Saturday, November 28, 2009

Discovering medical prices and the problem with paying cash

Walecia Conrad has written a pretty good summary of the problems of price discovery in medical care services. She mentions several approaches, including online services, calling physician offices, and checking payor (insurance) sites.

None, of course, are satisfactory. I hope she'll dig a bit deeper into price discovery. There are two places she could learn from. One is the problem with discovering how much a medication costs in different forms through different vendors with different coverage plans. Good luck on that one.

The other topic is more amenable to digging. She almost got into it, but perhaps had to set it aside for another day. Ms. Conrad mentions that cash fees for medical services are usually much higher than the negotiated fees insurance companies provide (this is very relevant to health care reform of course).

What she missed is why.

My own recollection, for I no longer deal with this issues, is that payor (insurance) reimbursement is based on a fraction "list price". So imagine that Blue Scythe pays 50% of list price. If costs+margin means a services costs $50 physician must then set "list price" to $100 so they get $50 from Blue Scythe. The "list price" must be validated as a customary charge, so it must show up on bills -- including bills for people who pay cash.

This means people paying cash are providing a huge margin, but this is an unwanted embarrassment for most practices. In my day we wanted to charge people paying cash less, not more.

I think there may be ways around this now. My knowledge is at least fifteen years old! Still, this an area that deserves some journalistic effort.

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