With higher healthcare costs than anywhere else in the world ($12,318 per person in 2021), it’s no surprise that medical expenses are the leading cause of bankruptcy in the US; accounting for 66.5% of all bankruptcies. In 2019, 65M Americans avoided treatment of a healthcare issue due to costs, and $90B was borrowed to pay for healthcare. This year, a national survey showed that 45% of participants believed they would never be able to pay off their medical debt. Whilst consumers are struggling, headlines of UnitedHealth Group a payer and provider, reporting record revenue do not go unnoticed ($359.98B in 2023). In this article, I share my personal experience navigating the US healthcare system, as a patient with the insights of a physician. I explore the challenges that US consumers face with their medical bills, highlight health system and insurer perspectives, suggest ways to reinvent this process and showcase innovative companies driving change in this space.
Earlier this year, I moved from London to San Francisco. I was pregnant at the time, and attended a 16-week prenatal appointment with an in-network midwife. After a routine assessment, the midwife placed an ultrasound probe on my abdomen, measured the head circumference of the fetus and recorded it in her notes. Two weeks later I received the bill, $530 for a transvaginal ultrasound scan. I contacted the health system billing department, explained that the appointment was for a provider consultation and that an arbitrary transabdominal ultrasound scan was performed – that was neither medically necessary nor complete. I also shared the billing code for a routine prenatal provider consultation that my insurer had approved. Days later I received a response from the billing department advising that a physician had reviewed my case and confirmed that the bill was correct.
In researching the underlying forces, I discovered that health systems in the US make very little profit from provider consultations and that imaging generates higher margins. I can only assume that an imaging billing code was used by the health system for this reason, and that the scan was carried out by the midwife to generate an imaging code. Let me try a different health system I thought. I transferred my care to another hospital, renowned for its world class experts and quality of care. I booked a routine 20-week fetal anomaly scan. Days later I received a bill for ‘detailed’ fetal ultrasound for $1,203, double the cost of a standard ultrasound.
Reflecting on my experience I could not help but think that consumers are being taken advantage of by health systems who overbill, up-code complexity, and carry out medically unnecessary tests to keep their profit margins healthy. It seems I am not the only one. Connor Hailey, CEO of nomedicaldebt.com recounts a similar story that led him to start the company, “I was charged $700 by a major hospital for a 5-minute phone consultation with my Primary Care Provider. It was only after receiving the bill I realized they coded for a video visit which is typically reimbursed at a 3-5x higher rate.” Unlike in my case, when he asked for a review, the billing department backed down quickly. “They wiped the bill to $0. It was a major violation.”
Nomedicaldebt.com helps self-funded employers, and their employees, lower their medical spend. Their software uses AI to find errors and up-coding in bills, then generates a dispute email that individuals can send to their provider. Connor says, this type of behavior not only affects the uninsured or under-insured. “People often think ‘well, my employer/premiums cover this so I’m not actually paying’, but it turns out we are. Our premiums go up every year by 5-7% in no small part because of these billing practices.” For readers who would like a review of their own medical bills, you can go to nomedicaldebt.com/dispute.
Along with health systems, insurers are no strangers to medical bill disputes. Between 2 to 49% of medical claims are denied by insurers. Whilst there is a case for protecting themselves against paying out for unnecessary tests and investigations, insurers have come under scrutiny for using AI inappropriately. Cigna was one such insurer cast into the limelight for automatically rejecting claims based on medical grounds without opening the patient record. According to the investigation, their algorithm identified mismatches between diagnoses and acceptable tests or procedures for them. Cigna doctors then signed off on the denials in batches, spending around 1.2 seconds on each case. UnitedHealth also came under the spotlight with reports that it pressured medical staff to cease payment for Medicare patients on a predicted date, denying them coverage for further rehabilitation care they required.
Prior-authorization goes some way to protecting both consumers and insurers from surprise bills, however, those who require prior-authorization are three times more likely to report being unable to receive provider recommended care or treatment, compared to those who do not require prior-authorization; which in turn leads to higher out-of-pocket costs. The same consumers are also three times more likely to report significant delays in receiving medical care or treatment. Physicians describe workflow inefficiencies and administrative burdens related to prior-authorization submissions and subsequent appeals for claim denials.
Emergency bills are one of the greatest contributors to consumer medical expenses. This is in part due to hospitals following ACEP guidelines for emergency room billing, which allows hospital coders to code based on possible interventions, not interventions that were actually performed. Medications are also a leading contributor to consumer health costs. Americans spend $1,200 a year on average for prescription drugs, more than any other country. The 340B Program enables eligible hospitals (that treat a minimum percentage of low-income Medicare and Medicaid patients), to buy outpatient drugs from manufacturers at discounted prices. However, despite purchasing at a discount, many hospitals still charge excessive amounts for the same medications when providing them to patients. Mark Cuban’s Cost Plus Drugs Company has been democratizing access to lower priced drugs by providing lower priced generic drugs directly to consumers.
From a legislation perspective, the Centers for Medicare & Medicaid Services (CMS) Hospital Price Transparency Rule (2021) mandated that all hospitals provide clear, accessible pricing information about their services, online. Last year, the CMS Health Plan Price Transparency also mandated that payers publish rates for in-network providers and allowed amounts for out-of-network providers. The Lower Costs, More Transparency Act was passed this year. It requires hospitals, payers, labs, imaging providers and ambulatory surgical centers to publicly list their prices, and that Pharmacy Benefit Managers disclose negotiated drug rebates and discounts on medications. Nevertheless, it does not mandate that lower drug prices are passed onto patients. Finally, the No Surprises Act (2022) protects consumers from surprise emergency bills, and non-emergency care from an out-of-network provider at an in-network hospital.
Financial losses due to insurance fraud are estimated to be around $300B each year. Medicare fraud alone costs the federal government $68.7B annually. Earlier this year, Cigna paid $172M to resolve allegations that it violated the False Claims Act by submitting inaccurate patient risk data for Medicare Advantage patients, to receive higher payments from the CMS. Yale New Haven Health and Northeast Medical Group paid $560K to settle allegations they submitted false Medicare claims for services billed by physicians that should have been billed by other providers at lower rate. St. Elizabeth’s Hospital of the Hospital Sisters Health System, paid $12.5M to resolve allegations of billing errors that may have led to overpayment for a higher level of urgent care services than those provided. Sutter Health also agreed to pay $13M to settle allegations that it billed government health programs for lab tests that were performed by others.
The key question arises, how can we increase price transparency for consumers and employers, whilst keeping providers afloat and collaborating with health systems and insurers? What is the role of startups and venture capitalists? Consumer marketplaces such as Turquoise Health are gathering and displaying price comparisons for certain providers, payers and procedures, to enable customers to make more informed decisions. Employers are starting to leverage price transparency data, requiring hospitals and insurers to share their negotiated rates at the expense of wages and benefits. Without collaboration however, we face a situation where each stakeholder deploys its own AI: the patient AI for claim disputes, the health system AI for optimized coding and the insurer AI for claim denials. Should we be bystanders in the war of billing AIs? Can we rely on GPT-4 agents to ensure a fair deal?
Reducing rates of medical expense related bankruptcy for patients starts with an alignment of incentives with providers and payers. For consumers, this means renewal premiums based on bills that more accurately reflect care that was delivered, rather than possible procedures, and the issuance of billing codes that are validated on medical complexity and condition severity. Tighter legislation is needed for passing on negotiated drug prices to consumers and payers, or as in the UK, drug prices need to be set at federal level. Deeper scrutiny and greater penalties are needed to combat fraudulent billing practices.
For hospitals, particularly rural hospitals facing imminent risk of closure, plugging financial losses is vital. Priced, value-based, government contracts with these hospitals to provide specified care to a certain number of people or health plans could secure consistent revenue. Such care contracts could involve bundling of services, rather than a variable fee for each service. For example, standard reimbursement packages for provision of routine prenatal care. Furthermore, greater standardization of coding across hospitals and health systems, and consistent use of standardized national codes through automated billing could lead to more predictable finances for providers. AI tools such as Phare Health can help to streamline the coding workflow, ensuring that providers are reimbursed fairly for the care they provide, and have higher quality data to make resourcing decisions.
Care delivery at the time of need would not be possible without insurance. Insurers need to be able to trust the billing codes they receive from hospitals and health systems. Again, increased standardization and reduced variability in billing practices between providers would help to build this trust. Insurers require assurance that diagnosis claims match with electronic health record data which calls for a higher level of data sharing. More reliable algorithms are needed to determine eligibility for claims and ensure compliance with approved indications. RISA is one such company using an AI-driven multi-agent system to streamline prior authorization and eligibility checks. The company aims to improve claim processing times, reduce claim denials and enable more timely delivery of care.
Current billing practices do not adequately meet the needs of consumers, providers or payers. While there is no magic wand, reinventing billing processes in the US will require measures that strengthen consumer protection, and continued policy change towards fairer drug pricing and increased price transparency of provider service costs. Increased data sharing, standardization of coding practices and automation of billing will likely be the key drivers of trust for payers. These efforts will not be without challenge. However, I am optimistic that we will witness an acceleration of innovation in this space, and I for one will be watching closely.
Photo: claudenakagawa, Getty Images
