As CMS price transparency rules go into effect, and demand grows for publishing provider charges, consumers are becoming aware of how widely healthcare prices can vary
With the COVID-19 Coronavirus pandemic saturating the news, it is easy to forget that clinical laboratories regularly conduct medical tests for influenza, the common cold, and other illnesses, most of which are affordable and covered by health insurance. So, how did a common throat culture and blood draw result in a $25,865 bill?
That was the question a New York City woman asked after a
doctor’s visit for a sore throat that resulted in a five-figure charge. This
should not simply be dismissed as another example of hidden prices in clinical
laboratory testing or the true cost of medical procedures shocking a healthcare
consumer. The issue is far from new.
For example:
An Indiana girl’s snake bite at summer camp in 2019 resulted in a $142,938 bill, which included $67,957 for four vials of antivenin and $55,578 for air ambulance transport, reported Kaiser Health News (KHN);
In 2019, Dark Daily highlighted a New York Times article showing the insurer-negotiated price of a common blood test could range from $11 to $952 in different major cities;
In 2018, Dark Daily spotlighted a Kaiser Health News story about a $48,329 bill for outpatient allergy testing; and
In 2013, Dark Daily reported on a patient’s $4,317 bill for blood work done at a Napa Valley medical center, which a national lab would have performed for just $464.
Prices Vary Widely Even Within Local Healthcare Markets
As the push for price transparency in healthcare increases, exorbitant patient bills—often tied to providers’ chargemaster pricing—add to that momentum. Consumers now recognize that prices can vary widely for identical healthcare procedures, including clinical laboratory and anatomic pathology group tests and procedures.
However, on January 1, 2021, price transparency will get a major boost when the Centers for Medicare and Medicaid Services (CMS) final rule requiring hospitals to post payer-negotiated rates for 300 shoppable services goes into effect. Clinical laboratory managers and pathologists should be developing strategies to address this changing healthcare landscape.
Until price transparency is the norm, examples of outrageous pricing are likely to continue to make headlines. For example, National Public Radio’s (NPR) December 2019 “Bill of the Month,” titled, “For Her Head Cold, Insurer Coughed Up $25,865,” highlighted a recent example of healthcare sticker shock.
New York city resident Alexa Kasdan’s sore throat resulted in a $28,395.50 clinical laboratory bill (of which her insurer paid $25,865.24) for a “smorgasbord” of DNA tests aimed at explaining her weeklong cold symptoms. NPR identified the likely causes for the sky-high charges. In addition to ordering DNA testing to look for viruses and bacteria, Kasdan’s doctor sent her throat swab to an out-of-network lab, with prices averaging 20 times more than other medical laboratories in the same zip code. Furthermore, the lab doing the analysis, Manhattan Gastroenterology, has the same phone number and locations as her doctor’s office, NPR reported.
In contrast, NPR learned that LabCorp, Kasdan’s in-network laboratory provider, would have billed her Blue Cross and Blue Shield of Minnesota insurance plan about $653 for “all the ordered tests, or an equivalent.”
Ranit Mishori, MD, MHS, FAAFP (above), Professor of Family Medicine at the Georgetown University School of Medicine and Senior Medical Advisor for Physicians for Human Rights, maintains patients should not hesitate to question doctors about the medical tests they order for them. “It is okay to ask your doctor, ‘Why are you ordering these tests, and how are they going to help you come up with a treatment plan for me?’” Mishori told NPR. “I think it’s important for patients to be empowered and ask these questions, rather than be faced with unnecessary testing, unnecessary treatment and also, in this case, outrageous billing.” (Photo copyright: Primary Care Collaborative.)
Hospitals Can ‘Jack-up’ Prices
The Indiana girl’s snake bite at summer camp last year became another example of surprisingly high medical bills. Nine-year-old Oakley Yoder of Bloomington, Ind., was bitten on her toe at an Illinois summer camp. The total bill for treating the suspected copperhead bite was $142,938, which included $67,957 for four vials of antivenin and $55,578 for air ambulance transport, KHN reported.
The summary of charges her parents received from Ascension St. Vincent Evansville hospital included $16,989.25 for each vile of anti-venom drug CroFab, five times as high as the average list price for the drug. Until recently, KHN reported, CroFab was the only antivenom available to treat pit viper bites, which created a monopoly for the drug maker’s expensive-to-manufacture product. Though the average list price for CroFab is $3,198, KHN noted hospitals can “jack-up the price.”
While Yoder’s family had no out-of-pocket expenses thanks to a supplemental insurance policy through the summer camp, Yoder’s father, Joshua Perry, JD, MTS, Professor of Business Law and Ethics at Indiana University Kelley School of Business, knows his family’s outcome is unusual.
“I know that in this country, in this system, that is a
miracle,” he told KHN.
The push for healthcare price transparency is unlikely to
wane. Clinical laboratory leaders in hospitals and health networks, as well as
pathologists in independent clinical laboratories and anatomic pathology groups,
should plan for a future in which consumers demand the ability to see pricing
information before obtaining services, and regulations require it.
US hospitals typically spend $2,424/day to provide inpatient care, according to the KFF report
How much does the average hospital spend/day to provide inpatient care? The numbers vary widely, but the latest statistics from Kaiser Family Foundation (KFF) State Health Facts show West Coast states incur the highest daily operating and non-operating inpatient costs.
This disparity in spending is unlikely to surprise medical laboratory executives working in hospital settings. They know firsthand that operating costs can vary from state-to-state and by hospital ownership type.
Oregon, California, and Washington are the most expensive
three states overall for inpatient hospital care. However, the leaderboard
changes when looking specifically at inpatient care at for-profit hospitals.
In the for-profit hospital category:
North Dakota, South Dakota, and Alaska rack up
the highest expenses/day.
Idaho, California, and Oregon top the non-profit
hospital segment.
Overall in the US, the average hospital incurs expenses of
$2,424/inpatient day, the KFF reports.
While the average US hospital spends $2,424/day to deliver inpatient care, West Coast states have the highest hospital adjusted operating and non-operating expenses/inpatient day, according to a recent report from the Kaiser Family Foundation. Oregon hospitals top the spending list at $3,599/day. (Graphic copyright: Kaiser Family Foundation.)
AMA Annual Survey
Rankings
Rankings are based on information from the 1999-2017 American Hospital
Association Annual Survey, which includes all operating and non-operating
expenses for registered US community hospitals. The figures are an estimate of
the expenses incurred by a hospital to provide a day of inpatient care. They
have been adjusted higher to reflect an estimate of the volume of outpatient
services, according to the KFF. The numbers do not reflect actual charges or
reimbursement for the care provided.
Most expensive average expenses/inpatient day:
Oregon, $3,599
California, $3,441
Washington, $3,429
Idaho, $3,119
District of Columbia, $3,053
Least expensive average expenses/inpatient day:
Montana, $1,070
Mississippi, $1,349
South Dakota, $1,505
Wyoming, $1,520
Alabama, $1,554
Most expensive non-profit hospitals/inpatient day:
Idaho, $4,208
California, $3,800
Oregon, $3,546
Washington, $3,500
Colorado, $3,319
Least expensive non-profit hospitals/inpatient day:
Mississippi, $1,365
South Dakota, $1,519
Iowa, $1,564
Montana, $1,627
Alabama, $1,723
Most expensive for-profit hospitals/inpatient day:
North Dakota, $4,701
South Dakota, $3,956
Alaska, $3,280
Nebraska, $3,031
Wisconsin, $2,830
Least expensive for-profit hospitals/inpatient day:
Maine, $1,055
Maryland, $1,207
West Virginia, $1,362
Iowa, $1,558
Arkansas, $1,619
Most expensive state/local government hospitals/inpatient
day:
Oregon, $4,062
Connecticut, $3,979
Washington, $3,312
California, $3,217
Utah, $3,038
Least expensive state/local government hospitals/inpatient
day:
Montana, $52
South Dakota, $442
Pennsylvania, $787
Nebraska, $906
Georgia, $917
Some Regions Pay Much
More for Healthcare
The KFF report did not look at whether patients in states
where hospitals incur the highest daily operating and non-operating expenses
also pay the most for hospital services. Hospital charges vary widely, with
many treatments costing far more in some regions than others.
In addition, health bills can vary at different hospitals in
the same city or region. According to Healthcare.gov,
the average total cost of a three-day hospital stay is about $30,000.
Adding to the confusion is the fact that hospital costs,
billed charges, and the amounts paid by patients for services can be distinctly
different amounts. Health insurance companies, for example, negotiate lower
rates with hospitals and health systems for their plan enrollees. While patients
without insurance are billed full price for services based on the hospital’s chargemaster.
Zack Cooper, PhD, Associate Professor of Health Policy and Economics at Yale University, told National Public Radio (NPR) that hospital consolidation is partly to blame for the wide variation in the price of hospital services within states and across the country. He says consolidation has eliminated competition in many markets. “Where one large hospital dominates the markets, that hospital is able to get higher prices,” Cooper maintains. “Hospitals have gotten increasingly powerful over time.” (Photo copyright: Yale University.)
CMS Final Rule
Requires Pricing Transparency
As of Jan. 1, 2019, a new Centers for Medicare and Medicaid Services (CMS) rule went into effect aimed at making hospital pricing more transparent. The CMS is now requiring hospitals to publish chargemaster price lists online, rather than release those numbers to patients upon request.
However, healthcare advocates have questioned the rule’s
impact on transparency. Posted hospital pricing information is often hard to
access and difficult to comprehend. In addition, chargemaster prices typically
do not represent the actual costs passed on to consumers.
“[The chargemaster] is the list price. When you go to buy a car, you have a manufacturer’s suggested retail price. This is basically what [the chargemaster] is,” Medical Contributor Natalie Azar, MD, told NBC News.
“Prevention comes first,” Nechrebecki suggests. “Utilize the
ambulatory care clinics. Go see your doctors and do what they recommend to keep
yourself healthy. Eat well and exercise often. You will prevent many surgeries
and hospitalizations.”
Sound advice. Nevertheless, clinical laboratories and anatomic pathology groups should take note of the federal government’s ongoing push for price transparency and prepare accordingly.
Pathologists in medical laboratories creating laboratory-developed tests (LDTs) should be aware that some in the scientific community want more transparency about technology and methods
Developers of clinical laboratory tests and medical diagnostic technologies might soon be feeling the pressure to increase their push for transparency and standards that ultimately would make replication easier.
That’s thanks to a review project’s inability to reproduce results from three of five high-profile cancer studies.
The review project is called the Reproducibility Project: Cancer Biology and is a collaboration between network provider Science Exchange of Palo Alto, Calif., and the Center for Open Science in Charlottesville, Va. They attempted to independently replicate selected results from high-profile cancer biology papers in an open fashion. (more…)
Medical laboratory and pathology groups could benefit from trend by receiving payments for testing services from secondary payer rather than directly from patient
As high-deductible health plans (HDHPs) become the norm for more Americans, gap insurance is being touted as an innovative way to protect consumers from crippling healthcare costs. This added insurance protection is proving attractive to a growing number of patients with HDHPs.
Use of gap plans by more patients also could benefit clinical laboratories and pathology groups. That’s because patients with HDHPs who would normally be required to pay 100% of their lab testing charges until their annual deductible is met, would be covered for these costs because of their gap insurance. In these situations, labs would have a secondary insurer to bill until the annual deductible was met. (more…)
NPR stations in San Francisco and Los Angeles crowdsourced healthcare cost data from listeners to reveal arbitrary pricing of medical services
Over the past two years, Dark Daily has published a number of stories dealing with price transparency, or lack of it, most of which involved government agencies or nonprofits concerned about the high cost of healthcare services. This latest effort to shine a light on healthcare pricing, however, comes from National Public Radio (NPR).
San Francisco’s NPR station, KQED, initiated PriceCheck, an innovative project designed to reveal just how arbitrary medical pricing is in California, in June 2014. KQED partnered with Los Angeles’ NPR station, KPCC, and ClearHealthCosts.com, a New York City start-up that publishes a national list of low to high charges for common healthcare services, to crowdsource healthcare cost data.
The two NPR stations appealed to listeners to share the charges they paid for four medical services: mammograms, lower-back MRIs, IUDs, and diabetes testing. Hundreds of people responded to share prices they paid for these services, and thousands of people looked up prices on ClearHealthCosts.com. (more…)
