Understand the financial demands we are making on patients

I have been thinking more about the price of health care services. I have already shared some thoughts about this, but this time I have a more personal story to tell.

I recently had an echocardiogram. I would score the indication as “uncertain” (not clearly appropriate or inappropriate) according to professional guidelines.  As a cardiologist myself, however, I would have ordered one in similar circumstances without hesitation. So I did not think the test itself was a problem — until I got the bill.

The charges came to $925 for the echo and an additional $121 for pharmaceuticals (an injection of echo contrast material). There was an “adjustment” of $413 reflecting the discount previously negotiated by my insurance carrier, leaving me responsible for the balance of $633.

As I paid the bill, a number of questions came to mind, none of which I could answer, but all of which I ought to be able to answer if the pricing of health care services made any sense:

  • Is $925 a reasonable amount to charge for an echocardiogram?
  • How much of a mark-up — if any — was there on the contrast, and does that have an impact on contrast utilization?
  • Was the “discount” negotiated by my insurer comparable to what other insurers had negotiated with the same provider?
  • What do we charge for an echocardiogram in our practice?

I think you can see where I am going with this. There is an utter lack of price transparency in the current health care payment system. That, in turn, creates the common absurdity of patients being completely unaware of how much they may be expected to pay for recommended services until after the care is rendered.

This has got to change. We, as providers, need to understand the financial demands we are making on patients. Patients should, and will, demand to know more about the price of services before they are provided, especially as high deductible insurance plans become more prevalent.

Price transparency, and honest discussion of the charge for services needs to become standard practice.

Ira Nash is a cardiologist who blogs at Auscultation.

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  • JPedersenB

    You are correct, Sir. I have been saying the same thing for years and usually get shot down for having the temerity to say such a thing!

  • http://onhealthtech.blogspot.com Margalit Gur-Arie

    Guidelines usually recommend that tests should not be performed if the results will not affect the course of treatment anyway. Along the same lines, I would be curious to know if having the price of the echo in advance would have changed anything (e.g. whether to have it done or not, where to have it done, etc.). If not, who exactly is supposed to take advantage of this transparency in order to make “better” decisions? People who can’t write a $633 check?

  • Gibbon1

    I’ve rolled this over in my head a bit. The problem is patients are in a bad position to judge appropriate costs and excessive billing. So all too often medical providers have patients over a barrel.

    Probably the best solution is to outlaw balance billing. If the hospital or physicians group doesn’t like what the insurance company is willing to pay, then they can take the insurance company to court or refuse to do business with them in the future. That is how most other types of insurance actually works, why should medical billing be any different.
    The second point is providers should be required to provide an estimate before any services are provided, to both the patient and the insurance company. In the case above, quite likely the insurance company would have demands more proof that the test was needed, and had it done at a lower cost provider. Seriously I had two friends, one with insurance one without, both need an MRI of their back. The one with insurance had it done at a hospital as directed by the doctors there. His cost out of pocket was ~$600. My other friend had his done at a testing only lab that took cash, $500 out of pocket.
    One other point, apologists often state that technology drives up costs. But that doesn’t ring true when you consider other high tech industries. A taxi costs $30-40 thousand. You can take one across town for $15. A jetliner with all the regulatory requirements, crew, etc plus capital cost of $30-120 million (aprox. $300,000 per seat) will take you from SF to LA and back for $150. You can rent a hotel room of $60/night/ I have a spectrum analyzer on my desk, I use it ‘sometimes’ cost was $25k. I’d never dream of sending my client a bill for ‘spectrum analyzer’ $600 like my endocrinologist does when he checks my thyroid. Right?

  • Thomas D Guastavino

    Not to belabor the obvious but everyone agrees that health care is expensive. The problem is no one is willing to face up to the principal reasons why health care costs what it does. Until we face reality our “cures” will always be worse then the “disease”

    • ErnieG

      This is the real question- Why is medicalcare expensive? Obama and his cronies, for all they’re apparent intelligence ducked that question. Their solution to why people could not afford medical care was because people aren’t insured, so lets broaden that.

      • Deceased MD

        Spot on. They have successfully dodged that question skillfully I might add.

    • Deceased MD

      Exactly stated. First start with Big Pharma getting whatever cost they bill medicare for drugs as it’s not negotiable. And get back the anti trust laws that are now legally being violated.

      So many laws have been written by industry lobbyists that they themselves are not transparent let alone the cost to the pt.

      • EE Smith

        “When buying and selling are controlled by legislation, the first things to be bought and sold are legislators.”

        –PJ O’Rourke

    • GT

      No one has been able to explain to my satisfaction just how Obamacare is going to “bend the cost curve down” and reduce the percentage of GDP Americans spend on healthcare.

  • Tiredoc

    I’m sorry, what was not transparent about the bill? You outsourced negotiation to the insurance company, who provided you a 40% discount. As you had not met your deductible for the year, you were responsible for the balance. $600 sounds like a fair price for the service you received.

    Last year, my truck lost all of its engine coolant. It turned out there was a hole in the diesel particulate filter cooler. Prior to needing it fixed, I was unaware that such a part existed. It turns out that the part was $4000. Happily, it was covered under warranty.

    I negotiate prices with and for my cash paying patients on a regular basis. I know the cost of the tests that I order, because I frequently buy them and then charge the patient. My regular office bill is less than it costs to change the oil on my domestic diesel truck.

    Your post doesn’t so much demonstrate the problem of lack of transparency but the problem of presumed charity. Because the service is for health, too many people assume that practitioners should provide those services for free, or without consideration of time or cost. Those people should try that line of thought with their car mechanic, or plumber, or electrician before they try it on their doctor.

    • Guest

      “Because the service is for health, too many people assume that
      practitioners should provide those services for free, or without
      consideration of time or cost.”

      That’s a natural outcome of the fairly recent narrative that “healthcare is a universal human right”.

  • ErnieG

    For price transparency

    1) end “preferred pricing” clauses between providers/hospitals and insurers- this is the direct cause of high chargemaster rates which protects providers and hospitals from the claim that they are not providing preferred rates to insured patients. This is because if they charge everyone high, they can accept lower “negotiated” payments, and be off the hook for not charging any one particular insurance lower rates.

    2) end deals between pharma and insurances for preferred drugs– really make it a market for drugs between patient and pharma, not pharma and insurance company.

    3) allow publication of discount rates for cash only patients within practices that accept insurance (without consequence from insurances making the claim providers are not accepting preferred rates for their customers.)

    4) allow balance billing of insured patients. Outlawing balance billing will only strengthen the roles of third parties.
    5) while insurance can “negotiate” prices down, there are way too many strings attached. Insurances are master negotiators, nickel and diming providers (e.g. not paying interest rates for outstanding claims, individually less than a certain amount, but when in aggregate are substantial; no “precert” but “post approval” for procedure with providers owing money back), making us absorb costs (for example, instead of making doc fill out sheets redocumenting what I already stated in the note, or talking with a rent-a-doc on the phone to approve a procedure, t should be on their dime to review my records, or rewriting script every Jan because they switch pharm providers to save a few buck, wasting everyone on the clinical ends time and NOT forwarding scripts between pharm providers) .
    Insurances are too good at squeezing cash out of everyone, with contracts that are unethical if they were between physician and patients.

    • PCPMD

      1) The concept of “preferred pricing”, that you are expected to give a discount to your biggest customers, is a basic part of all business. Why do we not insist government ban it for everything? Shouldn’t you be able to purchase a car directly from Ford for the same price as the dealership, or food directly from farm or factory at the same price as the wholesalers? Is food and transportation not as important as healthcare? If we accept that an individual purchase will generally be more expensive than bulk buying in all other aspects of our economy, how do we justify and rationalize it in healthcare?

      2) Insurance is, mostly, a discount program that you buy into. Why would you not want your discounter to try their best to get discounts? How do you get discounts, but by playing different vendors of similar products off of each other, to get the best price possible for your customer?

      3) See #1 above

      4) For the most part, I agree, though it does mean that providers would now be on the hook for collections (which, depending on the demographics of the practice, may mean lower overall reimbursement)

      5) Agreed – though IMO, patients should talk with their feet and wallets, as should providers (drop contracts with unethical insurers). Complaints to the HR department (assuming its for a large company) can also be very persuasive.

  • Gibbon1

    Yeah and if you paid $2500, your co-pay would likely be over $500.

  • Thomas D Guastavino

    Lets try this again. What are the basic economics of health care?

  • Tiredoc

    I think we’re all in for a rude awakening the next couple of years. The current practice of imaginary billing is unsustainable if a large percentage of the population has to negotiate their own bills.

    I agree with you that doctors do not have the luxury of ignoring the business side. We all need to look hard at the services that we provide to at least figure out what it costs us to perform them.

    As to your questions, if the charge to you was between 300% and 500% of the cost to the facility to provide the service, I would consider that reasonable. If the charge was above 500%, I would consider it appropriate only if you were a lawyer, mainly due to the extra difficulty in locating the organ. If the charge was less than 300%, I would consider it an undercharge likely to jeopardize the ability of the institution to perform the service.

    The payment by the insurance company for the contrast is generally no more than 5% above the cost of the contrast. That cost must be figured into the metric above to calculate viability of the service.

    If negotiations were open to all, why bother to negotiate? The price is either posted or it isn’t. If it isn’t, then you don’t get to find out what someone else paid unless you ask them.

    You never answered your last question. What does your office charge for the procedure?

  • Lemmethink101

    Well, a physician asks how the price is set and why is it so expensive.

    Now ask physicians, clinics and hospitals to release cost associated with test/visit/stay/surgery (to name a few, you will suddenly hear no one talking. Complete silence. Releasing such data means death to for-profit healthcare industry.

  • bill10526

    Health Insurance started as a prepayment mechanism because bill collection was so difficult. If Chareles died on the operating table, one can see where the widow would not want to pay a bill for a service that didn’t work -.the dead in bed patient.. Hospitals were community assets and their cost had to picked up either directly by government as in England or by accounting devices. No particular item had to be priced correcrty, whatever that might mean. All that was required was total revenue had to balance total expenditures. Remember the DOD’s $600 hammer. Those kinds of events come from spreading some development or overhead expense over a base of some sort.

    Price discovery through markets doesn’t work very well in medicine as one does not want to spend weeks seeking for the best deal for an incident MI. But pricing based on costs can be valuable in having rational allocation of resources. If a valid business plan to screen for lung problems for smokers calls for $100 a pop CT scans, it is hard to figure my bill of $6,000 for a screening CT scan of my belly.

    • Guest

      “Health Insurance started as a prepayment mechanism because bill collection was so difficult.”

      No, that’s not even close to true.

      Health insurance didn’t start off as a “prepayment mechanism” for routine healthcare purchases any more than auto insurance started off as a “prepayment mechanism” to pay for drivers’ petrol so that gas stations didn’t have fill ‘n’ runs.

      Health insurance started off as health insurance, to cover unexpected catastrophic events.

      • bill10526

        My statement that health insurance started as a prepayment mechanism comes from Blue Cross literature about its founding in Texas. Tying health insurance to employment allowed a reduction in underwriting expenses and the socialization of costs. When heath insurance was tax advantaged it behooved businesses to offer totally comprehensive care. The certainty of payment led to heroic measures being applied to 90 year old patients and other nonsense. The extended deductible in the ACA should be salutary with respect to the overuse problem. But the preventative stuff is wrong headed.

  • Suzi Q 38

    I do the same.
    Usually, the hospital is shocked that I would even request or need the information, since I have PPO insurance.