A recent story about why Northern California is the most expensive place in the country to have a baby began as a tip from an obstetrician. Dr. Sarah Azad told me that insurers were paying her just a third of what they pay doctors employed by large hospital systems in her town of Mountain View, Calif.
Unfortunately, she explained, she could speak only in general terms. She couldn’t share her actual payment rates with me because she was barred from doing so by a gag clause in her contracts with insurers.
So, I called the insurers who pay her, and the hospital systems that employ most of the other obstetricians in Mountain View. They all had the same answer: It would be illegal for them to tell me the dollars and cents.
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As it turns out, the vast majority of contracts between doctors or hospitals and insurance companies are subject to a gag clause, which prohibits either party from disclosing negotiated rates. That means it’s almost impossible for consumers, researchers or journalists to find actual, accurate numbers, despite the fact that cost differentials among doctors can be so stark. And it’s particularly problematic for the growing number of people who have insurance plans with deductibles that can run more than $10,000 for a family.
The underlying problem of our health care system — beyond the corrosive partisan politics — is its high cost. I have long understood that the lack of price transparency is one reason our system stays so expensive. It was a surprise, though, to find out that this opacity is cemented by legally binding contracts.
Think about what this would look like for a mundane purchase, say, a gallon of milk. Advertisements and price tags would disappear, so you couldn’t compare prices at different stores. And you wouldn’t even know how much you had paid for the milk until you got a bill in the mail weeks or months later. On top of that, the store and the dairy farmer would be barred from telling a journalist or an economist what you had paid.
It’s absurd, but I wasn’t going to let the absurdity kill my story.
I started by asking all of the health policy analysts, researchers and economists I could find, “How can I find these rates, by physician, for an uncomplicated vaginal delivery?” Everyone told me the same thing: You can’t get that.
I searched online, but most of the websites claiming to offer health price transparency offered only “average costs” for specific services in your area. Not much help if you’re trying to compare the costs of individual doctors.
Next, I asked Castlight, a “transparency tool” that gathers payment data and allows employees of certain companies to estimate the costs of their medical care. But Castlight told me that as a journalist, I wasn’t allowed to have access to the exact pricing information of individual providers. It, too, was subject to the gag clause.
So I turned to the consumers who might have access to those tools. I asked friends and colleagues, and put out social media requests: Would anyone be willing to share the information from the cost estimators they got from their employers or insurers? I found a few willing sources and was able to mine the results of their inquiries to find out the basic cost differentials between independent doctors and those employed by large systems, including Sutter Health.
Unfortunately, these estimators are difficult to use and often provide incomplete data. And when I tried to confirm that information, I ran up against the gag clauses again.
Finally, I found out about a health data company called Amino that was willing to send me the claims data it had been gathering. At last! The Holy Grail! It had hundreds of claims for vaginal births performed by obstetricians in the Bay Area. KHN data correspondent Sydney Lupkin helped me decipher a Medicare provider database to determine where each doctor worked. In cases where the doctor’s employment status was unclear, I called the health system or physician directly. We then calculated the median billing amount, on average, for a routine vaginal birth for each health system.
Weeks of digging and data analysis confirmed the imbalance Dr. Azad had told me about at the start of my quest. The few independent doctors left in the Bay Area receive a median amount of $2,408.45 for a routine vaginal delivery, which includes prenatal and postnatal visits. That compares with $5,238.13 for the same bundle of services provided by Stanford physicians and $8,049.84 when the doctors are employed by University of California-San Francisco — a fourfold difference.
Hard data, hard won.
The database we built gave us a strong sense of the cost variation between doctors who work at other health systems and those who have remained independent. But it did not include enough claims from the largest hospital system in the region, Sutter Health. For Sutter, I used the data from the online cost estimators, and found that obstetricians employed by the system are reimbursed about $6,452 for a vaginal delivery.
It’s no accident that data on physician costs are so hard to find. Its inaccessibility allows hospitals to keep raising their prices. It’s simply not in their interest for the public to know how much they’re charging. And insurers don’t want other doctors or hospitals to see the high prices they’ve agreed to pay, for fear they would demand the same.
In the end, all of us — through our insurance premiums and our taxes — pay a price for non-transparency.