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Lies, Damn Lies, and Healthcare Price Transparency

In case you missed it, Catalyst for Payment Reform (CPR) and Healthcare Incentives Improvement Institute (HCI3) just released their latest “Report Card on State Price Transparency Laws,” in which they gave 45 states an “F”. Only one state, New Hampshire, received an “A” for its work over the last year to stand-up the NH HealthCost website, which has received positive reviews.

Massachusetts, a former leader in the area of price transparency, received an “F” for its decision to place the responsibility of price transparency entirely on health plans, and its subsequent shuttering of its government-mandated price transparency website.

I understand that this must all be very confusing to the average consumer. Really, how hard can it be for healthcare providers and/or insurance companies to tell prospective patients what their visits are going to cost?

The truth is that very few people understand the back room horse trading that went into creating the opaque and corrupt system that we currently have. Needless to say, there are many very powerful groups that are highly incentivized to keep things exactly the way they are.  

Rather than trying to convince you that this corruption exists, let me try another path. Let me show you how easy price transparency is to solve.

First off, let’s be clear about what price transparency is. In my view, it’s being able to tell a patient prior to a visit how much the visit is going to cost, including how much his/her insurance is going to pay (if they have it), and how much they will have to pay out of pocket. This information should be available from the time the patient schedules an appointment until the time they check-in.

The challenge, of course, arises out of uncertainty, and in the world of medical billing there are four major areas of uncertainty:

  1. Physician fee schedule. These are the prices that your doctor has actually contracted with your insurance to accept. In general, this means that regardless of your doctor’s list price, the price on the fee schedule is what your insurance company considers “allowable”. In theory, every single insurance company that your doctor accepts could pay a different rate for every line item of service.
  2. Patient plan-level benefits. Although you may be confident that you are covered by insurance, your doctor cannot and should not. Every time you walk into the office, the office should be checking to verify that your insurance is still active, and the current status of your benefits. For instance, if you’re on a high-deductible plan, they should be checking to see where you are in meeting your deductible.
  3. Services rendered. Much of the time when people talk about price transparency, they use surgical examples, which typically have well-defined bundled prices (either DRGs or APCs). In other words, while there is still variability related to things like complexity and length of stay, there is no uncertainty related to what is being billed. Most of the time you go to the doctor’s office, on the other hand, there is no bundle that explicitly identifies the line items your doctor is going to bill. It is entirely up to the doctor (and her office staff). In other words, you can see two different doctors for the exact same problem and be billed completely differently.
  4. Payer-specific bundling/edit rules. In addition to predefined contracted rates, payers apply business logic when processing claims that frequently limit the amount they pay on a multi-line item claim. For example, your doctor may include 3 distinct line items on your bill, each with a defined allowable amount. However, when 2 or more of those line items appear together, they may reduce or fully eliminate the allowable amount of one or more of those line items.

As you should be able to see then, the challenge of knowing what is going to be billed, how it’s going to be processed (or adjudicated) by the insurance company, and how the allowable amounts are going to be split between insurance and the patient based on the patient’s specific and current benefits is non-trivial. Or, so it would seem.

Would it change the complexity of the problem if I told you that as a doctor, I can log into the various insurance company portals and enter a few pieces of information to get a detailed estimate of an anticipated visit?

All the insurance company needs to know is:

  1. Who’s the patient? (some combination of name, DOB, member ID)
  2. Who’s the rendering doctor? (they should know the doctor or at least the organization from the portal logon credentials)
  3. Services being rendered? (for office-based care, we are talking about the individual line items, or CPTs, being billed)

The problem for the insurance company is that they cannot perform an up-front estimate unless they know this information.

The problem for the doctor is that they may be supporting 150 insurance companies, and the office could be seeing dozens, if not hundreds, of patients a day. Even if the front desk could be logged into dozens of different insurance company websites, and entering information as patients call to schedule appointments, or as they arrive, they have no idea how to bill for visits before they happen.

Our solution is a very simple one. We create predefined CPT bundles around the reason-for-visit. We also have several ways for capturing the patient’s information. When a patient calls to schedule an appointment, or when they arrive to check-in, we can pass via API to the appropriate insurance company the information they need to process a “preclaim” or estimate. The beauty of the solution is that it is perfectly scalable, leverages the actual adjudication engine that will be processing the final claim, and best of all, it requires the insurance companies to do almost NOTHING.

Without going into details, I’ll say that we had a major break-through in our thinking after a meeting with Blue Cross Blue Shield of North Carolina. Up until that point, we had considered the lack of up-front transparency purely a doctor and patient problem. We assumed the insurance companies had no interest in solving it. When we realized how it was affecting payers, particularly their provider networks, it became obvious that this is actually very simple to solve.

So the real question isn’t how do we solve this seemingly impossible problem, the real question is - why isn’t anyone doing it?

I used to think that all clinicians were being crucified by the rapid rise of patient bad debt, directly attributable to the rise in high deductible health plans. I now think that many of the largest and most powerful health systems are perfectly content to write-off patient balances (mind you, they’ll have no problem sending patients to bankruptcy first) rather than allow their prices to become exposed.

Many of these organizations are charging 200-250% of national averages. They have captured populations of patients and currently face very little competition. When prices become more readily comparable, it will undoubtedly lead to new competition and downward price pressures. When many of their high value procedures are still heavily reimbursed through insurance payments, why in the world would they support price transparency?

Many consumer advocates, including the White House, believe that price transparency is a critical first step in empowering consumers to take control of their healthcare. I personally think it’s critical to unleashing desperately needed free-market forces. Nevertheless, the entrenched players who have a vested interest in perpetuating the status quo have all but convinced everyone that price transparency is not possible.

I have absolute confidence that when the pain becomes severe enough, consumers will show up en masse, pitch forks in hand and demand change. I only ask that in the meantime, please, please don’t believe the lies.