In our healthcare system today, the vast majority of what a doctor receives in payments comes from a third-party; namely your insurance company or the government. Payments made directly to the doctor which come directly from the patient account for only about 10% of revenue. The injection of this unnecessary third-party has caused healthcare costs to soar much higher than need be had payments come directly from patient to doctor.
If you know how the medical coding & billing cycle works, you will understand pretty quickly that the inflated billed charges justify the high premiums and the high premiums we pay support the inflated charges.
The truth is, that very few people ever see a real price or pay full fare once the claim cycles through the process ~ other than the unfortunate “self-pay” patient, of course. This absence of reliable price signals between buyers and sellers as a result of our reliance on third-party payments has caused an artificial increase in demand, thus leading to markedly inflated prices.
So why do doctors go through all the bookkeeping gyrations and the expense of filing claims if they always get less than what they bill? Because those are the rules of the game, that’s why! By rules, I mean the contract that your doctor has with your insurance company. The content of those contracts is just too mind-boggling to get into here, but suffice it to say the “house” has rigged the game so it always wins. The win is a sure thing because the insurance company also has a separate, but not equal contract with you (or your employer maybe).
This inconvenient arrangement does not allow that the real stakeholders (doctor and patient) to come together to seek a mutually beneficial exchange of value. It keeps them apart at a legally safe distance so the scam is usually not evident. By scam, I mean the reality that sets in after we find out that healthcare is really not as expensive as insurance premium costs would indicate. That is because those fees we pay are based on artificially set “charge-master prices” that are used as to keep the game funded.
It has gotten to the point where the price of insurance premiums is basically synonymous with the cost of healthcare, or sometimes even higher than the cost of paying for care directly; so much so that we have forgotten that the small stuff is truly affordable without having insurance pick up the tab.
As alluded to above, the current system that is dominated by third-party networks doesn’t have a mechanism to allow the minor medical issues to be handled directly with cash payments; it runs afoul of the contract your doctor signs with your insurer. It is legally difficult for doctors with network contracts to do deal directly with patients for cash, even if less costly and agreed upon. It has basically turned doctors into bill collectors for the insurance company, because that is they only way they get paid. In this kind of system it is hard to determine who the doctor actually works for: the patient or the insurance network.
An old saying sums up this conundrum: “Whose bread I eat, his song I must sing.”
Another consequence of our reliance on third-party insurance to pay our routine medical bills is that it makes it almost impossible for a patient to know a real price! If you exclude items such as Lasik surgery and Direct-Pay practices like mine and others around the country, it is rare to find “transparent” pricing in healthcare.
When a patient asks, “how much is an office visit” or “how much is that MRI”, the first response from the billing clerk is usually, “what kind of insurance do you have?”. They almost never quote a real price, largely because real value is indeterminable in our current system. This is because there are no real prices, just artificially set reimbursement numbers based on elaborate contracts that your network has with you AND your doctor, complex reimbursement schedules and complicated coding schemes used to determine how much “work” the doctor did.
The unfortunate and very predictable outcome from using this revenue cycle for many years has suppressed real prices. Would you agree to buy a washing machine or a sofa or an automobile BEFORE you knew the final price? Of course not, but that is exactly what we ask consumers of medical services to do each time we submit a billing cycle claim. To be sure, this heavily inflationary system benefits the health plan networks and large healthcare institutions at the expense of employers and patients!
Using “insurance” for routine medical services and minor problems have caused costs to skyrocket. Think about it. We pay the same co-pay at our doctor’s office for a hangnail as we do for heart palpitations. No matter how simple, each encounter with the doctor has to go through the insurance revenue cycle in order for the doctor to get paid. It shouldn’t be that way and it doesn’t have to be that way!
More and more practices are starting to post prices. Knowing prices before a transaction is made is a necessary ingredient to determine value. Posting prices is an integral part all Direct-Pay and Concierge Medical Practices. Transparent pricing is embraced in the culture of Direct-Pay practices, because Direct Pay practices believe that better consumers make better patients. We trust patients to recognize value in healthcare if they are given adequate information to make an informed decision about price, which allows them to compare apples to apples.
An industry pioneer in transparent pricing is the Surgical Center of Oklahoma under the leadership of Dr. Keith Smith. The SCO has been posting prices online for many years. This kind of total transparency has forced competitors to react. Dr. Smith is fond of saying that his pricing has saved patients money even when they had their procedure done elsewhere due to pricing pressure felt by competitors.
At my own practice, I believe prices matter because my clients can’t know value without them. I post ALL of our prices online and nothing is hidden. I can keep costs low and service high by NOT accepting any insurance payments or billing insurance.
Eliminating the “middleman” decreases indirect expenses dramatically. By promising to never put an insurance company between you and your health care, doctors can now offer direct-to-the customer services tailored to the individual needs of patients.
Who says the free market doesn’t work in healthcare?!