an ambulance. Likewise, there may be limits if the treatment options are so complex and require such specialized knowledge that a layman cannot make an informed judgment.

Still, some procedures should lend themselves to comparison shopping. Take hip transplants, for instance. The procedure is easily explained by doctors, and the risks are readily grasped by patients. Rarely do patients require emergency surgery. They have ample time to check around to find the optimal balance of price and quality. 

In 2010, according to the Centers for Disease Control, surgeons performed more than 310,000 hip transplants. At an average cost of $40,000 per procedure, hip surgeries account for more than $12 billion a year in health care expenditures. Americans could literally save billions of dollars if they were empowered to spend as much time looking for the best deal on hip surgeries as they do, say, buying a car.

I had the opportunity last year to put that theory to the test. I had been suffering from an arthritic right hip for several years. While the discomfort usually was tolerable, the infirmity was limiting my mobility. I had trouble getting in and out of the car. I found it difficult to straighten my body when I stood up from a chair. I couldn’t walk more than a mile or so without my hip giving out. If I wanted to live an active life as I approached retirement age, I knew I had to do something.

My primary care physician referred me to an orthopedic surgeon in the Richmond area, Dr. Jason Hull. He took an x-ray of my hip and found that most of the cartilage had worn away — the hip and socket were scraping bone on bone. I was an obvious candidate for surgery.

Although he performed 450 to 500 hip and knee replacements a year, Hull confessed that he couldn’t tell me how much the procedure would cost — or even what he would charge. I’d have to ask the business office of his practice, Tuckahoe Orthopedics. As for what Bon Secours St. Mary’s Hospital would charge, I’d have to ask them.

While I liked Hull’s forthright demeanor and had full faith in his competence, I also felt a responsibility as a health care consumer to check out my options. Over and above what the surgery would cost me personally, I felt a moral obligation to see if I could save “society” some money. As it turned out, being a good health care consumer was all but impossible.

One idea particularly appealed to me. My friend Bill Moscowitz, a Virginia Commonwealth University pediatric surgeon, highly recommended Health City, a state-of-the-art hospital on Grand Cayman founded by renowned Indian heart surgeon Dr. Devi Prasad Shetty. Its value proposition: By focusing on a narrow range of high-volume procedures, it could provide treatment at comparable outcomes to the best U.S. hospitals but at much lower cost. Indeed, the hospital was known to put up the patient and a family member in a resort hotel on Grand Cayman’s famed Seven Mile Beach for post-operative recuperation. That sounded like a great way to recover from surgery! When the website confirmed that the hospital performed hip replacements, I had fantasies of my wife and me sipping margaritas and lounging under umbrellas on soft sandy beaches.

Seven Mile Beach — my kind of rest & rehabilitation.

I submitted an email inquiry to Health City but, alas, the hospital never responded. Then I thought to inquire if my health insurance company, UnitedHealthcare, even covered procedures conducted at Health City. When I checked, the answer was no. That was a deal killer. It didn’t matter if Health City could under-price an American hospital by 50%, without insurance, I’d personally pay more. So, I restricted my search to hospitals in the Richmond area.

The Virginia Health Information website provides average cost data for various high-volume procedures performed in Virginia hospitals. Based on 2015 data, the website reveals that the average price of a hip replacement in Central Virginia — $18,810 — was lower than in any other region of the state. (The statewide average was $20,697.) As I recall, when I searched the website last year, it provided average cost figures for individual institutions. I can’t find that data any longer. Here’s all the database offers now:

Given the fact that a dozen Central Virginia hospitals conduct orthopedic surgeries, this table isn’t remotely helpful. As I recall, VFI data indicated last year that Bon Secours St. Mary’s Hospital had the lowest, or almost the lowest, charges among the high-volume hospitals in the region. The hospital performs more than 2,000 procedures a year, and 10% of its total business consisted of orthopedic surgeries. Dr. Hull also conducted his surgeries there, so I felt certain that, whatever the price, at least I was assured of a positive outcome.

From a medical point of view, sticking with Hull and St. Mary’s turned out to be a good decision.

St. Mary’s had a pre-admission orientation program that provided useful information. Patients were instructed on what we needed to do before entering the hospital, such as showering with an antiseptic soap the week before surgery and applying a disinfectant hours before, in order to reduce the risk of infection. We also learned how to change clothing after surgery, and what exercises to perform to speed our rehabilitation. It was all very useful.

Then came the surgery itself. Everything went swimmingly. Only a couple of hours after post-op, I was hobbling down hospital corridors on a walker. By the next evening, I was ready to go home. I was astonished how such an invasive procedure — the surgeon cuts through the muscle, dislocates the femur from the hip socket, saws off the top, attaches a metal ball, and implants a metal socket before sewing you back up — would not cause more pain. Once I got home, I never needed the opiates they gave me, just some pumped-up versions of over-the-counter medication. The treatment included several in-home visits by physical therapists, which also was helpful. Within a week, I had tossed my walker, crutches and cane and was walking again. Hull was great, the St. Mary’s nurses were great, the therapists were great, and a half year later, my hip is great.

It wasn’t until a month after the surgery that I found out what it cost. Here’s the tally I received from United Healthcare:

Amount billed: $47,868
Plan discounts: $17,051
Paid by my plan: $26,754
Amount I owed: $4,063

Hull’s practice, Tuckahoe Orthopedics, charged $9,528. St. Mary’s charged $38,341.

That’s when it dawned on me that even if Tuckahoe Orthopedics and St. Mary’s had given me a list price, I still wouldn’t have had the information I needed to make an intelligent consumer choice. That’s because I didn’t know what discount UnitedHealthcare had negotiated with them — or with competing providers whom I might have consulted.

Even for a procedure as routine, high-volume, and standardized as hip replacement surgery, there is no price transparency in Virginia’s medical marketplace. Consumers have no leverage, and they exert no power. Physicians and hospitals charge whatever they charge for their own arcane reasons in interaction with equally inscrutable insurance companies.

If there’s one thing Americans can agree upon when it comes to health care, it’s that costs are out of control. The system is bankrupting the country. But no one agrees on the solution. Some say we should move toward a single-payer system which saves costs by stripping out the insurance middleman. I would prefer to move to a market-based system that saves costs through innovation. But you can’t have a market economy when consumers can’t discover prices.

Virginia’s efforts to promote price discovery through the VHI website are laudable but grossly inadequate. I don’t understand the health care industry well enough to opine on how to create price transparency. But I can say this: We know how to get to a single-payer health system but we don’t know yet how to get to a market-based health system. If conservatives and libertarians want to avoid government usurpation of the medical-insurance function, they’d better put on their thinking caps or the statists will win the debate by default.

This column was originally published in The Republican Standard.

Share this article


(comments below)


(comments below)


10 responses to “One Man’s Descent into Healthcare Price Opacity”

  1. LarrytheG Avatar

    re: ” In theory, Americans could control runaway healthcare costs if they shopped around for the best deal on big-ticket medical procedures.”

    Here’s the thing – no where on the planet earth does healthcare actually “work” that way.

    And in my view , you missed an exceptionally important aspect – which is the quality and competence of the provider.

    Sure you can get your car repaired on the cheap.. or have some guy come and do electrical work on your house for 1/2 what others charge… but is that a good way to determine …. VALUE?

    AND you missed another important aspect … which is WHY your insurance company would not pay for some providers… what is the reason why they will not AND is this something you’d use the govt to force them to or would you… SHOP for insurance that would “cover” more providers? Is it also your responsibility to “shop” for insurance also?

    Finally – what would you do – if your insurance company refused to cover you in the first place because they thought you might need expensive surgery and their goal was to keep down costs for everyone and not let you “take” more in benefits than you actually did pay in premiums?

    In other words – true – “market” insurance decides for EACH subscriber what they will charge – based on factors like age and health status. They could, for instance, require you to have a physical and if they thought you would likely need a new hip – deny you insurance or charge you a lot more than they would -younger folks who won’t needs hips?

    Price “transparency” is not the panacea some think it is. There’s a LOT MORE to health care than “price” and it actually goes back to insurance – which we all seem to take for granted….

    but what if you did not have insurance? Could not get it? Could not afford it? what good is price transparency then?

  2. >>but what if you did not have insurance? Could not get it? Could not afford it? what good is price transparency then? >>

    Your post completely ignores what is perhaps the most important factor: The vast majority of health insurance is not insurance. It is merely taking money from one of your pockets and sticking it in another of your pockets. It was originally designed as such during the wage-price control era of WWII.

    The system is now so convoluted with rules and government interference that only a completely market based system could fix it. Otherwise, you are merely shifting money from pocket to pocket to pocket in an effort to avoid rules and the government. This is what lefties always fail to understand, as in the recent discussion on this blog re: how money is or is not fungible with respect to Medicaid expansion: Money, like water, can always find its way through or around obstacles.

    1. LarrytheG Avatar

      re: ” The system is now so convoluted with rules and government interference that only a completely market based system could fix it. ”

      there are only about 3 dozen OECD countries in a world of 200 countries… so what would be the reason the other 170 counties without significant govt involvement – don’t succeed with “market based” insurance?

      This is what I find not realistic in the advocacy of those who want a “market based” approach. Surely out of 170 other countries on this planet there are some examples of where the govt is out of it and the market prevails.

      the 3 dozen countries that DO have significant govt involvement – DO provide health care for most all of their citizens – at 1/2 the cost we do – and they all live longer.

      So it appears that the industrialized countries that have govt provision health care – are far superior to any other country on the planet out of more than 170 that do allow the “market” to provide health care.

      I think too many in this country – take for granted – that they have insurance coverage – and they actually do depend on the government to insure that they get “coverage” but in a true market-based environment – insurance companies shed anyone who is old or sick or has health problems… the only way you are guaranteed coverage is the government requires insurance companies to cover people via the HIPAA law and if that law did not exist – no insurance company would have to cover you – even at employers… they could pick and choose who they covered.. you would not be guaranteed insurance.

      that’s the way it works in 170 other countries that don’t have the government requiring insurance companies to cover people.

      is that what we really want in this country or is it the people who actually have insurance that advocate the “market” for others?

  3. LarrytheG Avatar

    re: ” Your post completely ignores what is perhaps the most important factor: The vast majority of health insurance is not insurance. It is merely taking money from one of your pockets and sticking it in another of your pockets. It was originally designed as such during the wage-price control era of WWII.”

    Yes – you make an important point.

    BUT – are you saying that insurance should not cover hip replacements that those are discretionary choice that people themselves should pay?

    Is “insurance’ for catastrophic losses and not day-to-day expenses and discretionary choices?

    I’m quite sure back in the 1940’s that people could not afford hip replacements and the insurance did not cover it.

    is that what we want to return to?

  4. “[Y]ou can’t have a market economy when consumers can’t discover prices.” — Exactly!

  5. Peter Galuszka Avatar
    Peter Galuszka

    This is one of the best reported health care stories I have seen in a long time. Amazing the lack of transparency in pricing.

    1. Thanks, Peter, I appreciate the compliment.

      1. Reed Fawell 3rd Avatar
        Reed Fawell 3rd

        Yes, I agree with Peter. This is a very fine article.

        It raises an overarching problem. The increasingly out of control bureaucracies, public and private, that are taking ever more control of our lives with absolutely no accountability to us.

        Even more disturbing is the fact that far too often we seem resigned and unconcerned about these massive intrusions into our lives by these seemingly autonomous systems.

        Thus we don’t seem to see, much less ask, what should be obvious questions. Why are the people running these operations not going to jail? Why are they not hauled into court and prosecuted? Why can refuse to tell us what their services cost us? Why is transparency now allowed? Why is it increasingly built into the system, instead of eradicated.

        One can ask the same questions of a growing number of institutions in this country. It is as if lying, theft and abuse of the public is now institutionalized into these systems by the very same people that commit these crimes for their own personal advantage. In my view, for example, that is also what is going on at the University of Virginia.

        1. Reed Fawell 3rd Avatar
          Reed Fawell 3rd

          Correction to last three sentences of 4th paragraph above.

          “Why can those who run these unaccountable bureaucracies refuse to tell us what their services cost us? Why is transparency not allowed? Why is obfuscation increasingly built into the system, instead of eradicated?”

          Also another point:

          How many times have your encountered intentional obfuscation and delay by a medical insurance company when inquiring about a claim – tactics such as being put on endless telephone waits and/or endless referrals to other departments, and/or claims of lost your claims, throwing you into an maze of bureaucracy and double-talk that leads nowhere. And that is obviously and intentionally designed to lead the insured nowhere.

          Or recall the institutionally directed obfuscations, half-truths, and outright falsehoods all carefully orchestrated by the UVA and peddled day after day by various departments, centers, boards, and officials at UVA, all carried out pursuant to an elaborate strategy to hide the truth of what happened there last Spring and Summer in and around Charlottesville, and to hide the truth during the uproar over the Strategic (Research) Investment Fund, and to hide what really happened in the Jackie affair, and now, most recently, who really pays for all these many millions of costs that UVA assumes for “third sponsored” research at UVA, and its own research.

          At some point in all of this dishonest behavior, the real question becomes why can all of these dishonest people using all of these dishonest systems and tactics get away with their dishonesty, collectively and personally, without paying any price at all, indeed without any accountability to the public whatsoever, but instead keep on using the system for their own private advantage while thumbing their noses at everyone else? Why?

  6. Insurance was (is?) intended…well, let me make a normative statement…should be intended… to protect against unexpected costs and spread the risk of such costs. We insure maritime cargo against the possibility the ship will go down. We know what the actuarial risk is and price the insurance accordingly. Yes, normal insurance will not cover the presumably unexpected act of war. That’s because the risk is assessed based on peace time. Yet you can get coverage for unexpected acts of war; you’ll just pay through the nose for it.

    I would cover hip replacements if everyone can agree that it is an unexpected cost. Of course, risk for hip replacement is nowhere assessed actuarially to my knowledge. So how to price the insurance? All “medical insurance” would be priced the way car insurance is. Bad drivers pay increased premiums based on actuarials. People who weigh 400 lbs would be priced for their increased risk of heart disease, diabetes, etc. That is what insurance is, except the social justice warriors will complain that it’s not fair.

    I have never understood why Medicare is called insurance. The risk and result is well understood: You’re going to die and cost plenty of money in the process. It is simply a government transfer payment, from younger people to older people.

    If you want to have transfer payments to cover poor people who might not be able to afford medical care, then do so, acknowledging the real cost of government interference in the health system that causes the lack of transparency complained of on this blog.

    Larry, I would submit that none of the countries you speak of that have “non-working” market based systems also have no government interference in those systems. But I will listen to argument that I am wrong.

Leave a Reply