Healthcare price tag is coming your way

Where would you rather have your baby delivered -- at a prestigious Boston teaching hospital or at a community hospital near your home? My guess is most people would opt for the teaching hospital.

But what if the price for a delivery was $2,500 higher at a teaching hospital and if you wanted to go there you had to pay a big chunk of that $2,500 out of your pocket. Would you make the same decision?

The price differential I've cited is a reality today. Health insurance policies that make you pay the difference barely exist. But they are coming. When they do, the medical world is going to change -- maybe dramatically.

Consider: Just last week, UnitedHealth Group, the country's biggest health insurer, paid $300 million for Definity Health. Definity is a small company that specializes in health savings accounts, plans that come with two features: a high-deductible insurance policy and a personal account that people can control themselves.

The specifics of health savings accounts are complex. The underlying philosophy is simple: All of us are supposed to become bona fide consumers of healthcare. With more of our own dollars at stake, the idea is that we will spend our money wisely, which in turn will restrain the growth in healthcare costs.

For a true market in medical care to develop, consumers will need what they have when they shop for cars: information on quality and price. Some medical quality data are available. Information on prices is nearly impossible to come by. In economics jargon, there is no transparency. But when that transparency develops, as it inevitably will, consumers may be startled by what they find behind the curtain.

In the Boston area, for instance, the price of care for some fairly routine procedures is far higher at the teaching hospitals than at the community hospitals.

I know that because an executive at one of the local insurance companies provided me with some numbers. For competitive reasons, this executive doesn't want his company named. The prices he gave me are blended prices -- an average of what he pays at a group of teaching hospitals versus a group of community hospitals. Massachusetts General Hospital and Tufts-New England Medical Center are among the best-known teaching hospitals in Boston. Newton-Wellesley Hospital in Newton and South Shore Hospital in Weymouth are community hospitals.

The statistics are revealing. A basic birth costs $6,500 at the community hospitals and $9,100 at the teaching hospitals. For a cardiac catheterization, the prices are $3,000 and $4,700, respectively. For an MRI scan, $800 and $1,200.

The services listed here are bread-and-butter procedures. We are not talking brain surgery. A recent report by Harvard University researcher Nancy Kane found that on most routine procedures the quality of care at the community hospitals and the teaching hospitals is roughly comparable.

So why do teaching hospitals charge more? A variety of reasons. Teaching hospitals need higher fees to support their mission -- research, teaching, and the handling of complicated cases. The money they make on hernias and babies subsidizes everything else, including the skimpy payments they receive from Medicaid, the government insurer for the poor. Teaching hospitals can charge more because their status gives them considerable market power -- and because we don't see the bills.

But if the day comes when we do see the bills and pay a portion of them, you have to think behavior will change. Regina Herzlinger is sure it will. Herzlinger is a professor at Harvard Business School and the author of ''Consumer-Driven Health Care."

''When prices are made transparent to the users, costs go down," said Herzlinger. Some patients may vote with their feet for cheaper hospitals. And the more expensive providers -- the teaching hospitals -- will have to find ways to cut their costs. In theory, at least, that is how markets are supposed to work.

Not everyone is sure things will work out so smoothly. ''We could get a lot of collateral damage," said Dr. Thomas Lee, network president for Partners Healthcare, which includes both teaching hospitals and community hospitals. Lee worries that if the teaching hospitals get squeezed financially, they may have to make some unpleasant tradeoffs, such as providing less care to the uninsured. It's a legitimate worry.

But make no mistake. A market approach to healthcare is coming, with all its pluses and minuses. Get ready for a brave new world.

Charles Stein is a Globe columnist. He can be reached at stein@globe.com.