Doctors, as well as patients, in the dark about prices

September 12, 2013
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If you’re frustrated that health care prices are both unavailable and incomprehensible, you’re not alone.

Your physician is in the dark too.

That’s the excellent point made by Indy’s own Dr. Rick Gunderman over at The Health Care Blog.

Gunderman describes what he calls the “black box” of health care prices that lies at the heart of every single interaction between patient and physician, and ends up roiling the economics of the entire system.

“No one – not the patients, the physicians, the hospitals, or the payers – really understands in a thorough way the true costs of their decisions,” wrote Gunderman, who is a professor of radiology and pediatrics at the Indiana University School of Medicine. Speaking of physicians, he added, “Many do not know the retail prices of the tests, medications, and procedures they prescribe and perform.  Even the ones who do often have little idea how much will actually be collected for such services.”

Gunderman mentions that true price lists are hard to come by, and that leads even cost-conscious doctors to make costly decisions. He gives a hypothetical example where a teenager injures his knee and his physician, wanting to avoid a needless MRI scan that carries a retail price of $1,500, instead prescribes six weeks of physical therapy for $600.

Unfortunately, the amount the patient’s health plan would actually pay for the MRI is only $300. So that means the physical therapy, rather than being the cheap option, was actually twice as expensive and delayed an accurate diagnosis by six weeks.

That’s a classic example of high-cost, low-quality health care. And it resulted from a doctor and patient trying to be cost-conscious—but doing so in a system where prices are completely unknown.

Gunderman’s example rang true for me on Tuesday, when I sat in a meeting of the Employers Forum of Indiana. Several large employers—Purdue University, Indiana University, Cummins Inc. and the state of Indiana—described their experiences so far having their employees use a health care shopping tool made by Castlight Health.

Castlight, as I’ve written about before, has built an Expedia-like shopping experience using past medical claims processed by each employer’s health insurer. The large employers at the meeting had worked with Anthem Blue Cross and Blue Shield and Cigna Healthcare to feed the price information from past claims into the Castlight software.

Also, Castlight is trying to provide quality data through its software.

These employers, who collectively have more than 135,000 workers and dependents who can use the Castlight tool, said hospitals and doctors have noticed that their prices are now available and are reacting in clear ways.

These employers get frequent calls from doctors and hospitals wanting to submit new price lists—often with reduced prices—so the employees will see the lower prices.

The biggest example of this was a change made this spring by Indiana University Health, which reduced its prices on 38 imaging procedures by 60 percent to 80 percent, according to the employers.

But some doctors and hospitals want to go even further. They have inquired if they could use Castlight when consulting with their patients to see what the price would be for the procedure they’re recommending. That way, providers say, they could use their knowledge of medicine and the quality of other health care providers, to help patients achieve the best balance of low-cost and high-quality.

"Our physicians would like access to such information so we can influence referrals to quality providers which may be a lower cost to the patient and the employer," wrote Don Stumpp, manager of payer contracting at Indianapolis-based American Health Network, a large physician practice. He added, "If two facilities are equal quality, then cost should be part of the decision for the patient. Many people may be surprised that their family doctor does not know what the cost of services are at other providers. If Castlight or the employer could provide that to us, that would be terrific."

California-based Castlight so far has no service aimed at health care providers. And even if it wanted to start such a service, there are likely some contracting issues that would have to be worked through.

But it’s a tantalizing thought that, with the combination of a tool like Castlight and the medical expertise of physicians, the necessary information on cost and quality—which has been so elusive for so long—might be in view.

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  • Overcharged hospital fees
    Here is an important lesson to be learned. The first week of July my wife had a stress test done at St. Vincent. The charge was $852 and her adjustment was $771 leaving her a bill of $81. It took her several days to obtain the results, which was not what she was told. Two weeks later I had a stress test, same procedure code. When my family doctor who is employed by St. V’s suggested my five year stress test I explained to him that I was not happy with St. V because of my wife’s experience and he referred me to IU North. I then had the procedure done there. When I received the EOB, they charged $923 – same exact procedure and the adjustment was $324 leaving me a balance of $599, over $500 more than what it cost my wife. Lesson to be learned – don’t think all hospitals charge the same. Before having anything done call and find out the cost. However, based upon experience calling the hospitals for their fees is like pulling teeth and expect long wait times on the phone. By the way, IU was even worst than St. V’s informing me of the outcome. Nearly three weeks went by and my doctor had to call for the results.
    • in-office vs hospital
      We think the biggest problem with health care is cost side transparency. It's maddening that a massive number procedure list exists for billing purposes. Insurance and hospitals have had it for years... but its not avialable to us. My son had a very minor adjustment to his circumcision.. basically a little snip. Thank goodness IUHealth helped me price the procedure before we said yes. Well meaning doctor said "Best in surgery room in case there's bleeding" (his office is in the hospital). I checked price for surgical suite and Anesthesiologist .. 4000.00 per 15 minute unit, and we need 2 units totaling 8000.00 . Back to Doctor: How much if we do it in office? He said $400.00 ! I said if he bleeds we can roll him to emergency, but the doctor said "its quite unlikely he will bleed" and accommodated us for $400.00 My 11 year old son said there was a bit of pain but ..in his words "Not 8000.00 worth"! You doctor (and the front line people at the hospital) probably aren't trying to gouge .. but insurance companies & hospital admins absolutely are.
    • Excellent Article
      P.S. Thank you JK for an excellent article. I'm a rightist who believes Obama is focused on the right issue ... high cost of insurance, but is totally off base with his answer. Obama case can fix it in 2 steps. 1.) Insurance companies and self pay the same price. Insurance companies are acting as if they some sort of volume buyer ... they are not. The family or person buying the service is the buyer. 2.) The schedule of procedures and price must be published by the providers. They already maintain one .. they just don't show it to us. Conclusion. Hospitals build half empty satellites because they have so much excess cash they don't know what to do with it. Insurance companies have giant palaces because they are doing well. Nothing wrong with that except the fact that they control the money (i.e. volume payers, but not volume buyers) make it impossible for Adam Smith's big hand to work properly ...at least for now.
    • overcharged hospital fees by Keith
      I have tried to call ahead and get costs of tests before. They have never been able to correctly give me a cost. Usually don't give me a cost but anytime they have, the cost has always proven to be wrong and cost me more in the long run.

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