Will the Real Price Please Stand Up

The popular TV game show To Tell the Truth, aired from 1956 to 2001. It featured celebrity panelists who would quiz three contestants, each claiming to be the same person, in an attempt to determine which one of the claimants was authentic, and who were the imposters. Suffice it to say, it wasn’t easy to make this determination, as the contestant’s stories were very convincing. Often the contestant with the more convincing story or “professional” persona ended up being the imposter. Whereas many times the authentic contestant was unassuming and even at times, easy to overlook. But nonetheless, if you paid close attention, you could often identify an authentic quality that didn’t manifest in the imposters.So in a similar way, maybe we can determine authentic prices in healthcare by using some analysis and comparisons to what we know to be true in markets or in transactions in our daily lives. Let’s take a look.Listed below are some treatments, tests and services rendered to a family member of mine at a local healthcare facility following a minor car accident resulting in some minor neck pain. Following each there will be two prices. One price represents the real market costs that my supplier (at my former practice) charged me for these same products or medications; and the fee my imaging center charges me for x-rays and CT scans (and remember they are making a profit). The other price is the charge posted by the large hospital.

Now keep in mind, I owned a very small practice without buying power clout and no economy of scale. I didn’t have the ability to obtain volume discounts on my supplies like the hospital. Please factor that into your decisions.

Please select which price represents the large hospital’s price, which has buying power and financial leverage in the market, and which one represents my prices obtained from my suppliers. Yes, they have high over-head cost, but so does Home Depot and Lowe’s but they also have competitive prices, often lower than smaller retail stores. In parentheses is the percent increase from the lower price to the higher price.

Ketorolac 60mg IM injection (non-narcotic for pain): cost of med only = $4.28 vs $32 (648%)
Intramuscular injection of Medication: Cost to administer = $176 vs zero (bundled)
Soft Cervical Collar: $247 vs $6.39 (3,765%)
Cervical spine X-ray: $35 vs $534 (1,426%)
Head CT scan: $1,696 vs $240 (607%)

Tic-toc, tic-toc…. Give up? I’m sure you figured it out.

The bill at the healthcare facility was $3,937 for a minor, non-life threatening injury, which is the total of the higher costs above PLUS a level 4 facility fee of $1,252. And I should mention that this amount does NOT include the physician’s fee which was about $300.

The lower prices in all categories were my costs or charges to the patient. Assuming I saw a similar patient for neck pain in their home ($200 – $240) and treated it the same way and ordered all the same imaging tests, I could have rendered the same care for a patient expenditure of $530.67 total. That amount would have covered my costs, paid my imaging center bill and includes a $5 fee for my x-ray ordering and follow-up on the result, plus my fee of $240.

The point of this little exercise in not that we should have mandates or price caps on mark-ups, but to demonstrate the lack of transparency, and thus the lack of price honestly contained within our CPT billing protocols used in medical billing. High over-head costs alone do not explain these inflated prices, since the hospital’s costs for these supplies and treatments have to be much lower than the prices I get from my suppliers; and they run a very high volume of patients through their system. Their total charges were more than seven fold higher than the total patient responsibility if I would have rendered the care.

Now let’s consider the fact that there were three different insurance companies involved with this “claim” that shared financial responsibility. The health insurance company paid $1,558, leaving a balance of $2,379.

So even the “allowable” amount the health insurance company paid was almost 3 fold more than what the patient would have been charged by me.

Here is the truth. These CPT charges are set at many multiples higher than my real market costs simply because they can be, due the inflationary drivers that are inherent in this CPT billing protocols. Indeed, the entire way we finance healthcare (the way we buy, access and bill for healthcare) has created a false economy, the proceeds of which enrich those that run the game, and the house always wins. The cost of insurance premiums support the high CPT charges and leave room for “network discounts” down to the allowable rate, which is all the insurer cares about, because that guarantees profit. And likewise, the inflated CPT charges justify the high premiums and around and around it goes. To the extent that premium dollars are sufficient to sustain these artificially inflated charges, then the whole things keep purring right along.

So real prices (which should reflect actual costs) are not very important to insurers and they don’t care how inflated costs are. They care about the margins. And realize they have a captive market of employer-sponsored enrollees due to bias in our tax laws and further propelled by the employer mandate, plus the individual mandate via the ACA for everyone to obtain coverage. And don’t forget providers of care are forced to use a government mandated billing protocol which runs claims for virtually every encounter through these same health plan cartels – because of contract they have with both the provider of care and the policy subscriber.

I contend that insurers and health plans don’t want us to know the true costs of care (the real price), because when we find out the true costs we will realize how foolish it is to pay for routine and no-critical care via pre-paid health plans, and much cheaper it is to go outside of these billing protocols.