As patients in the U.S. healthcare system, we have become accustomed to going to the doctor without knowing what it’s all going to cost. There are few markets that could keep customers so much in the dark for so long and get away with it. Even physicians and nurses know little if anything about what services will end up costing their patients. The reason can be seen in the graphic below.
Let’s start with your visit. When you go to the doctor’s office or have some test or surgery performed, the physicians and nurses who diagnose and treat you will make some notes, either on paper or some sort of electronic device. These notes are far from plain English, and neither systematic nor deterministic enough to use as a pricing mechanism. In fact, trained medical professionals, qualified after years and years of schooling, who we trust to improve our health and in some cases save our lives, have no professional concern with pricing or payment. None. They leave that to someone else.
Enter the medical coders. No, not computer coders. These are people trained to take the medical jargon of a doctor’s notes and translate the services into one or more medical codes. You can imagine the complexity of this task. There are in fact tens of thousands of codes, not to mention modifier codes, which can be added to change the way the first codes are priced.
Because there are often multiple codes that could be used to describe a procedure, medical coders are required to make frequent judgment calls. There is also plenty of room for mistakes, though hardly mentioned in the medical community because of their relative insignificance compared to mistakes that threaten people’s lives. Assigning the wrong code, adding additional codes that do not apply, or leaving off a modifier that would reduce the cost, are just a few of the possible errors that could affect your pocketbook.
Errors on your bill? Not only is it happening; it is happening frequently. Although some coders do lookups electronically, the majority still thumb through big, thick coding encyclopedias (physical books), which would take most observers back to the 70’s or 80’s. Surprise and alarm were some of my first responses after a glance at these text books (only recently have some added pictures and more understandable descriptions as enhancements). Even the publishers of these manuals cringe at the fact that the industry hasn’t caught up to the digital age yet.
For cases where computer systems are used to try to map descriptions to codes, one could guess that mistakes would be less frequent. Unfortunately, if the computer software is programmed to map a procedure to the wrong code, that mistake will be propagated to a much larger number of patients. And this is actually more likely than you might think. Code publishers provide long lists of rules about how procedures should be coded, and how codes should and shouldn’t be applied, not to mention the changes and additions to code sets put out in hard-to-navigate quarterly updates. Software engineers are known to make mistakes with systems that are much simpler.
Then of course there are fraudulent activities, including upcoding, which is when coders (often with pressure from providers) purposefully use higher-cost codes rather than lower-cost ones for the same procedure, even if sometimes those codes are not accurate.
So the next time you look at a bill, take a look at those codes and their descriptions. If you’re like me, you may want to ask someone at the billing department if you could please speak to a coder to answer a question on your bill. Oops – sorry! I forgot to tell you that these coders often do not work at the doctor’s office or hospital, and they aren’t always readily available to answer questions (not that anyone would let you speak to them directly). Be prepared for the response: “we will get back with you in 2-4 days”, and then call them in a week to follow up.
Right, back to your bill. Once the list of codes has been determined for your encounter, they are sent to the billing department, which also may not be at the same office as your provider (so much is outsourced these days). In fact, the billing personnel may have no relationship at all with the people who provided your medical care. Their job is to map medical codes (and those services which don’t map to a code in the standard code sets) to items in the provider’s chargemaster. The chargemaster is an electronic record (sigh of relief that at least it’s electronic) maps services/codes to list prices. These are the prices that you will be charged if you are not insured.
Ah, but you have insurance, you say? Great. Then you get a lower price (well usually – some items are not covered by insurance). But we’re not out of the dark zone of our graphic yet. Why was that particular lower price placed on my bill? And is there any way to lower it further?
The lower price is the price that your insurance carrier negotiated with the medical office beforehand. The term is negotiated because it is set by two parties, one who would like to see it as low as possible, and the other as high as possible. One insurance company (or carrier) may negotiate widely different prices from another company. The reason is that some insurance carriers have a lot more subscribers on their plans. A provider is going to be more willing to lower their prices for someone bringing a lot of traffic (paying customers) versus someone sending just a few per month. So in theory insurance plans with the most subscribers would have the lowest negotiated rates. But it is impossible to know that today, because providers and insurance carriers are under contract to not reveal their negotiated rates to anyone. So while you may be able to compare monthly premiums and copays between insurance plans, you can’t actually compare what your healthcare will cost you if you sign-up for those plans.
One more thing on insurance. Rates are negotiated by plan, not just by carrier. So if you sign up for a more obscure plan with an otherwise popular insurance carrier, you may not be getting as low a price as someone with a more popular plan.
So once your medical provider sends a claim to your insurance, the insurance company sends pricing and copay information back to the medical facility. It also sends you in an Explanation of Benefits (EOB) statement, explaining what they paid for and what they did not. You’ve seen the “this is not a bill” line on your EOB. That’s because your insurance is just helping you pay. Soon you will also be getting a bill from the provider telling you the discount you got through your insurance, what your insurance company paid for and what they did not. You just hope the two parties tell you the same story, which is a common point of error in medical billing (a medical facility probably won’t tell you if it was paid twice for the same thing).
If all of this is giving you a headache, you’re in good company. So the only choice now is whether to pay or not, right? Well, what very few facilities will ever tell you is that because they’re so worried you may not pay, they will give you a sizable discount (sometimes 30% or 40% or more) if you will pay cash (credit cards count) within 30 days or so. This is called the cash price. Sometimes the discount is only given if you pay before leaving the hospital (“oh I’m sorry, didn’t someone tell you that before you left?”). There’s one caveat with the cash price, though. You cannot get the discount if you file a claim with your insurance. You either get the insurance negotiated rate –or– the cash price, not both. And if you go with the cash price, you cannot apply the payment toward your deductible on your insurance plan.
There are some who claim to have success negotiating their bills down by calling a doctor’s office after they receive their bill. This would only be possible when you’re paying list or cash prices, not insured rates. I wouldn’t bet on being able to do this, but if you want to try, you will increase your chances of getting an adjustment if you are armed with some information about competitive pricing.
A word on the other option – to not pay. I can’t say how it will affect your credit rating, or tell you whether someone will be coming after you to repossess your car or house or something (not any of your family members last I heard), but I can say that there is a growing number of non-payers, which causes medical facilities to inflate their prices for the rest of the people who do pay. So in effect, people who pay their bills are rewarded with higher prices. And if a hospital files a claim with the federal government, they can even be reimbursed for some of the money they would have gotten had the person paid. Who knows how this all works out on their books, but when was the last time you heard of layoffs or salary cuts at a hospital or medical firm?
This brings us to what the prices represent to begin with. Are they based on cost with a markup? Markup – definitely. Based on cost? Less and less. Initially (or so I have been led to believe) medical prices were in fact based on cost. Not too long ago it was standard for providers to base their services on the Medicare rate for those services (Medicare aims to reflect cost as much as possible). That is the rate the U.S. government agrees to reimburse doctors and facilities for patients 65-years and older. But those days are fading.
Many medical markets are operating as virtual monopolies (sanctioned by the U.S. government), or have created patient-doctor relationships which most are too nervous to mess with. Some hospitals and group practices have also taken extreme liberties in recent years, creatively adjusting prices in order to maximize profit. They even license expensive reports to inform them of how other facilities in the area price their services. One hospital may try to price themselves at the 50th percentile, while another may try to be as close to the high end as possible. That doesn’t mean administrators won’t try to convince you their rates are based on Medicare (I got this explanation recently even though the service I was being charged for was not even reimbursable by Medicare).
A response from a manager of a health clinic over a year ago is still gnawing at me. “We set our prices however we see fit. You received the service, which means you are obligated to pay. If you are concerned about cost, you should ask about the price beforehand.” If only that were reasonably possible.
Whew! That is one vicious cycle.
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