But there has been no easy way for consumers to shop for the best deal on a colonoscopy or blood test. A start-up financed by prominent venture capitalists and the Cleveland Clinic, Castlight Health, aims to change that by building a search engine for health care prices. Patients using Castlight could search for doctors that offer a service nearby and find out how much they will charge, depending on their insurance coverage....
Price transparency could significantly change the way health care is bought in the United States. The notion “seems ridiculously simple and obvious, and in any other industry, you would say, ‘Duh, we already have that.’ But in health care, it’s revolutionary,” said Alan M. Garber, a professor of medicine and the director of the center for health policy at Stanford, as well as an investor in Castlight.
Pricing transparency is better than pricing opacity. But you can't have a truly efficient and cost-effective health care system with price uniformity. The most revealing fact in the Times story is this:
But so far, prices have been very difficult to find because health insurance providers and doctors negotiate rates and often agree not to reveal those numbers for competitive reasons. The Cleveland Clinic, for example, has about a hundred different contracts with insurance carriers, each with a different rate for a given procedure.A hundred different contracts. In France, which spends less than half what the U.S. does per capita on health care while achieving better outcomes, there is essentially one contract, though payments are filtered through about 14 nonprofit insurers known as "sickness funds." T. R. Reid, in The Healing of America, describes how the system works:
On paper...France is a multipayer health care system, with fourteen different sickness funds and a cluster of supplemental plans paying doctors and providers. In practice, France acts like a sing-payer system, because the national Health Ministry essentially dictates what providers can charge for most types of treatment and what price will be paid for each prescription. Just as Aetna and UnitedHealth negotiate with doctors, hospitals, and drug companies to set fees in the United States, the French government negotiates, on behalf of the big sickness funds, with doctors, hospitals and drug companies. The difference is that the French negotiations are completely transparent. That why you see a highly detailed list of authorized fees in the waiting room when you go to the doctor in France (p. 54).
Because prices are uniform, the French can completely unify patient records on citizens' health insurance cards, known as the carte vitale. The result is, by U.S. standards, an administrative miracle:
But the greatest value of the carte vitale is its impact on the payment of medical bills. Each patient's green card knows which sickness fund and which private health insurance plan (mutuelle) [for supplemental insurance] covers that patient. When Dr. Bonnaud finishes a consultation and enters that day's treatment on the patient's card, he stretches out the ring finger on his left hand and hits the "transmit" key on his computer. With that single keystroke, all billing information--how much the patient owed, how much he paid the doctor as a co-pay, how much each of the insurance plans should pay back to the doctor and the patient--is transmitted to each of the relevant insurance plans. With that single keystroke, the billing process is finished. "I will be paid," Dr. Bonnaud told me, with total confidence, "in three days." The insurance funds are required to pay him that fast, with no quibbles--and they do.What's it like for a hospital to manage over a hundred separate insurance contracts? A reader of Andrew Sullivan's blog, who worked on a team implementing an automated billing system at a nonprofit U.S. hospital, describes the process of collecting the information needed to make the system work:
In addition to the certainty of the process and the resulting peace of mind, this national billing system creates major financial savings. No French doctor, hospital, or drugstore has to pay a "denial management" company to collect what is owed by the health insurance industry. The expensive layer of administrative workers and paper handlers found in every corner of American medicine doesn't exist in France. Dr. Bonnaud told me that he and his partners would never consider hiring a secretary or office manager. "Why would I pay somebody to do my billing?" the doctor said. "C'est automatique." Automatic payment also makes French hospitals, public and private, dramatically cheaper to run than any U.S. hospital. Although French hospitals generally have more doctors and nurses per patient than an American establishment, they have 67 percent fewer administrative personnel to keep track of paperwork and billing (pp. 58-59).
1. Pull up a list of upcoming appointments, along with the code for the expected procedure.
2. Find Patient A's record.
3. Locate the phone number for their insurance company (this is why they photo copy your insurance card - it's on there somewhere).
4. Call the insurance company and wander through their phone tree.
5. Sit on hold.
6. When the person on the other line answers, identify the patient and recite to them the code of the procedure.
7. Wait until the insurance company representative decides if they will pay.
8. If they agree to pay, the insurance company representative recites a different code back indicating their approval.
9. Write down the insurance company's code and hang up.
10. There's a system that actually records these phone calls so the hospital has additional proof that the insurance company agreed to pay. The employee now writes down yet another code from the voice recording system - the "receipt" for that call, essentially.
11. Input all of this into the hospital's record keeping system.
Lather, rinse, repeat.
Of course we know that just because the insurance company says they will pay, it doesn't mean they really will. There's a whole different team of people who have to pick it up on the back end in that case.
A reasonable person would think that this approval process is simple for the hospital and the insurance company to automate--there's no need to have two people sitting on the phone all day reading numbers to each other when computers can send numbers back and forth all day. The only problem is that the hospital would have to automate it with every insurance company, and the insurance companies don't have much of an incentive to bother with it.
From the insurer side of the equation, another Sullivan reader chimed in:
I work for a national insurance company and it's my job to pay hospitals and clinics for services performed. Now when I say pay, you should think of that in air-quotes. Assume it takes a week for the bill to be routed to the right person in the right department at my company. Once the bill reaches the right desk it heads back out. Because before we pay a bill we send it to a 3rd party company who reviews it to see how much we "really have to pay" for the services. This is because every state has different guidelines about what services should cost. This takes a week. Then the bill comes back to us, and if there are no issues with the hospital's records in our systems we pay the bill then.
However, if there are any issues it comes to me.
It's my job to call the hospital for updated tax forms (because it's not enough that we know their tax id, we have to have a government form showing the number). Then I send the records to another company who updates our database with the information. This takes another week, or longer if I have trouble getting a hold of the right person at the hospital.
Finally, we pay the bill. During this time the hospital has been waiting to get paid X number of dollars. Only instead we'll be paying them Y because that's what the state says is the minimum we have to pay.
So while your readers are being charged $50 for asprin; my company employs an entire department just to shuffle bills around while they decide what they will pay the hospital for that asprin.All that negotiation makes the notion of price transparency for patients a pipe dream in many cases, as the Times article points out:
Even for more basic services, pricing is not always cut-and-dried. The delivery of a baby, for example, includes the hospital stay and the obstetrician’s fees, but could also include fees for a pediatrician, an anesthesiologist and specialists if there are complications.
At this stage, Castlight works best for big companies that are self-insured and for outpatient doctor visits for which quality does not vary greatly.
The key factor in the high prices and Byzantine administrative procedures of the U.S. health care system is not so much the plurality of payers as the plurality of pricers. Japan, according to Reid, has over 3,500 health insurers but only one price schedule. In the U.S. the government, through Medicare, Medicaid, the VA and other programs does pay close to half of the health care fees and strongly influences pricing, but it's still far from establishing the total or near-total price control that governments of nearly every other wealthy country in the world exercise by one means or another. Perhaps a strong public option or Medicare buy-in option for people under 65 in the health care bill would have brought us toward a tipping point of price uniformity. Until we have the functional equivalent of a single pricer system (a.k.a. monopsony),our health care inheritance will be opacity, inefficiency, overpricing and inequity.
BTW, the whole Sullivan "View from your Sickbed" series, from which the testimonials above are taken, is well worth reading. A series index is here.