About two and a half years ago, my wife was experiencing severe reflux and pain. This had been occurring off and on for several years, so we felt it was time to have it checked out.
We found a gastroenterologist and scheduled an endoscopy at an outpatient facility. We had insurance, but it’s sometimes less expensive to pay the cash rate for services rather than the “negotiated” rate determined by your insurance plan. This is especially true for elective, well-defined services or procedures that have a lower likelihood of unexpected events, and therefore, unexpected charges. We wanted to pay out of pocket.
Problem was, it was almost impossible to determine the cash rate ahead of time. The doctor’s office staff was more familiar with insurance rates than cash rates, and there’s no Amazon-equivalent website to check accurate, up to date healthcare costs.
We spent three days trying to figure out how much the price would be, waiting for endless return phone calls that never came. No one, it seemed, had any idea how much the procedure, the anesthesiologist and the endoscopy center would charge. It was maddening.
And yet millions of people across the country have experiences like this every day, both for elective procedures, like the one my wife had, and urgent medical procedures.
It’s no shock that prices are notoriously difficult to come by in healthcare. That was supposed to change on January 1, 2021 when the Centers for Medicare and Medicaid Services (CMS) price transparency law went into effect. This first of several Trump-era price transparency laws required hospitals to provide cash and negotiated rates on their website.
Additional regulations mandated that by Jan. 1, 2022, insurance companies must also offer pricing information for negotiated rates with doctors, hospitals and surgery centers. However, the Biden Administration delayed enforcement of this ruling by six months, so health insurance companies now have until July 1 of 2022 to publish these much anticipated rates.
By Jan. 1, 2023, they will have offer an online price estimator that provides personalized, out-of-pocket cost estimates for 500 pre-determined common services, like colonoscopies, hysterectomies and knee replacements.
Although insurance companies argue that showing pricing will paradoxically increase costs, I believe that these laws taken together are a much-needed start to helping millions of Americans manage their healthcare costs. Nearly 83 percent of consumers report wanting to see their out-of-pocket costs before getting healthcare services. But most people don’t know that the law even exists. According to one study by KFF Health, 69 percent of adults said they were unsure whether hospitals had to disclose the prices of procedures and treatments, and 22 percent said hospitals weren’t required to disclose this information.
There’s a reason for this uncertainty. As a July report from PatientRightsAdvocate.org noted, only about 6 percent of hospitals have complied with the hospital price transparency rule.
This is hardly surprising; there’s little incentive to adhere to the rules. The penalty for non-compliance is only $300 per day per hospital, or $109,500 per year—peanuts for an institution earning billions annually. Higher penalties are on the way. CMS under the Biden Administration is raising the maximum fine to $2 million per year. At this time, CMS has delivered warning letters to non-compliant hospitals, but no penalties have been issued.
While hospitals are slow to comply with the price transparency rules, full compliance will eventually mean hospitals provide “machine readable files” with thousands of lines of pricing data. In essence, a machine-readable file, as the law mandates, is a spreadsheet with various prices for services, including tests and procedures, in-patient and out-patient costs and every medication and supply cost. The prices must include the cash rate as well as the negotiated rate that each insurer has with the doctor, hospital or surgery center providing the service.
While in theory it sounds like a good idea, the reality is that all of these procedures and prices prove daunting to the consumer. The sheer volume of medical jargon and abbreviations is overwhelming. Additionally, these spreadsheets show pricing for individual procedures but not necessarily the cost of the entire episode of care. For example, they may show the hospital or facility fee but not the professional fee, or cost for the physician to perform the procedure. Clearly, an estimate that includes only one, but not both, of these fees is unhelpful to the consumer.
It’s like shopping for a car and asking the salesperson how much it costs. Instead of giving you the price of the Cadillac, they tell you the price of the muffler, piston and engine, leaving it to you, the consumer, to determine the actual cost of the whole vehicle.
The new price transparency rules do encourage the use of price estimators to help make sense of all of these numbers. But they typically only show specific procedures, not the total cost of care, similar to the limitations found with the machine-readable files. And studies have found that people don’t use price estimators because they’re so cumbersome.
However, with the large troves of pricing data forthcoming from hospitals, and eventually the insurance companies in 2022, price estimators can succeed by providing the consumer with a complete picture of their healthcare expenses prior to receiving care.
Rather than showing the cost of an isolated procedure from the hospital, a well-designed price estimator can “link” the professional, facility and other ancillary fees. So, for example, in the case of an upper endoscopy, like my wife had, price estimators can aggregate not only the professional fee, anesthesia fee, and facility fee from the hospital but also the cost of processing a biopsy, if one was done, as well as the pathologist’s reading of the biopsy.
As for my wife, after multiple phone calls to the doctor and anesthesiologist’s office, as well as the endoscopy center, we were able to determine the cash rates up front. Had we used our insurance, the total bill would have been $6900; our out-of-pocket responsibility would have been $3700. But since we paid cash up front, the total was only $2600, $1100 less.
My wife was diagnosed with nonspecific gastritis. Not a particularly helpful diagnosis, but at least it ruled out other terminal diseases. Still, it was unnecessarily frustrating. If a physician and expert in healthcare financing, has difficulty determining all of the potential costs, then a consumer will have a similar or worse experience. That’s why the consumer will come to rely on intuitive price estimators that have search functionality, insurance verification and the ability to calculate the total estimated out-of-pocket expense in real time.
Armed with 21st century technical innovations and government enforcement, the consumer will no longer have to settle for part of the story. They will have more information to make better financial decisions for themselves and their loved ones. But for price estimators to fulfill their potential, hospitals and insurers must release all of their negotiated rates.
Photo: adventtr, Getty Images
