The knowledge gap in healthcare

The article above tells the story of a family taking their 3-year old to get an MRI for a new-onset illness. They did some cursory work to determine their out-of-pocket cost for this service. They thought they had a general idea of the cost beforehand. A few thousand dollars probably. Their bill ended up being $25,000. This was partly because they chose to go outside of their Obamacare-exchange insurance network.

Yes, this is expensive and yes, there are hidden fees at some facilities. That was the point of the article. But there is an underlying knowledge gap that led to the decisions on the part of the family, and even the facility, where the MRI was done. That was not the intent of the Vox article. Let me explain.

Extending bad insurance to more people isn’t the answer

First, Obamacare exchanges provide insurance for more of the population that what was available pre-ACA. The article correctly points out that it made insurance more affordable to the consumer. But did didn’t change the underlying cost of healthcare. But what is also missed by the consumer is that you can’t solve the healthcare crisis by extending bad insurance to more consumers. Not everyone takes these Obamacare exchange insurance plans because they reimburse so poorly. As in this example, Stanford Hospital didn’t accept the family’s plan because of low reimbursement from the insurance company. So the family was forced to pay the costs out of pocket. This leads to another example of a knowledge gap.

Don’t go out of network for standard procedures

While the family was forced to pay out of pocket because they went out of network, going out of network wasn’t necessary in the first place! The family thought that they should get the MRI at a hospital that specializes in that particular disease process. What they didn’t understand is that an MRI is an MRI is an MRI. No matter where you get it. An MRI is a commodity which means it’s essentially the same test no matter where it is performed. So best to get it in-network and avoid the costly out-of-network rate.

Sometimes, even the facility doesn’t know what they’re talking about

The next example of a knowledge gap was on the part of the facility. When the family called around asking about pricing, my guess is they “simply” asked about the cost of an MRI or more specifically, the cost of an MRI for a 3-year old. The distinction is critical and I would argue the facility didn’t appreciate this distinction when providing an estimate beforehand. You see, an MRI requires the patient to stay perfectly still for the better part of an hour. While some adults may be able to do this, clearly a 3-year old child can not. So part of the $25,000 bill from Stanford was for an anesthesiologist and placing the child under general anesthesia for the MRI. Placing a child under general anesthesia for an MRI may sound unusual but it is necessary for a study (MRI) of this nature.

Yes, the cost of healthcare is critically important. While checking pricing on healthcare services is easier than ever, it can’t completely fill the knowledge gap. Parents will continue to think they’re doing the right thing by getting insurance, even if, unbeknownst to them, few facilities will accept it due to poor reimbursement. Consumers will still think they have to go to the most well known institution for a test that can be done anywhere (and probably for less). And ultimately, the consumer’s knowledge gap is no match for knowledge gap exhibited by the facility for their own services!

Click here for the original blog post written by Dr. Kaplan for BuildMyBod.

The post The knowledge gap in healthcare is wider than I realized first appeared on Plastic Surgeon San Francisco | Pacific Heights Plastic Surgery.

Claims data and the negotiated rate

The difficulty in providing good price transparent data to consumers prior to receiving a service or procedure is due to complex variations in healthcare policies. Each consumer’s health insurance varies with the individual or employer’s policy.

The out of pocket maximum or deductible varies among policies. As does specialist copays or drug copays. And for that reason, it’s not always clear how much an individual will pay out of pocket for any given procedure. It depends on the negotiated rate between the provider or provider’s representative (read: whomever “owns” the provider or facility and negotiates on their behalf) and the insurance company.

But here’s the thing. The negotiated rate isn’t even that good a rate for the consumer. And it’s certainly not an adequate amount of money for the provider to then quibble over and appeal to the insurance company to get reimbursed. That’s right, the negotiated rate agreed upon by the provider and insurance company – the insurance company tries not to pay it!

From the consumer’s perspective, the negotiated rate isn’t the lowest rate they could pay for a service. Somewhere along the way, we’ve been led to believe that the negotiated rate is synonymous with the least expensive rate. A negotiated rate may be less than an out-of-network insurance rate but it’s far from the least expensive rate.

I know this because hospitals and outpatient facilities have “prompt pay” discounts or cash-pay prices that are often less than the negotiated rates. That’s why I argue for bundled pricing in this article here. Bundled rates are often the least expensive rate for the consumer. This facility, a member of the Free Market Medical Association, bundles the pricing for their spine care surgery center.

“the negotiated rate agreed upon by the provider and insurance company – the insurance company tries not to pay it!”

It’s beneficial to the doctor and facility to accept a bundled rate as well, because the consumer pays it directly to the provider with the unnecessary insurance middle man. Remember, the consumer with a high deductible health plan, which is greater than 50% of employer-provided health insurance plans now (Kaiser Family Foundation), is paying this money out of pocket regardless. So better to pay out a lesser amount towards a discounted bundled pricing package than the out-of-pocket negotiated rate. And whatever the consumer spends, whether it’s in network or out, can still apply to their deductible.

If the negotiated rate isn’t the best price, how are claims data helpful?

So we’ve pointed out the fallacy that is the negotiated rate. But in an effort to provide price transparency to consumers, companies attempt to determine the negotiated rate based on previous claims paid by insurance companies.

In other words, they look at the claims’ consumers make to insurance companies, how much the insurance company pays and how much is left to the consumer. This information is then made available to the consumer in the form of averages. The averages are based on claims data.

However, this does not provide actionable information for the consumer. In this example, the consumer can see what many people have paid in the past in various health plans. But it’s only a prediction of what they will pay when they need treatment.

Just as you don’t want a prediction of what you’ll pay for a house or car, knowing an average healthcare price isn’t actionable. Does it provide education? Sure. But when paying thousands of dollars out of pocket before a deductible is met, I’d prefer actionable data over education that leaves me wanting.

Simply put, we’re focusing on the wrong thing here. The negotiated rate isn’t the best price. So why bother averaging claims data to leave the consumer paying the more expensive negotiated rate?! Stop focusing on approximations and encourage providers to show the discounted bundled prices they already have in place for self-pay patients without insurance.

Click here for the original blog post written by Dr. Kaplan for BuildMyBod.

The post The fallacy of claims data and the negotiated rate first appeared on Plastic Surgeon San Francisco | Pacific Heights Plastic Surgery.