Transparent medical pricing lowers health costs

My friend, the Buckeye Surgeon, has resisted reforms in medical residency training programs, that have eased some of the inhumane exhaustion on young interns and residents.

I have a different view on the subject. This issue generates spirited debate in the blogosphere and in teaching hospitals across the country.

Not all medical education reforms, however, provoke controversy. I learned recently from an Ohio medical student that they are now being taught about the financial costs of medical tests and treatments. This makes so much sense that I am astonished it has taken so many decades to be incorporated into medical training. Indeed, even practicing physicians like me are often clueless about the costs of the tests we recommend.

A commentary in the New England Journal of Medicine chastised medical educators and training programs for not practicing or teaching cost consciousness to physicians-in-training.

A challenging aspect of this issue that medical pricing is fluid and incomprehensible. Churchill’s aphorism describing Russia applies perfectly to medical costs: “It is a riddle wrapped in a mystery inside an enigma.”

There is no fixed price for a medical item, as we expect when we purchase a gallon of milk at the grocery store. For example, when I spend a morning performing half a dozen colonoscopies on 6 lucky individuals, the reimbursement for each procedure may be different.

While I am not an economist, this seems rather odd. If 6 patrons order the same entrée at the same restaurant, their bills will be identical. Not so, in the medical world, which has a cost system so abstruse that we need CIA codebreakers and cryptographers to decipher it.

As an aside, when I receive my own medical bills, I need an insurance company Rosetta Stone to decode them; and I am in the medical business. Unraveling these insurance company documents tests the wits of our most seasoned patients who must be steeled for hours of dogged inquiry to capture a windfall refund of $4.86. However, recovering even a trivial sum is a sweet victory.

A few years ago, in my own community hospital, we were provided with a running total of medical charges accrued for each patient. The financial charges were stratospheric, for even brief hospital stays. I was surprised that the administration shared this data with us, and I wondered if the disclosure was inadvertent. This speculation was supported when the data disappeared from our computer screens without warning, and has never reappeared. We lost a tool that could have helped us to practice medicine more judiciously. If we were reminded of the cost of a CAT scan, at the moment when we casually ordered it, perhaps, we would pause and consider relying on the scan from 2 months ago, which was performed for the same reason.

My hometown newspaper published an article that informed how to comparison shop by price for medical care, not an easy task. When my own patients ask me for the cost of my procedures, I can’t give a straight answer to this seemingly innocuous inquiry, which they find puzzling. Each insurance carrier uses its own pricing playbook. And, if I take a biopsy, additional charges will materialize.

The medical marketplace is a unique universe. The patient receives a medical service, has no idea of its cost and likely isn’t paying for it. Any wonder why medical costs are breaking their own records?

Paradoxically, communities that spend more on health care may have inferior medical quality, as shown in the Dartmouth Atlas of Health Care. While I don’t advocate denying medical care because of cost per se, it should be a consideration when medical options are being considered. This is of critical relevance to individual and public health.

For example, a flu shot may be medically indicated, but if it cost $250, and isn’t covered by insurance, would we roll up our sleeves? Costs matter.

Medical pricing should be simplified, accessible and transparent. Physicians should be aware of how many health care dollars we are burning up. More importantly, patients should have this knowledge also. If they had ‘skin in the game’, and were more financially responsible for their care, this would go far to reform a health care system where mysterious and enigmatic costs, like our politicians’ hot air, have nowhere to go but up.

Michael Kirsch is a gastroenterologist who blogs at MD Whistleblower.

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  • Dave

    THIS. Actually if I had my way medicine would be priced like a reputable (non-dealership) repair shop. When I take my car in I am charged a fair price for any materials needed (the guy I use is good about finding either slightly used parts or cheaper non-oem pieces that work just as well), plus an hourly rate as well as any overhead costs (disposing of toxic substances etc.). While my mechanic does give estimates based on how long he things a given task will take, his pricing model is flexible. If something comes up it might be a little bit more, if it turns out to be easier than he thought a little less. Why can’t medicine be the same way, other than the fact that the current system is so entrenched? Why shouldn’t patients save if a procedure turns out to be quicker/easier to perform as opposed to another individual where things are more complex?

  • Psych Resident

    Your last paragraph is the crux of the issue. If only patients had more skin in the game. As long as they aren’t paying for their healthcare directly they have no say so. Insurance companies pay and we sign the contracts. As long as we have the ability to choose who we sign with their will be variance in prices in order to capture the most money.

    If you want a market price you must return the system to an actual market. That means getting rid of insurance and especially the government. Neither will happen.

    I also find it pointless that we recieve instruction of costs. We don’t pay for it. Patients don’t pay for it. Why should we care? Choosing to be cost conservative only opens up the floodgates of not practicing the “standard” of Cover Your A$$ medicine. Who pays for that? You and I do when we get sued. As a result, docs will continue to do what’s best for patients regardless of cost.

    Get the government out of healthcare and stop mandated health insurance. Stop giving tax benefits to employers for insurance costs, give it to individuals. Get rid of EMTALA. These are all corrective measures.

    • anon

      Agreed with the author, and with this commenter. Physicians would be hesitant to change their testing patterns if it makes them run a higher risk of being sued. If we can take care of that problem, there are numerous ways that physicians could save their patients money. Why I imagine that even our friend, the physical diagnosis, may even come back. Imagine how much money that would save!

  • Dr Geek

    THIS + This ^
    I just found out this week that our hospital contractually forbids us from releasing any pricing information, specifically because of competitive pricing with other local systems. Absurd. Incomprehensible.
    I can think of few reasons other than profiteering to forbid sharing cost information. Using obfuscation to keep prices artificially inflated and prevent cost equalization and discounting. No way to undercut something you can’t see.

  • BD

    >>As a result, docs will continue to do what’s best for patients regardless of cost.>>

    Um, no, it’s not quite that simple (remember “Cover Your A$$ Medicine”?).

    Furthermore, uninsured do pay out-of-pocket. So do patients whose insurance companies reject claims, which happens regularly, particularly among those who have individual insurance policies – about 10% of the population, IIRC. Both of the aforementioned groups pay “full price” because the insurance company didn’t “negotiate” the lower price actually paid by the insurance company.

    What a screwed up system.

    I think both physicians AND patients should be aware of costs. We’re all going to pay for this train wreck of a system, eventually.

  • WhiteCoat

    Spot on, Doc.
    In most cases, the healthcare system won’t need cost control if there is transparent pricing and patients have skin in the game. I’ve been singing this tune for a couple of years.
    CYA medicine would diminish. Patients take the risk by deciding for or against low-yield testing. Don’t want to pay for the test? You assume liability if there is a bad outcome. The doc wanted to order it.
    Of course, in addition to decreasing costs, such a system would also improve the reputations of physicians who were able to fully explain the risks/benefits/utility of expensive testing to their patients.
    Wouldn’t that be cool?

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