An End to Medical-Billing Secrecy?

After all the misunderstanding with our health insurance policy changes, anything to end the confusion, secrecy, and overbilling of our medical expenses, I am eager to see happen!

This morning, Health and Human Services Secretary Kathleen Sebelius is announcing a groundbreaking initiative that will take a lot of the secrecy out of hospital billings.

Acting on the suggestion of her top data crunchers at the department’s Centers for Medicare and Medicaid Services (CMS), Sebelius will release a data file that shows the list — or “chargemaster” — prices by all hospitals across the U.S. for the 100 most common inpatient treatment services in 2011. It then compares those prices with what Medicare actually paid hospitals for the same treatments — which was typically a fraction of the chargemaster prices.

CMS public-affairs director Brian Cook told me that Sebelius’ action today comes in part in response to TIME’s special report on health-care-pricing practices in the March 4 issue, “Bitter Pill.”

In the same announcement, Sebelius is offering $87 million to the states to create what she calls “health-care-data-pricing centers.” The centers will make pricing transparency more local and user friendly than the giant data file she is releasing this morning.

There are two reasons why Sebelius’ release of this newly crunched, massive data file is a great first step.

First, it reveals the vast disparity between what hospitals charge for pills, procedures and operations and the real cost of those services, as calculated by Medicare.

As I explained in “Bitter Pill,” Medicare uses expense data submitted by all hospitals to determine the actual cost of all treatments — including allocations of overhead such as rent or administrative salaries — and pays accordingly. In other words, Medicare takes seriously — and enforces — the idea that nonprofit hospitals should be nonprofit.

The first line in the more than 163,072 lines of data in the CMS file being released today covers the treatment of “extracranial procedures” (“without complications”) at the Southeast Alabama Medical Center in Dothan, Ala. When Medicare reviewed the list prices on bills it received for 91 patients getting that treatment at the Dothan hospital in 2011, the average chargemaster bill claimed by the hospital was $32,963. Medicare only paid an average of $5,777.

Doctors may be being shortchanged in their payments from Medicare. But if you think Medicare is paying hospitals less than cost, recall this quote in “Bitter Pill” from a top CMS official:

I was driving through Central Florida a year or two ago, and it seemed like every billboard I saw advertised some hospital with these big shiny buildings or showed some new wing of a hospital being constructed … So when you tell me that the hospitals say they are losing money on Medicare and shifting costs from Medicare patients to other patients, my reaction is that Central Florida is overflowing with Medicare patients and all those hospitals are expanding and advertising for Medicare patients. So you can’t tell me they’re losing money … Hospitals don’t lose money when they serve Medicare patients.

The second reason the compilation and release of this data is a big deal is that it demonstrates the point I tried to make in spotlighting the seven sample medical bills in “Bitter Pill”: most hospitals’ chargemaster prices are wildly inconsistent and seem to have no rationale. Thus, the release of this fire hose of data — which prints out at 17,511 pages — should become a tip sheet for reporters in every American city and town, who can now ask hospitals to explain their pricing.

For example, Sebelius points out in her announcement that “average inpatient charges for services a hospital may provide in connection with a joint replacement range from a low of $5,300 at a hospital in Ada, Oklahoma, to a high of $223,000 at a hospital in Monterey Park, California. Even within the same geographic area,” she notes, “hospital charges for similar services can vary significantly. For example, average inpatient hospital charges for services that may be provided to treat heart failure range from a low of $21,000 to a high of $46,000 in Denver, Colorado, and from a low of $9,000 to a high of $51,000 in Jackson, Mississippi.”

These wild pricing gaps are everywhere. Who would have thought that Maimonides Medical Center in Brooklyn charged an average of $43,940 for a heart attack with no complications (and no death), while the more prestigious Mount Sinai Hospital in Manhattan charged $16,611? Who knew that the same treatment at Chicago’s Northwestern Memorial Hospital averages $41,820 in charges, but at nearby Evanston Hospital it’s $22,994?

The hospital lobby, led by the American Hospital Association, is going to howl that Sebelius’ publication of these chargemaster prices is unfair. Only a minority of patients are actually asked to pay those amounts, they will argue. Insurance companies, which cover the majority of patients, receive huge discounts off of the list prices, though they pay substantially more than Medicare.

That’s true, but in the through-the-looking glass world of health care economics, those who are asked to pay chargemaster rates are those who are underinsured or lack insurance altogether. Moreover, insurers typically negotiate discounts off of the grossly inflated chargemaster prices ($77 for a box of gauze pads!) — so the chargemaster matters for insured patients too.

So, what should Sebelius and her team do next?

The feds need to publish chargemaster and Medicare pricing for the most frequent outpatient procedures and diagnostic tests at clinics — two huge profit venues in the medical world. This will be harder — the government doesn’t collect that data as comprehensively — but those outpatient centers and clinics provide a huge portion of American medical care.

But an even bigger step in transparency would be collecting data that Medicare doesn’t have: exactly what insurance companies pay to the various hospitals, testing clinics and other providers for various treatments and services. After all, as the hospitals themselves concede in downplaying their chargemasters, these insurance prices are the ones that affect most patients. But it’s also where there is close to zero transparency.

Here’s why it matters so much. Suppose you have a knee replaced at Hospital X. Aetna’s discount there might mean it pays $11,000, while United Healthcare’s discount might mean it pays $22,000. Or the prices could be reversed. No patient has any way of knowing. But if you’re on the hook for 20% co-insurance for each policy, then you’ll pay $2,200 with an Aetna policy or $4,400 with a United policy. It looks like you have the same insurance — a 20% co-pay — but you don’t. Similarly, the same insurer might have dramatically different discounts for hospitals that are both listed in the insurance company’s network, meaning you’ll think your coverage should be the same. Suppose, for example, the knee surgery at Hospital X is $11,000 for an Aetna patient, but at Hospital Y it’s $22,000 for an Aetna patient.

Neither insurance companies nor hospitals want to reveal the details of the discounts they have negotiated. But patients know, bill by bill, because they get an Explanation of Benefits from their insurance company when a claim is paid, telling them what the insurance company paid.

Perhaps states could use the money Sebelius is offering for those new pricing centers to collect this data from insurance companies, which are regulated by the states. Insurers and hospitals would vehemently resist, claiming the deals they negotiate are proprietary trade secrets. (They also fear they’ll be embarrassed by all the disparities that show them negotiating bad deals compared with their competitors.)

Failing that, there is another solution: these state pricing centers could gather the information from patients who volunteer, in exchange for a promise that their names won’t be used, to submit their Explanations of Benefits. After all, a hospital or insurance company can’t claim a patient can be prohibited from talking about or making public his or her own bill.

The state pricing centers could then do what CMS just did with hospital billings to Medicare: average all the results for what each insurance company pays to each hospital or clinic for various services. That’s the next frontier in billing transparency.

Can Better Access to Health Care Really Lower Costs?

Health care access — as measured by the ease and timeliness with which people obtain medical services — is a key indicator of quality of care. Some people have high-quality care, with round-the-clock access to doctors. Others don’t, waiting months for an appointment, resorting to Google for medical advice and the ER for primary care. In other words, having an insurance card or even a doctor doesn’t mean you have good access to health care.

The elusive question for many people is how to get better access. There are no websites or apps that let patients find out how long it takes to get appointments with specific doctors. And efforts to determine waiting times through secret-shopper studies — really the only way to get good info on waiting times — have been thwarted. What’s more, there is no way to know how responsive a doctor will be off-hours, or whether she will return your phone calls promptly.

The good news is that there are two health-care models that promise better access: concierge medicine and the patient-centered medical home. The former has been around for years, but the medical-home model is just catching on, spurred by provisions of the Obama administration’s Affordable Care Act. Figuring out the differences between the way these models work — and whether either is really worth the trouble — is very confusing, even to people who work in the health-care field.

First, let’s start by explaining concierge medicine: for a flat yearly fee — ranging from hundreds to thousands of dollars, depending on the services offered — patients get enhanced access to care. Concierge doctors usually guarantee same-day appointments, give patients their cell phone numbers, and promise to arrange consults quickly with really good specialists and to arrange MRIs on the weekends. Some concierge doctors will even go to the hospital with their patients and monitor their care. They not only explain what is happening, but also scrutinize each medical decision made by hospital staff, and step in if the “right” care is not delivered.

Concierge docs claim to have averted impending medical catastrophes this way, but their critics have several complaints, chiefly that concierge medicine creates a two-tiered system in which the rich get prioritized and the poor have to wait their turn. Many patients who would benefit from having someone help them navigate the health-care system can’t afford concierge care. Further, when primary care physicians practice concierge medicine, they take on fewer patients because they get paid more for and spend more time with each patient. This effectively reduces the already scarce primary care workforce.

Concierge medicine can also potentially lead to increases in unnecessary medical care, particularly if physicians respond to their patients’ every ache and pain by ordering a test or prescribing medication. Such patients may feel compelled to use more health care as well, since they’re already paying a premium for it (interestingly, the same thing happens when you lower people’s co-payments), similar to the way people scramble to spend their pre-paid health savings accounts by the end of the year.

If concierge medicine sounds elitist, consider a different model that uses some of the same methods, but focuses on children, poor patients and those with chronic diseases: the patient-centered medical home. In the medical home, each patient has a personal physician who provides “first contact” care and then coordinates care across multiple settings, from specialist to specialist. The medical home pays attention to the “whole person,” which means that it considers not only the patient’s medical issues, but also social ones that may contribute to health. Importantly, it also promises enhanced access to care through open scheduling, expanded doctors’ hours and increased communication with care providers. In medical homes, patients don’t have to wait months for appointments; often, they can see their doctor the same day they feel sick.

So, what are the similarities and differences between these two models? First and most importantly, they’re both expensive. Enhanced access and better coordination of care represent a higher level of service, so they cost more. The reason doctors don’t offer greater access as a matter of course (e.g. giving patients their cell phone numbers) is precisely because they don’t get paid to do so — the traditional payment model requires a face-to-face encounter and doesn’t pay extra for coordination of care. Yet it takes a doctor time and energy to make sure that her patient’s multiple specialists are working in sync, or that information about what happened during a hospital stay (such as outstanding tests or unanswered questions) don’t get ignored after the patient is discharged.

So, who pays for these enhanced services? In the case of concierge medicine, it is clearly the patient. In the case of the medical home, it’s less clear who will pays; most likely, the increased costs will fall on insurers, who may the indirectly pass the higher costs back to the patient. The resources necessary to transform traditional practices into medical homes may also come from other sources, such as foundations and government entities.

In either case, if the patient ends up using less health care resources as a result, and is ultimately healthier (i.e. health problems are prevented before they happen), there are two winners: the insurer (or taxpayer) who ends up paying less in costs, and the patient who ends up healthier.

Another major difference between the two models lies in who actually delivers the care. In the concierge model, it is usually the doctor. In the medical home, non-doctors (nurses and other professionals) deliver many of the services. This may end up being cheaper in the end because it allows the doctor to focus on doctoring, while letting others coordinate follow-up appointments, deliver diet counseling, and make sure that screening tests and vaccinations are up-to-date.

Perhaps the most important difference, however, is that while concierge medicine is accessible mostly to the wealthy, medical homes are available for both the rich and the poor — at least in theory. There are currently projects testing the medical home model in practices that serve patients on Medicaid, the government-sponsored insurance for the poor. To our knowledge, there are no state-subsidized concierge medicine practices. But it could be argued that at the low-end ($100 per month), concierge fees may actually be affordable to the middle class, particularly for people who already spend a lot on health care.

Ultimately, the key question is whether enhanced access and coordination of care is really worth it. In at least one respect it is: people don’t like waiting for medical care; studies on the benefits of enhanced access show that it increases patient satisfaction and experience. But the jury is still out on whether any of these models really make anyone healthier. No large, well-designed studies have looked at mortality rates in concierge medicine or medical homes. Similarly, while enhanced access would presumably keep patients healthy enough to avoid hospitalizations and ER visits, there are no studies showing that it actually saves money in the long run.

What is clear, however, is that both models offer a greater focus on prevention and care coordination, which is potentially especially helpful for people with chronic medical problems like diabetes and heart failure, for whom close personalized management can reduce hospitalization rates.

In the coming years, as studies are increasingly conducted to explore these issues, it will hopefully become clearer which care-delivery model is better, more effective and sustainable in the long run. But until then, it will be up to patients to weigh the personal costs and benefits, if they’re deciding whether to pay for concierge medicine or to seek out a medical home.