Often such statistics do not stay within the doctor’s office. On our side of the table we do some procedure with multiple definitions and generate some CPT codes (eg lap cholycystectomy is 47562, add bile duct examination is 47564, and if you just do cholangiography it is 47563). Usually, we pair that with the ICD-10 code that specifies your specific disease (K80 for gallstones, K81 for cholecystitis, etc.). Then we dump those codes into the computer.
Can any of this change? Sure enough, we find a lot of moving neovasculature around the gallbladder, congratulations you may have cancer which means this surgery is now a different CPT code and a different ICD-10 set. Maybe only one does – we find out that the gallbladder does not have an obstructing stone, but it has a transmural inflammation and you get a new ICD-10 code. If we find that you actually have multiple obstructing stones and we need to go deeper into the biliary tree, those are different CPTs.
Regardless, we do what is medically indicated, we write the codes used.
At this point, unless your doctor keeps full charges in-house, those are handled by the processor. Typically, claims from multiple providers are handled by a single processor who assigns claims to insurance companies to their specifications. Usually this involves a lot of things – when the surgery is done (with more complicated rules, more accessible hospitals, for example, can charge more for the same surgery because the government wants to keep them solvent lest more people lose their emergency room or OR), what it does (eg the rates cover high complication rates and insurance doesn’t encourage surgeons to make all their complex patients drive hours and hours). Then we come to the big purchase – buyers. In Medicare, there are some committees that don’t seem to know much about actual medical practice but set the basic reimbursements for these CPT/ICD-10 combos. Those are then prepared to account for county expenses, equity concerns, and God only knows what else. This is usually set near the break point for the national average. Medicaid, in general, uses those rates as a baseline and cuts them (which is why many doctors won’t take new Medicaid patients, reimbursement rates often leave people out of pocket). Private insurers add another layer of negotiation where they use their monopsony power to extract lower rates while, allegedly, guaranteeing capacity to doctors. The range of these interactions can be very broad – insurers can have variables of quality of care (eg how many people come back during surgery), timeliness of care, and so on.
Ok, so someone has set a rate and we just think get the average bog lap chole worth?
Of course not.
See if that is what is agreed upon, in theory, these medical services will be reimbursed. The real costs involved non-negligible risk of non-payment (eg insurance denial and the patient can’t or won’t pay), delayed payments (and having to use lines of credit to pay salary when a major insurer has IT problems and doesn’t pay for two weeks is very expensive), and variable legal and compliance costs. You may also be subject to clawbacks, incomplete payments, and other payment uncertainties.
Okay, but let’s imagine a single CPT/ICD-10 setup, a pre-negotiated amount paid on time with no additional processing fees, and everything is cool there. Do we have a price yet?
Of course not.
Note that all of the above is for the surgeon’s fees only – i.e. the fees paid for the use of his hands. The OR itself? That’s a whole different bucket of money with its own set of payments and negotiations. Institutional fees make the cost of labor look straight forward and simple.
But are we done now? OK?
Of course not.
See what your surgeon’s professional fees were. You also need an anesthetist (and/or his/her agents). And guess what, yes it’s a whole different bucket of money and price negotiation.
But are we done now?
Well, no. There may be different discussions about lab fees (eg where a CBC is billed), tissue pathology, any post-operative hospital services, and actual medicine (which is billed completely differently if it’s an inpatient or outpatient) to name a few of the more common options.
There is no “price” for surgery. There are, potentially, a dozen different prices that can be combined in a multitude of ways with some buckets covered by one payer and other parts covered by another (and things get really interesting when you have overlapping payers).
But aren’t there any surgeries that only have list prices? Yes. And they have a very limited set of procedures for everything handled in-house – which is a very illegal setup to set up de novo post Obamacare.
Why is everyone having all these weird conversations. Why not just pay the surgeon for everything and then pay the hospital, anesthetist, pathologist, etc. Because that is an invitation for your surgeon to be criminally charged. It is a federal crime to undercharge or underpay when it comes to government funds (and in many states, private insurance funds). We need to raise the Pencil not only in price, but to make that price visible to regulators. If the hospital wants to give me cheap time OR time because I have a reliable volume of patients, keep the OR clean (which reduces the shift time enough to fit another case in the day), and don’t create the risk of inefficiency at a constant rate… the hospital is in danger of being marked down for promotion. If I negotiate a lower price with a lab for my patients’ tests, it is considered prima facie evidence to get the money back and I have a good burden of proof that I am not receiving a hidden payment from the lab.
Separate, disjointed, charging by legal negotiation is readable. Applies to courts, regulators, and malpractice insurers.
But does all this greatness change the effectiveness of care delivery?
Not that I see easily. I have personal experience with IHS, TriCare, Kaiser, VA, and for-profit, nonprofit, and prison care; A full Beveridge like IHS usually doesn’t work well.
So where do currency prices come from? Other than money-only practices, those are extreme myths that someone took themselves out of their nether regions in a potentially futile attempt to BS their insurance negotiation partner.
Why is all this so complicated:
1. Principle agent. The patient has a very different incentive structure than the collective payer (insurance or government) and American health care undervalues the patient compared to other approaches. People with very specific control feel that a small part of the price pain has almost zero incentive to save for anything big.
2. Taxes. The original sin of American health care was making insurance, rather than the medical procedures themselves, tax deductible. This creates strong incentives for people to bundle non-health care into insurance premiums in a way that is hard to explain (eg health insurance offering a discount on gym memberships, allowing people who already have gym memberships to pay pre-tax, or simply selecting healthy patients).
3. People are afraid of being exploited by doctors. Most people, even some doctors, have a hard time knowing if their doctor is cheating on them. So they turn to something more powerful to control the doctors. But, not knowing what is really important, these people find it very difficult to navigate the markets. Health care is better off with about 100 deaths and twice the cost than with 1 death that could be avoided by regulation.
4. The complete disconnect between what people are getting for prices (eg my tape costs easily 10 times more than department store specials, my in-house EMR processor is an order of magnitude more expensive than MSWord let alone Emacs or the like) and how medical costs work.
5. Failure to appreciate the cost of holding inventory. We have people ready incase a simple IR process fills the walls of the vessel. We have many people to help if your infusion leads to anaphylaxis. Even if your blood transfusion goes to TRALI. Just opening the doors often means we need to have a few doctors and their support staff available at all times. I’ve seen a simple gallbladder turn into a massive blood transfusion through staging, SICU, and all operations. I’ve seen STD treatment turn into such a dangerous emergency that the Derm came in for a century.
None of this goes when we post prices. And many people will be angry – someone will criticize us for different prices for different patients – everyone deserves the same care at the same cost. Someone will criticize us for not including enough different values - people should be rewarded for making good decisions.
Over time, health care will become more expensive. I expect it will eventually be part of the mortgage payments (you know you live in your body 24/7). But there is an evergreen dream that … if only … we could lower the prices.
You can’t. You can, perhaps, make them go up a little bit, usually because of the strong trade the Americans will not stop. And almost every important intervention that really moves the price needle … is either selective (eg health departments have people who are in very good health because they are more selective about drugs, promiscuous behavior, etc.) or they are completely reimbursed by the patient who will later die. And the few things that have to be done (eg HPV vaccination, Hep C treatment) … it becomes another feeling of how much you have to pay.
Health care is not a normal market. We have to stop pretending it can be one.
