The website lists the average prices paid by Medicaid for nine common non-emergency procedures offered at the state’s 44 hospitals. The site also provides quality metrics for hospitals in the state, such as data on 30-day readmission rates and patient-provided quality ratings.
The website, developed by a research organization called Think New Mexico, is the result of legislation signed into law in 2015 by Gov. Susana Martinez, a Republican. Implementation of the website, including the transparency database, was completed in 2018.
True Costs Revealed
Fred Nathan, founder and executive director of Think New Mexico, says health care is more expensive than it should be, and part of the reason for that is a lack of price transparency.
“Information about prices and quality is essential to almost every market transaction,” Nathan said. “The lack of transparency around the cost and quality of health care means that it is more expensive than it would otherwise be. We believe that the most important outcome from New Mexico’s health care transparency initiative will be to incentivize hospitals to compete to improve their quality and drive down costs.”
Nathan says New Mexico took some of its cues from other states that have succeeded in lowering costs by encouraging price transparency.
“We have seen in other states that making prices more transparent helps brings down costs,” Nathan said. “A 2013 study by researchers at the University of Chicago found that the price of common elective procedures dropped by an average of 7 percent in states that had created transparency websites. This is particularly important here in New Mexico, which is one of the poorest states in the nation.
“When we began working on health care price transparency several years ago, we noted that health insurance deductibles grew by 84 percent between 2003 and 2011, and the average family deductibles established under the Affordable Care Act were $6,000 for a Silver Plan and $10,386 for a Bronze Plan,” Nathan said. “To place that in context, the median family income in New Mexico is $45,674.”
Nathan says the website benefits consumers by publishing the costs of procedures, which gives hospitals an incentive to lower prices to remain competitive. Nathan says price transparency also saves taxpayer dollars.
“We highlighted [in the database] how California saved $5.5 million on the cost of knee replacements by retired state employees after that state implemented a price transparency initiative,” Nathan said. “California discovered that the cost of knee replacement surgeries varied from $15,000 to $100,000, with no difference in quality, so the state announced that it would pay only the average cost, $30,000. In response, 40 of the higher-priced hospitals reduced their prices by as much as one-third.
“An ‘All-Payer Claims Database’ and an expanded health care transparency website can help us achieve similar savings for state taxpayers here in New Mexico,” Nathan said.
Helping Doctors Choose
As Nathan’s organization developed the database and website, the team learned many doctors were interested in how a database of costs might help them make better references to specialists and providers, Nathan says.
“As we developed the proposal for the transparency website, we heard from many doctors that they would like to be able to advise their patients on the most affordable options for care,” Nathan said. “Doctors simply do not have access to that information. The ‘All-Payer Claims Database’ [they already use] and health care transparency website will empower New Mexico doctors to help their patients access care they can afford, so that patients do not have to choose between medical care and paying for food, rent, and utility bills.”