One of the things people like the most about my practice is that they know what things will cost. Anyone can simply go to my website and see the cost of visits, procedures, labs, and anything else that happens behind my doors. There is no bait and switch, no hidden fees, no secret charges. In other words, we are the exact opposite to the rest of the healthcare system, which is rife with hidden fees, secret charges, and financial booby traps ready to grab at the wallets of any unsuspecting victims.
Go to a typical primary care practice (like the one I was in for 18 years) and try to find out the cost of anything and you will only get shrugs and obfuscation. It’s not only that they don’t know what things cost, but the design of the system on which care is built goes out of its way to hide those costs. Why? Because it would be infuriating to people to see that their insurance pays 100% more than someone else’s plan and it would be equally mortifying to some physicians to realize just how bad their pay is compared to the docs down the hall.
Why does this happen? The answer is quite complicated, but basically there\’s a secret back door that many parties use to hide cost and so continue overcharging everyone.
A. Office Visits
Insurance companies make contracts with physician groups to pay a set of fees for a set of procedures (including office visits). These lists can be quite long and vary from group to group. Some docs are better negotiators than others and some are part of a larger consortium of docs who negotiate on behalf of the group. These negotiated fees are specific to a policy (usually an employer), and will vary widely, even within a single insurance company. So one patient with Blue Cross may have insurance reimburse the doctor $15 for a strep test, while others pay $2.
Complicating matters more is the fact that doctors don’t keep track of each of these fee schedules. The common practice is instead to bill the highest paid amount for each item ($15 for a strep test, for example), and then write off what isn’t paid (so they’d write off $13 for the insurance company that only pays $2 for the strep test). In my old practice we had hundreds of different fee schedules from different insurance plans. This is why billing staffs are so large for most offices: keeping track of all of this is a very tough job, and making sure that doctors put in all the right codes to get maximum payment is often even harder.
For an office visit there are often many codes. A well-baby check, for example, would result in a specific code for a wellness visit with an extra code if the child had any illnesses (level 3 visit, usually). Then if immunizations were given, there were three charges per vaccine: counseling (usually just giving a handout), administration fee, and the fee for the actual vaccine. So at a 2 or 4 month visit, a visit with 5 different vaccines given, there would be 16 or 17 different codes submitted for the visit. Each of these codes have a different dollar amount for each insurance plan.
So you see why asking the question of “how much does an office visit cost?” is a difficult one to answer. Now, if a person is self-pay (uninsured), they are charged the full fee-schedule price for each item (which is never what insurance companies pay). Yeah, that’s lousy.
B. Facility Fees
If you go to a private office, be it primary care or specialist, you have to pay the charges from the doctor as described above. If, however, you go to an institution, such as a teaching hospital, you will also have to pay a “facility fee.” Facility fees are exactly what they sound like: fees charged for the use of the facility (which are paid for by insurance companies), and often these charges are substantial. An office visit that is a bargain at $100 will have a $50 or $100 fee added (for example). These fees are not charged by private offices, although there is (at least) one exception.
You may have noticed that many specialists have their own surgical suite attached to their offices. Most of the GI doctors in our city have them, as do many of the surgical subspecialties. This is so they can collect the facility fee that would otherwise go to the hospital or surgical center. This is a substantial enough fee to justify the huge expense of building and maintaining a surgical suite of their own.
C. Drug Costs
Once you’ve dealt with my profession, you get to move on to another delightful part of healthcare: pharmacies and pharmaceuticals. These each have their own pitfalls waiting to snare the unsuspecting bank account.
I’ve actually discussed the shenanigans pharmacies enroll to get extra money. In short, they hugely vary in what they charge cheaply and what they charge a lot for. Go GoodRx.com and type in any drug and see the disparity of price — not only from pharmacy to pharmacy, but also the price from which GoodRxsomehow gives the discount. Amlodipine (Norvasc), a common medication for blood pressure is free at Publix, but costs $13 at Walmart and nearly $20 at CVS. So why not shop at Publix for all your drugs? Lipitor, the popular cholesterol drug, is $12 at Kroger, $21 at Walmart, and nearly $70 at Publix. Additionally, pharmacies often will charge an insured patient the copay amount for their drug…which makes sense, but what happens when the cash price is significantly less than the copay? I think you can guess.
Blatant gouging happens in the area of generic drugs. Once a haven from the high price of medications, generics are often nearly equal to the price of the brand drug. One example of many is Adderall XR, the long-acting version of the attention deficit drug, which has a cash price of nearly $200, the same as the brand drug. Even the discounted GoodRx price is still more than $100 at most pharmacies. Why? There are a number of reasons, but one of them is the consolidation of the generic market, with many generic companies being owned by the brand pharmaceutical companies (here is a list of the top generic companies; note how many are owned by or have an intimate relationship with a big brand pharma company).
Drug Rebates are the last issue I’ll hit on (because I care about my readers and would feel terrible about any burst aneurysms). Rebates are basically a legal form of kick-back from a pharmaceutical company to the insurance company or pharmacy benefit manager (PBM). Obviously, it is very beneficial for a drug to be listed on the company’s formulary — and even better if that drug is exclusive. So a drug is listed on the formulary, and instead of giving a significant discount to prices to compete for business (and reduce cost), the rebate (often around 30% of total sales) is sent back to the insurance company/PBM.
So what can be done about all of this nonsense? Simple awareness is a start, as angry consumers still have some power (albeit less than in the past). Also, passing laws that would require simplification medical billing, restricting or eliminating facility fees, and outlawing rebates would help some. Transparency in pricing may help as well — require pharmacies to make the prices of all of their drugs public, so customers could shop around.
But more than any of this, I think the fact that many companies are still able to see American healthcare as a “cash cow” is the most pernicious force that keeps costs hidden. Drug companies, pharmacy chains, hospital systems, and insurance companies are able to still make huge profits while the system crumbles under the weight of increased cost. There’s no competition for consumers by lowering cost because each of these parties has a secret back door to the vault that takes much less work than the usual means of making money.
Close the back door. It\’s letting the scoundrels in and letting the health of our country out.
4 thoughts on “The Secret Back Door”
Great piece, Rob. So true. What do you think of the ideas in this piece — https://www.linkedin.com/pulse/redefining-transparency-fair-trade-healthcare-help-us-dave-chase? If we turned this into a pledge to adhere to, do you think we could get many docs to sign on to adhere to those guidelines?
DPC docs would, but we already are making such a declaration by doing DPC. I don’t think the contracts within healthcare would allow price transparency, though. There are clauses within the contracts that prohibit talking about reimbursement. I think it would take more than unilateral physician action on this side; it would take a whole revamp of the system. Simply requiring pharmacies to post their prices and outlawing rebates would be a start.
I actually remember what medicine was like when the insurance companies paid for everything without question.
Out of curiosity I would ask "how much does this cost" and 100% of the time from the front desk to the doctor I was told "what do you care, you have insurance."
I replied I care a lot, and so should they, and if they didn’t understand why, wait till they see what’s going to happen BCS this party (of never questioning doctors) ain’t gonna last forever.
And eventually the push back happened, and doctors now have to justify a lot of what they do to ins cos.
But I will never forget those 7 little words that bugged me so much :"what do you care, you have insurance."
But the insurance companies really price gouge group plans. I called Costco for a med I used to take and the price was $12.00. The group plan was being charged $600.00 for the same thing! What a racquet.
This is a nice post shared by you.
A backdoor is a malware type that invalidates ordinary verification strategies to get to a framework. Thus, remote access is conceded to assets inside an application, for example, databases and document servers, enabling culprits to give framework orders and update malware remotely.