Hospitals post their charges: almost indecipherable, but important!

The recent Trump administration order to have hospitals post their prices has been widely covered in the media, along with both headlines and articles that make it clear that these prices list are far from…clear! For example, Robert Pear’s article in the NY Times on January 13, 2019, titled “Hospitals Must Now Post Prices. But It May Take a Brain Surgeon to Decipher Them” , starts:

‘Vanderbilt University Medical Center, responding to a new Trump administration order to begin posting all hospital prices, listed a charge of $42,569 for a cardiology procedure described as “HC PTC CLOS PAT DUCT ART.”

Baptist Health in Miami helpfully told consumers that an “Embolza Protect 5.5” would cost them $9,818 while a “Visceral selective angio rad” runs a mere $5,538.’

The Arizona Star piece on Tucson hospitals had a more moderate title, “Hospitals post prices, but public can find it confusing”, but made the same points. As a physician (if not a brain surgeon!) I think I can figure out what most of these mean, but the point that they are making is that they are hard for almost everyone to understand. The reason, of course, is that they have simply posted online their “chargemasters”, the price list that they supply to insurers (including Medicare and Medicaid), which are based on the nationally used “procedure codes”; these are numbers which identify different treatments that are abbreviated as above. So, the charge at Baptist for a radiologist injecting dye into an artery supplying your intestines is only a little over $5,000, while Vanderbilt charges over $42,000 to do a surgical procedure to close a shunt artery in your heart that is vital to fetal circulation but normally closes spontaneously after birth. The question is, what does all this mean? And what are you and I supposed to do with this information?

Elisabeth Rosenthal, the emergency room physician turned NY Times reporter turned editor of Kaiser Health News, is more optimistic in her Times Op-Ed on January 22, 2019, “Donald Trump did something right”. She acknowledges the opacity of the posted charges to most people, but says it is a great step forward, because they areaccessible, at least to those who are academic experts, and can be compared, both one hospital to another (“Maybe, just maybe, a hospital will think twice before charging a $6,000 “operating room fee” for a routine colonoscopy if its competitor down the street is listing its price at $1,000”), and to alternative treatments (“With access to list prices on your phone, you could reject the $300 sling in the emergency room and instead order one for one-tenth of the price on Amazon.”) Obviously, these would not be easily available on your phone now, but her hope and expectation is that third parties will develop apps that will take this nearly impenetrable information and make it easily accessible to people, as apps such as GoodRx® have done for drug prices. She emphasizes the magnitude of this change, since before now these prices have been closely-guarded secrets.

Rosenthal makes a number of other important points that illustrate the fact that this system is not only opaque, but deeply morally corrupt. Hospitals are run as businesses, to make money, even when they are ostensibly “non-profit”. Their CEOs and other executives are mostly businessmen, CPAs and MBAs – even when they are physicians, which sometimes happens, they are usually also MBAs – and are hired for their ability to run a money-making operation that happens to sell health care. And sell it, to your insurance company, at what often seems like deeply discounted prices because they are based on absurdly inflated chargemasters. “You don’t really want to change your charges if you have a Saudi sheikh come in with a suitcase full of cash who’s going to pay full charges,” says one CEO. More important, it allows them to reach agreements with insurers to pay a lot less than the official “price”, which in turn allows those insurance companies to brag to you about how much money they saved you. Rosenthal notes this is farcical, raising prices to make you think that you got a discount (‘If a supposedly $1,000 TV is “on sale” for $80, it’s not really a discount. It’s an absurd list price’), and that it emulates practices in other arenas, such as airlines overestimating their flight times to make it seem like they have a better on-time percent.

At a higher level, Rosenthal points out what is wrong is that these inflated charges do make a difference. Your co-pays and deductibles, if you are insured, are based upon the amount that your insurer pays, so that if they have agreed to pay only 20% of the listed charge, $200 for the TV set instead of $1000, you still may pay more than if you bought it for $80 cash. And certainly more than if the insurer were paying 20% of the old list price, say $500. You pay. You always pay. (See, for example, how insulin manufacturers and insurance companies and pharmacy benefit managers, each following their own profit incentives, have made insulin – a life saving treatment for millions of people with diabetes – often unaffordable: Danielle Ofri, “The Insulin Wars”.)

And, of course, there is the nasty little glitch that it is the most vulnerable and most needy, those who are uninsured as well as sick, and often poor, that get charged the full list price, the $1000 for the TV, or the ostensible “uninsured discount”:

When Wanda Wickizer had a brain hemorrhage in 2013, a Virginia hospital billed her $286,000 after a 20 percent “uninsured” discount on a hospital bill of $357,000 — the list price, according to chargemaster charges. Medicare would have paid less than $100,000 for her treatment.

Wait. Medicare? Medicare would have paid a quarter of their list price and a third of what this uninsured person got billed with the “discount”? Yes. And that is a place to start. Hospitals – or the third-party app developers that will let you see these prices on your phone – should be required to list the Medicare-approved payment right next to what they will charge you, or your insurer. That would measurably increase the “light of day”.

Of course, some doctors and hospitals do not want to accept Medicare for this reason – they can charge more money to insurance companies, who pass it on to you in premiums (in addition to your co-pays and deductibles) while claiming to be saving you money. There is a solution to this also, although Rosenthal does not mention it. It is to have everyone in the same insurance program, a single payer, an improved and expanded Medicare for All. This would set the rates and pay them, without co-pays or deductibles for necessary services. Everyone in the same plan would mean that the better educated, wealthier, and generally more empowered would ensure that it worked for them – and thus would work for everyone else, middle-class, poor, and even homeless.

Yes, hospitals and other service providers (physicians, nursing homes, etc.) and drug companies and insurance companies would make less profit. I’m sure that your heart goes out to them (maybe the next requirement could be the posting of the salaries of the C-suite executives at hospitals…). But, after all, what the health care system should be run for, and is run for in every other developed country, is the health of the people, not the profit of corporations.

Amazing, huh? And it could be that way here!

Medicare payments to doctors: the big issue is the underpayment for primary care

The Center for Medicare and Medicaid Services (CMS) just published how much money individual doctors get paid from Medicare. This initial version is without names, but undoubtedly the names will eventually be revealed. Enough information is available for Reed Abelson and Sarah Cohen, who wrote the article for the New York Times on April 9, 2014 “Sliver of Medicare Doctors Get Big Share of Payouts”,   to identify many of the specialties and locations. About ¼ of all Medicare payments, the article tells us, go to about 2% of all doctors. “In 2012, 100 doctors received a total of $610 million, ranging from a Florida ophthalmologist who was paid $21 million by Medicare to dozens of doctors, eye and cancer specialists chief among them, who received more than $4 million each that year.” The largest amount of money was accounted for by office visits, $12B, but this was for 214M visits, with an average reimbursement of $57, in contrast to the Florida ophthalmologist, or to the “Fewer than 1,000 radiation oncologists, for example, received payments totaling $1.1 billion.”

Much of the discussion in the article, and in the comments attached, relates to why so few doctors get so much of the $77B Medicare pays out each year. There are, obviously, concerns about fraud; not only is Medicare seemingly fixated on looking for fraud everywhere but there is good evidence that it has occurred, at least historically. For example a highly paid (by Medicare) Florida ophthalmologist is apparently linked to a previous Medicare fraud scandal in which there was some implication of New Jersey Senator Robert Menendez. “The Office of Inspector General for the Department of Health and Human Services, which serves as a federal watchdog on fraud and abuse for the agency, released a report in December recommending greater scrutiny of those physicians who were Medicare’s highest billers.” I would have to say that this is a much wiser, fairer, and probably more productive strategy than simply trying to find largely unintentional errors in coding for outpatient visits, or checking each hospital admission to see if it could have been an “observation”, which is reimbursed less because it is considered outpatient status, as is done by Medicare’s Recovery Audit Contractors (RACs, or as I have called them, bounty hunters). Also, as I have previously discussed, these efforts are harmful to the patient in a direct financial way; as an “outpatient”, a Medicare recipient in the hospital has much higher out-of-pocket costs than if they are admitted as an inpatient. This is, of course, why CMS wishes to limit some stays, but if a person medically needs to be in the hospital, Medicare should pay for a hospitalization, and not play these games that not only financially penalize the hospital and doctors but more importantly the patient.

The other big area discussed is whether, if not exactly fraud, there is substantial difference in practice (e.g., getting CTs before each procedure, using more expensive drugs, etc.) that some specialists who are highly reimbursed by Medicare are doing more of than others. In addition, the question is “are they doing more procedures” or doing procedures with less strict indications? It is worth looking at; there is no guarantee that, even if some doctors are doing more procedures, having looser criteria for them, using more expensive drugs and tests, that this is not the better way to practice, but there is no guarantee that it is the better way to practice. If some doctors are outliers in their specialty, and their practice characteristics “happen” to end up making them a LOT more money than others, then this is certainly a reasonable basis on which to look more closely at how they are practicing, and what is the evidence basis of appropriate practice.

A third issue is that many of the recipients of the most money from Medicare, particularly oncologists (cancer doctors) and ophthalmologists are using very expensive drugs, which they have to buy first and which Medicare reimburses them for. Thus, this skews their reimbursement upward even though the money (or most of it) does not go to the doctor, but rather to the pharmaceutical company. The article refers to a drug called ranibizumab, injected into the eye by ophthalmologists monthly for age-related macular degeneration. It is very expensive, as are many drugs which are made through recombinant DNA (a lot end in “-ab”) used by oncologists, neurologists, rheumatologists, and gastroenterologists as well. One comment notes that he as a physician only makes 3% on the drug. While it can be argued that this is a significant markup (for example, making $3000 on a $100,000 drug), and that this doesn’t include the doctor’s fee for administering it (substantial), it is unfair to count the full cost of the drug as income for the doctor. Of course, it is income for someone (the pharmaceutical company) which suggests there needs to be substantial investigation into pricing of these drugs. And, of course, if a physician is found to be using a lot of a drug where he (or she) makes a 3% markup rather than prescribing an equally effective drug (if there is one) where there is no markup profit, this would be a bad thing.

However, the most important thing revealed by this data, I believe, is the enormously skewed reimbursement by specialty. It is an excellent window into the incredible differences in reimbursement for different specialties, with the ophthalmologists, radiation oncologists, etc. making huge incomes while primary care doctors (and nurse practitioners) are making $57 for an office visit. This is major. The fact that Medicare pays so fantastically much more for procedures (and, as a note, it is likely that all of the doctors, including the 202 family doctors in the highest-paid 2%, are getting it for doing a lot of procedures) leads to private insurers paying similarly more. And makes these specialties very attractive to medical students because they are lucrative (and often, though not in the case of many surgical specialties, involve fewer hours of work). Which leads to fewer primary care doctors, and a dramatic shortage in this country.

Medicare could change this. It could dramatically, not a little bit, change the reimbursement for cognitive visits to be closer to the payment for these procedures. If it did, so would private insurers. If the income of primary care doctors was 70% of that of specialists (instead of say, 30%) data from Altarum researchers and from Canada suggest that the influence of income on specialty choice would largely disappear. More students would enter primary care, and in time we would begin to see a physician workforce that would be closer to what this country needs, about 50% doctors actually practicing primary care.

It is fine if CMS and the OIG look at these highest billing doctors to make sure that they are not committing overt fraud. It is also fine to look at them and see if they are using criteria for procedures that are not supported by current evidence, or doing too many other tests, or taking kickbacks. It is also a good idea to look at the cost of drugs, especially the portion going to the drug company, as well as the markup for physicians, and to re-present the data excluding that portion of the money the doctor does not get (goes to the pharmaceutical company) from their income.

But the most important result of this report should be to be shocked at the way Medicare enables the continued practice of reimbursing for procedures at such high levels, and to kickstart a complete revision of the Medicare fee schedule to bring reimbursement for different specialties into better balance.

That would be a great outcome!