Health Care Stewardship: Keep an eye on discount claims

Many businesses signal that they’re offering a good price with percentage discounts. If a product is 50 percent off, we assume that we must be getting a good deal. It’s a comforting mental shortcut, and our brains crave that simplicity in a world where we’re confronted with too much information.

Unfortunately, discounts can be misleading. We’ve all encountered the clothes retailer that seems to have a perpetual sale going on, with everything permanently 25 percent off. Marketers call this practice "anchoring." If they can suggest to you that a particular price is expected, anything less than that seems like a good deal. If almost no one pays the sticker price, it ceases to be a meaningful number.

The real cost of care

We also get misleading price signals in the world of health care. Hospitals use a list of the services they offer and their prices, called a chargemaster. Unfortunately, chargemaster rates aren’t tied to the costs of providing care. The rates are set by hospital finance departments, whose focus is on managing revenues and supporting hospital negotiations with insurance companies. The chargemaster rate is an opening bid that the hospital uses to negotiate with payers. This means that the chargemaster rate is usually much more aggressive than the actual cost. It’s also higher than what the hospital ultimately hopes to collect. This role as a negotiating tool means that chargemaster rates can change dramatically and arbitrarily.

Since chargemaster rates are disconnected from the true cost of care, it’s difficult to assess whether a particular percentage discount off that price is a fair amount. A procedure discounted by 70 percent could still be a bad deal if the original price was inflated, and a 10 percent discount could be a fair amount if the original price was reasonable. Few professionals in the health care industry know the cost of care for a particular procedure, and cash-pay patients have even less information.

Becoming a wise consumer

How can we be discerning consumers and wise stewards of our God-given financial resources when it’s so difficult to get reliable information?

First, understand that a percentage discount isn’t a reliable indicator of value.

Second, ask your provider for a good faith estimate (GFE) prior to having a major procedure done. The federal No Surprises Billing Act of 2023 requires providers to issue estimates of services upon request, and to issue the document at least three days prior to the scheduled procedure date. The law also threatens penalties if providers exceed the quoted price by more than $400. Knowing your expected cost in advance will make it easier to make a wise decision. For more on GFEs, you can refer to our November newsletter article (bit.ly/good-faith-estimates).

Third, you can compare the price listed in a GFE to the market data provided by Healthcare Bluebook™. GFEs can regularly exceed the fair price by 400 percent or more. If you discover that the price you’ve been offered is a bad deal, you have time to consider seeking an alternative.

By combining an accurate quote with an objective standard, you can be confident that you’re making a wise decision as a health care consumer. It’s a straightforward way that we can care for one another and have greater peace of mind.