Getting a fair price for healthcare is tricky because it’s not an apples to apples comparison.
Benefit season is starting soon. I’ve compiled some of my recent posts to help you get your arms around the latest strategies being offered to establish a fair price for healthcare services and to help you manage your total cost of healthcare.
Charges [aka List Price]:
Healthcare charges still seem to be a bit of a mystery to everyone. So let me start by explaining how most providers develop their list price and why.
The charge for most services in healthcare is based on a multiple of the Medicare fee schedule — at least initially. There are so many billing codes that it would be really hard for providers to keep up with the cost of each one which is why most base their charges on Medicare.
The tricky part is the multiple because every payer has their own methodology for payment. To capture the full amount due, the provider has to establish a charge that is sufficient to capture any outlier payer. Unfortunately, the multiple [aka: the markup] can make the charges seem unreasonable.
The charge for new services usually captures part of the cost savings so that providers are incentivized to adopt new technology. It helps them cover the cost of doing so. The charge and the price [contracted rates] consumers pay usually go down over time assuming the provider updates their chargemaster.
Then there are what I will refer to as the “fraudsters” who will keep increasing their charges to capture more and more from insurers as benefit loopholes close, such as out-of-network coverage. Their charges defy all logic and unfortunately, create an aura of mistrust.
Tip: The best way to protect yourself from fraudsters is to ask for an detailed estimate prior to service. Have them explain it to you.
Ambulatory Surgery Centers (ASCs):
ASCs offer a lower cost alternative to hospital based services and are a good option for surgeries and other service for the low acuity population. For those with increased medical risks [obesity, heart disease etc.] hospitals are a safer option.
The Ambulatory Surgery Center (ASC) industry grew rapidly from 2000–2008 largely because it provided surgeons a way to make more money from something they already do. It also gave them more say in and in some cases, more control over their work environment in terms of support staff, supplies and business practices.
Unfortunately, many were more focused on making a fast buck from the out-of-network strategy [aka: fraudsters] rather than providing an efficient service to lower the cost of healthcare. That’s changing.
Economical Credentialing and Narrow Networks:
Some health plans have been developing narrow networks that are economically credentialing some providers [aka: the fraudsters] out of their networks for past behaviors. It’s one way to lower cost but many not be a win for those that value choice.
Unfortunately, penalizing providers usually forces more consolidation which drives up price. Many ASCs are being sold to hospitals and healthcare systems that have more leverage with the payers to negotiate higher prices for their services. Pricing transparency tools that use historical claims data may not reflect the new higher prices.
Bundled payments are catching on as a new reimbursement model in healthcare but not all bundles are the same.
Bundles are a flat fee paid to a healthcare provider for a full episode of care. By limiting the payment, it forces the provider to reduce the cost of care for the defined service and guarantee a certain outcome.
If you’re considering using bundles as a way to control your healthcare costs, there are several questions that you should be asking, such as:
1. Who are the providers included in the network? Not all providers are included in every network or selected the the same way.
2. What is the scope of service included? The services and amount of service included in the flat rate will vary bundle-to-bundle.
3. How is a quality outcome defined? Is the patient returned to pre-injury condition or returned to a basic ambulatory state or returned to work?
4. How much control do employees/patients get? Can they select all their providers or just some, the location, the time, the supplies and implants used or is that the tradeoff for a lower cost?
5. What is the expected cost savings over standard contracted rates? What level of savings makes it worth it to you?
Understand what you’re getting and trading off for a lower cost of healthcare. Bundles can pose problems is they are not Administered well because there are always some who will game the system. You have to think through these deals carefully.
Change is Hard Won
Changing the healthcare system takes time. Everyone needs to do their part to lower the cost of healthcare.
1. Healthcare Consumers: Many Americans don’t change their unhealthy habits until they have a major life event like a heart attack, cancer scare or some other health related crisis. The cost of all those unhealthy habits plus the life events drive up healthcare costs for everyone and no one wants to foot the bill.
2. Healthcare Providers: Healthcare providers don’t change until there is a financial benefit for doing so. Many providers didn’t adopt technology that costs maybe 1–2% of their revenue until the government incentivized them to do it. Why? Because they were focused on their top line rather than their bottom line.
3. Health Plans: Health Insurers don’t change their coverage and payment practices until they understand how something impacts their medical loss ratio. Untimely payment decisions make it hard for providers to change how they serve and delight patients. As you know, not many people are willing to work for free.
There are no silver bullets to fix healthcare. Americans need to take a good look in the mirror and own their part, providers need to focus more on the bottom line and insurers need to do more timely financial modeling to fix the incentives for providers.
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