“Just tell me the effing price.”
By Michael Gorback, M.D.:
“There’s something happening here. What it is ain’t exactly clear.” — Buffalo Springfield, “For What It’s Worth.”
Dateline 2000. You go to the doctor. At the end of the visit you are asked to pay your co-pay. The doctor files a claim with the insurance company for the rest. You might not even have to pay the co-pay at the time of the visit if you have a naive doctor who is unaware of how many people don’t pay their bills.
Dateline 2016. You go to the doctor. After the visit you have a discussion as to whether you want to use your insurance or pay cash (actually credit card, etc., not cash-in-fist).
That’s different, to say the least.
In days of yore, insurance paid a high percentage of the costs. After the advent of managed care, many people figured a doctor visit cost $20 or so. Insurance covered most of the fee, and the patients were blissfully ignorant of what medical care really costs. You could get a one month supply of medication for a co-pay of $10-20.
In recent years, we have evolved a system where deductibles have risen in order to keep premiums from rising. This allows employers to offer health insurance at lower rates, with the cost being passed to the employee. After a certain point, rising deductibles turn everything upside down.
High deductibles have rendered many people functionally uninsured for the first several thousand dollars of care every year. Whereas 10 years ago, your share of a $500 surgeon’s bill might have been $50, now it’s $500 unless you’ve met your deductible to the point where at least some of that $500 is covered. Even then, there’s often coinsurance after the deductible has been met. You could still be on the hook for 30% of the $500.
Unfortunately, the medical profession has not kept pace with what’s happened, nor is it equipped to deal with it. Like negative interest rates, this is new and hard to conceptualize: cash (credit card, etc.) might be better than insurance. In the past, doctors preferred insured patients, and it was best if they had private insurance. Nobody was thrilled about Medicare.
In response to the functionally uninsured, various fragmented approaches have been tried. Now we have concierge and other forms of cash practices that bypass insurance. This can work for practices with low patient costs, like family practice. It won’t work for a heart surgeon. Nevertheless, cash payment is on the rise.
Here are three stories from just the past two days:
- I had a patient who needed an MRI. The facility where I sent her was in-network with her insurance, but the contracted rate was over $1,000 and her deductible was $3,000. I knew that this facility had a cash rate of less than $500. My advice? Don’t use your insurance. Pay cash.
- I emailed this story to an acquaintance who related a similar story. His daughter saw a doctor who recommended a procedure that would cost $450. When she said she had a high deductible, he recommended the cash price of $195.
- I mentioned the above stories to an anesthesiologist this morning in the O.R. He told me he went to have blood tests done and the projected cost was $400. When he mentioned his high deductible, they offered him a cash price of $99.
What does this say about the burdens of dealing with insurance companies that the providers of these services are willing to discount so much for cash?
And here’s another story. It shows there are parts I still don’t understand.
I had a patient who needed a Synvisc One injection. His insurance company insisted we use their specialty pharmacy, which quoted a price of $1,200, which is the full-pop retail price at a retail pharmacy. My cash price for an x-ray guided Synvisc One injection — drug, x-ray guidance, and my professional fee — is $787. The patient had a large deductible, and we just couldn’t understand why the insurance refused to allow him to get the lower price. Finally after drilling through several layers of bureaucracy, we got someone to approve it. It seems somebody’s getting a kickback somewhere. I think there’s something very crooked about the whole Pharmacy Benefit Management business.
I can tell you some of the things I like about cash (credit card, etc.) payments:
- First and foremost, the only decision makers are the patient and me. There is no game of “Mother-May-I?” with an insurance company.
- If I can provide the service in my office and not use a facility, I can provide a 100% accurate cost estimate.
- We don’t have to delay treatment while we wait for authorization. I can see you in the morning and do your procedure in the afternoon. The patient with insurance often has to wait while we get the OK from the insurer.
Transparent cash pricing is uncommon among hospitals. I know of a handful of facilities that disclose prices, among them the Surgery Center of Oklahoma and Houston Physicians’ Hospital (where I am one of the founders and a current shareholder). Both facilities offer package deals that include the surgeon’s fee, the O.R., and the anesthesia. Even then, however, there are considerations that can’t be packaged because different hardware implants have different costs or further testing must be done.
Note that the more transparent facilities like Surgery Center of Oklahoma and Houston Physicians’ Hospital are owned and operated by doctors. The government doesn’t like physician-owned hospitals, and there has been a moratorium on new hospitals or expansion of existing hospitals for about a decade. Perhaps they think doctors don’t look out for your welfare as well as politicians and career bureaucrats.
Congress prefers non-physician hospital owners like HCA, which paid out over $2 billion for Medicare fraud. Rick Scott, the Chairman and CEO at the time, did not go to jail. Instead he left with $350 million in stock and $9.88 million in severance pay. He then went on to become the Governor of Florida.
Or Tenet, which has paid over $1 billion in penalties and legal settlements for fraudulent psychiatric admissions, unnecessary heart surgeries, and Medicare fraud.
Before we schedule a procedure, my staff goes online and checks benefits (deductible, how much unmet deductible, coinsurance, etc.) and runs the numbers. We then give the patient an estimate of their out of pocket expenses for my services. We have a standardized work sheet that we give to the patient so they can follow the calculation.
Imagine trying to do this calculation yourself every time you needed expensive care. How many people know how to do that? How many medical practices and facilities have transparent cash pricing? The answer to both questions is “not many.” I instituted cash pricing for my practice on the Internet in 2014 at directpaypain.com, and I have not raised the rates since then.
I can give you an accurate estimate of the cost of a procedure done in my office because I have total control over the process. I can’t control what hospitals, anesthesiologists, radiologists, etc. will charge. Houston Physicians’ Hospital will call my patients before their surgery with an out of pocket estimate for the facility charges. This is rare. It also prevents unpleasant surprises.
Most hospitals will not give you a cost estimate. If they do, you’ll get a quote based on the ChargeMaster, which is sort of like MSRP for a car – it’s much higher than people end up paying. However, unlike MSRP, the ChargeMaster is often astronomically higher than the true final cost.
Somehow, as if by magic, on the day of surgery, they will suddenly know what your out of pocket cost will be. You register and they tell you they need $1,500 before you can proceed. Unfortunately, that’s after you’ve taken off from work, plus a day or so for recovery, and maybe the person who is transporting you back and forth has taken time off as well. It’s hard to walk away at that point and comparison shop.
I don’t know how many of my colleagues provide cost estimates. I think there is still a fair amount of old style thinking regarding insurance. Practices don’t seem to understand that we have evolved into a system where many patients are functionally uninsured until they meet their deductible, which is often several thousand dollars. The fact that it’s often better to pay cash is a new wrinkle that we’re adjusting to.
To complicate matters, if you go the cash route it doesn’t apply to your deductible.
Every medical practice and facility that accepts insurance has the ability to provide realistic cost estimates. It’s time they started. Given the wide disparity among third party payers, it may not be feasible to advertise prices, but surely if my little solo practice can provide estimates based on analysis of benefits, so can they.
Competition on pricing usually reduces costs, but since the hospitals refuse to disclose costs, there is really no competition. They might compete for doctors to use their facilities, and they might compete for patients with advertisements, but they don’t compete on price.
Ads for hospitals talk about caring, they talk about quality, they talk about how US News & World Report ranked them #1 within a 500-foot radius, and there are usually several smiling people in some sort of medical garb from diverse ethnic groups. They talk about everything except their prices.
The only entities that consistently advertise prices are cash businesses such as Lasik. The CEO of the Cleveland Clinic has been quoted as saying they won’t reduce prices due to transparency because they will compete on quality. It would be interesting to test that hypothesis with a truly transparent pricing system. The market might hand them an unpleasant surprise.
As Americans continue to pay an ever-increasing share of their medical costs, the ability to do comparison shopping through a transparent pricing system would help immensely and is highly likely to reduce prices. By Michael Gorback, M.D., board-certified in Anesthesiology and Pain Medicine. He practices pain management at the Center for Pain Relief in Houston, TX.
Buying a home has been an effective way for foreign residents to launder some money and get their wealth out of harm’s way. In the trophy markets on the US West Coast and in Canada, rumors of a massive influx of Chinese money have formed a crescendo. In Vancouver, 33% of sales are to Chinese investors, according to a new estimate by National Bank. Read… Desperate Chinese Investors Flood US, Canadian Housing Markets, But Real Numbers Are Taboo