So what’s the real usual, customary and reasonable price of care?

The Ingenix mess apparently won’t go away. Sen. Jay Rockefeller is now going after the health plans for using Ingenix’ database. Ingenix and some of its customer health plans have already settled with several states, but apparently it’s not enough. Now Rockefeller is after them. And the words are tough. “Fraud”, for one.

Now, health plans don’t exactly have much credibility. And when the politicos find out that Ingenix a) sells tools to help health plans cram down the amount they pay providers, b) sells tools to providers to extract more money from health plans, and c) is owned by the biggest (and not too long ago) baddest insurer on the block, this may get a little more interesting. After all, it’s kind of an arms dealer arming both sides.

But there is one thing that troubles me. I’m quite prepared to believe that Ingenix’s view about what was UCR was different from the local medical society’s view of what was UCR, and therefore that the plans were “under-paying” the consumers and the doctors who serve them.

But let’s remember what Usual, customary and reasonable fees are.

They’re what providers have made up over the years. It’s not as if there’s a market price for provider fees. Everyone, from my buds at Cato to the single payer crowd agree that there’s no real market for health care. After all we know that there’s huge differences in prices charged to those who are in a PPO versus the uninsured by the same providers. And price discrimination is a symptom of a failed market. And even when they’re based off Medicare’s RBRVS pricing, we know that those fees are not based in reality, but rather in politics.

So the UCR prices, which Ingenix was or wasn’t paying correctly, are just made up. So tell me why Ingenix’s made up prices were different from the made-up prices of the providers?

And for that matter why aren’t we going after doctors and hospitals that used Ingenix products to increase the amount they got paid. Weren’t they committing “fraud” against health plans and cosumers too?

And then tell me why we use this nutty system of paying doctors anyway. Oh, I remember now…

Coda: While I don’t say very much very nice about health plans, I am very impressed with Kaiser Permanente’s new campaign on disparities in health care based on race. Uninsurance in particular is very different among different races, and it’s great that KP is putting a face on it.

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  1. This is a capitalistic society and everyone is entailed to charge what ever one including non contracted health care providers to charge whatever ts desired for the good and services that are provided, However Health care is necessary to protect the well being of society and should be provided by all civilized countries.

    The best plan would to create two entities a private access and governmental universal access paid for from a tax funded as has always been in place under either Medicare, Nidicaid, Medical, and recently affordable health care

    The usual and customary plans would be solely for the private sector and opened to employers and insurers who would offer a PPO plan based on a Usual Customary and Reasonable rate.The so called Reasonable rate to be fair would need to be provided by AMA or Specialty groups, who have by a majority vote to agree for the rate determined to be reasonable for every CPT Code in the AMA registry,
    To date all rates Published by the AMA are based solely in accordance to CMS or medicare rates and not any reasonable rates established by the providers or their professional organizations
    Therefore, I am informed and believe that until THE PRIVATE create through its professional organizations or the AMA a separate Reasonable rate schedule for all reimbursable (Medically necessary), CPT codes
    There will continue to be abuse by both the insurance companies and the providers.

    I would like to start a campaign to among the private sector of Health care providers to implement a program funded by all the AMA and or all professional health care organizations to create a reasonable rate schedule for all the reimbursable ( Medically necessity), CPT code.
    This project I believe if implemented would modernize our present system and control health cost for all Americans

    All interested parties can email me at TCCLOUDIII@YAHOO>COM

  2. That’s what irritates me the most. You could get radically different prices on medical procedures from city to city and state to site. The Healthcarebluebook helps give you the median price on a particular procedure and tells you where you can find the type of service for the cheapest. Insurance companies and hospital corporations set their own prices so its’ up to the individual to do their research.


  4. Full-blown competition in the healthcare field will only occur if service provider contracts between the doctors/hospitals and insurance companies are eliminated. These contracts limit access, quality, competition and raise prices. Also these contracts make it harder for new insurance providers to enter a state since these contracts are used to build the insurance companies’ service provider network. A new insurance company would lack the network and find it difficult to recruit local providers who are already fully booked by established insurance carriers. The key is to eliminate the service provider contracts and require the doctors and hospitals to accept patients with any valid state licensed insurance until their full patient load is reached.
    It is only possible to eliminate service contracts in a Medical PSC environment since there has to be some mechanism for negotiating prices. The Medical PSC would set fair pricing based on actual costs plus a reasonable mark-up which all state insurance carriers would pay for the exact same medical provider services. Since all insurance carriers would pay the same, the Medical PSC would require that all doctors/hospitals accept all valid state licensed health insurance without prejudice. Anyone could walk into any doctor’s office or public hospital accepting patients in the state and receive medical attention and pay a fair price for service. (The insurer may still require an authorization to see a specialist, but the choice of specialist would not be limited.) This would equally apply to any newly created non-profit co-op plan so that it would not be cost effective for this plan to invest in its own medical facilities.
    In the Medical PSC environment the insurance carriers are all the same except for the uniqueness of the policies they sell. The carriers only collect premiums and pay-out claims according to the terms of the individual policies. Their former network is no longer a selling point. Their patients no longer get preferential treatment if the carrier paid the highest. The common denominator becomes competition over which carrier can sell the best coverage at the cheapest price to out sell the others. Then the more carriers selling insurance in the state, the more competition you have. The level of healthcare access and quality available to the customers of these insurance carriers would be equal. Then everyone in the state could purchase the best healthcare they choose to afford. This is the basic healthcare operating environment which should be operational in each state now. A few cents can be added to the state tax tables to cover the cost of the Medical PSC. Spread over the millions of state tax returns makes the cost practically negligible. (Other states without a state income tax will have to decide how to cover these costs, but the best way is via the state income tax since all payers should have insurance and share these costs.)
    Common sense, which seems to be lacking in Washington, should tell you that the Medical PSC solution would increase access, quality, competition and policy coverage while lowering patient costs. These benefits are independent of any law changes in Washington. This idea should be echoed across the nation. Any “appropriate” law changes in Washington to glean money to subsidize the disadvantaged is an aside to creating the Medical PSC environment. If we had created the Medical PSC environment earlier, we probably would not have the healthcare crisis we have now. Like I said, if you do not eliminate the service contracts between the doctors/hospitals and the insurance carriers, you are subsidizing the problem by feeding it more money to absorb. A real solution requires fundamental change in the mechanics of the system. The Medical PSC is the missing piece of the healthcare puzzle.

  5. Its time to dust off an old tried and true solution to solve a problem like healthcare that the free market cannot solve. In the past when competition was not sufficient to control prices on big ticket items like the price of electricity, price of land-line phone service, and the price of natural gas service, our state governments instituted public service commissions (PSCs) to arbitrate fair pricing. We need a PSC for healthcare to set medical charge code prices billed to insurance.

  6. If data is power—and make no mistake, data IS power– then these data warehouses, like Ingenix, are very powerful. Although problematic, I completely understand UHC’s interest in purchasing Ingenix. In fact, they are not the only data warehouse owned by a health plan.
    The attraction is understandable. Traditionally, health plans have succeeded based on the efficiency of the claims processing and strengths of their provider contracts. Using data to drive business decisions and demonstrate value, particularly of care management programs, is a relatively new competency. Health plans with their finger on the pulse of the industry have needed to build out their data analytic capabilities quickly. Buying companies with proven data competencies makes sense.
    The problem starts when these data warehouses start to resell their data. It is hard to build firewalls tall enough and strong enough to avoid what happened with Ingenix. The value of the data in the marketplace is compromised when the ultimate owner has conflicting interests. Pushing these reimbursement (rate-setting) databases out to independent, academic organizations may avoid the conflict of interest issue, but, as Matthew suggests, it may do little to improve the accuracy of the underlying flawed data.

  7. I can only guess that most of the commentators are not practicing physicians. Practically speaking, UCR price is a non-issue. As a primary pare physician (with an MBA) in a two doctor practice I can tell you that “charges” in no way reflect “payment”. In the contracts with payers, the actual reimbursement is generally a percentage of Medicare. Commercial insurers usually, but not always, pay a small amount more—let’s say 110% of Medicare rates. This rate is “take it or leave it”. I can assure you the extra $5 I receive for an average office visit does not offset the hassles of dealing with commercial insurers. My staff and I waste an enormous waste of my time on things like prior authorizations— decided by a clerk using proprietary, often nonsensical algorithms—for referrals, imaging and medication.
    UCR charges are determined by payers—period. There are virtually no market forces in this case. Federal antitrust law and legislative complicity (see: http://www.healthcarefinancenews.com/news/humana-buy-unitedhealths-medicare-advantage-business) has permitted Big Insurance to become an unrestrained business, and we physicians have become a commodity that no longer has control of our destiny or our patient’s health.

  8. > Thanks for the Starr book referral.
    It is a great book — a little dry, Starr’s an academic.
    > btw, that “noble reasons” bit was not me.
    Oh, sorry.

  9. Tom Leith,
    Thanks for the Starr book referral. A quick blog search returns a bunch of hits. When I saw Maggie Mahar’s mention of the book there was no need to look further. I will be ordering it.
    Thanks, too, for your time and patience.
    (btw, that “noble reasons” bit was not me.)

  10. John Ballard writes:
    > they don’t give it away for noble reasons
    You’re changing the subject.
    To even begin to discuss all this would be far too much for me to write here. I suggest Paul Starr’s book “The Social Transformation of American Medicine”. You can get it for less than $10 including shipping through ABEBooks.com.
    > The system in place IS. NOT. WORKING.
    No it isn’t, not anymore. The old social bargain is collapsing and we’re in the throes of working out a new one. It is not easy:
    “There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new.” — Niccolo Machiavelli, The Prince, 1513
    > Sorry to have taken your valuable time.
    You haven’t taken it, I have given it.

  11. Clearly, spending too many years in a plain old business has left me with an understanding of accounting way too primitive for this forum.
    Physicians and hospitals are rational monopolists with charity in their hearts. Something wrong with that image.
    One of my neighbors with no insurance tell me that the few times he has sought medical attention he negotiated a favorable price up front by paying cash, thus avoiding the “usual and customary charges” and the price of insurance at the same.
    Four men I know are eligible for VA benefits and are very satisfied with their “government insurance.” And the price? Don’t get me started. I’m a veteran, too, but can’t pass the means test. I’d like to know how many eligible veterans choose Medicare instead when they become eligible.
    The system in place IS. NOT. WORKING. And the costs are rising so much and so fast that my children will not be able to bear them.
    I’m not here with any agenda. I’m just a concerned old guy blogging. And what I’m encountering is agenda-driven interests approaching the reform of health care with barbs and armor, defending the status quo.
    Sorry to have taken your valuable time.

  12. “Then the dirty dogs turn `round and give away free care just like what you paid good money for.”
    Tom, they don’t give it away for noble reasons, or willingly because of charitable inclinations – they do it by force of law and then use the courts/collection agencies to collect it. The minimum (charitable) consideration for someone uninsured would be to at least charge them what the hospital has already determined to be “usual, customary and reasonable” – but no, these “dirty dogs” up charge the most vulnerable 3-4 times above standard charges. Sounds more like the attitude of a loan shark. Paying the freight is getting harder and harder, pray that some fix is done before we all need healthcare.

  13. John Ballard writes:
    > I’m sure glad the billing didn’t have to be padded.
    Let’s see…
    Didn’t you tell us all the other day
    > As for profits, I’m all in favor of profits.
    > Whatever the market will bear, I say. I want
    > surgeons to have vacation homes and yard men.
    > I want RN’s to take their spouses out to eat at
    > expensive restaurants at least once a week. I
    > want housekeepers to have well-funded benefits
    > including PTO and generous matching of retirement
    > plans. Hell, I want so much profit to flow to
    > health care professionals they can’t figure out
    > how to spend it all.
    Unless, I suppose, they want to spend it on someone who can’t afford to pay what their efforts are worth.
    Your bill isn’t “padded”. Docs and hospitals are getting what the market will bear by practicing price discrimination like any rational monopolist. Then the dirty dogs turn `round and give away free care just like what you paid good money for. The injustice of it all!
    This precisely was the social bargain with respect to medical licensure: docs get monopoly pricing power, but they have to take all-comers, which had been “usual and customary” stretching back into classical antiquity and that old pagan Hipocrates. The bargain has broken down lately due primarily to your particular attitude taken on the part of people with the ability to do something about it. There may be a new social bargain coming where docs don’t get monopoly pricing power anymore, but then they don’t have to take all comers either. The notion of what is “usual and customary” will have changed, not necessarily for the better. Pray that when the time comes, you’ll be able to pay the freight yourself or that a generous soul will provide you the opportunity to be healed in body and grateful in spirit.

  14. Thanks for that summary. I see now how it works.
    Some kinda way it just gets cleared up.
    I’m sure glad the billing didn’t have to be padded.

  15. John Ballard writes:
    > No one has explained to me where the money
    > comes from to pay the actual expenses of the
    > thousands of uninsured patients who get treated
    > and walk away, or who are insured but have claims
    > denied, or declare personal bankruptcy because of
    > horrendous medical bills.
    Oh, come on!
    It comes from those who did pay their bills (or a portion of them), from gifts to the hospital (usually a hospital), from the self-sacrifice of doctors, nurses, and staff (including administrators), and from tax-free status (most of the time). This is not a mystery.

  16. Very good questions. I don’t think anyone can answer before the finished product squeezes its tortured way through the sausage grinder we call government. I’m sure those and many more questions will be addressed repeatedly, in committee, on the floors of both houses, in conference, and across endless meetings between lobbyists and legislators of all persuasions.
    You bring up an interesting point.
    “…may appeal to those paying their own bills but is it going to make any difference to affordability? Does the patient really care what part goes to ‘administrative costs’ as long as they’re happy with their care?”
    The subtext here is that as long as “someone” pays the bill, who cares? Except, of course, the misbegotten saps “paying their own bills.”
    Part of the challenge we face is precisely that. In the current system costs are concealed from everyone, providers and beneficiaries alike. My guess is that only a handful of administrators have any idea what the actual costs are for their own operations. I’m not talking about how the numbers work out after billing, but what portion of the bills is not for services for those who get the bill, but uncollected and noncollectable amounts that already went (or may yet be applied) to other unrelated costs.
    I’ve argued this point repeatedly, but it’s like talking to myself. No one has explained to me where the money comes from to pay the actual expenses of the thousands of uninsured patients who get treated and walk away, or who are insured but have claims denied, or declare personal bankruptcy because of horrendous medical bills.
    That word “transparency” is worse than a snake bite, isn’t it?
    I feel like I’m talking to one of my kids about the responsible use of a checking account. I heard a story of a youngster once who was forever overdrawing her account. She was mystified. “I don’t understand,” she said. “Every month I still have checks left in my checkbook!”
    I mentioned earlier two of my former employees who died. Both were apparently healthy young women whose deaths may or may not have been avoided, but it’s too late now and we will never know.
    What I do know is that they, like most of their peers, worked responsibly at their jobs, paid their bills and were good mothers form their children. No substance abuse, no smoking, no welfare assistance. But like so many in their status they had no insurance because it costs too much. Health insurance is for their peer group as out of reach as root canals, hair replacement or cosmetic surgery.
    The first woman went to the emergency room with abdominal pain. I’m not a doctor but in the Army Medical Service Corp we were told there is no first aid for undiagnosed abdominal pain. Too many things can go wrong. Don’t even give pain medicine. Pain is an important diagnostic tool. The only “first aid” is to see a doctor right away. So she was seen, probably Dx negative for appendicitis, given some medicine and sent on her way. She had a sudden pain a few days later and1 was taken back to the hospital but died. Her family is not sophisticated enough to do anything but accept what happened. But I cannot escape thinking she may have had a gall bladder or other more serious problem but was not given much attention because whe was uninsured.
    The other case was death during childbirth. In may families an OB doctor is as out of range as a CPA or a grounds keeper. Pregnancy means a surge of excitement, followed by a shower or two, and when labor starts, go to the hospital and hope you can pay for the delivery. Prenatal care is out of the question. You see where this is going. I will always wonder if this young woman would be alive today had she been under the care of an obstetrician. As in the other case, we will never know. But these are a couple of the personal reasons for my passion about health care reform.
    To address a couple more of your questions “…Does anyone care if the company making the product they buy has higher admin. costs than another company? And how much choice will the patient have depending on the number and proximity of hospitals?”
    “Does anyone care?” indeed. I realize I’m being melodramatic, but what difference does it make if uninsured people simply die?
    Using the word “affordability” should cause some people to choke.

  17. John, also from your link to Obama’s Plan.
    “Require full transparency regarding quality and costs.”
    “Health care quality and costs can vary tremendously among hospitals and providers; however, patients have limited access to this information. Barack Obama and Joe Biden will require hospitals and providers to collect and publicly report measures of health care costs and quality, including data on preventable medical errors, nurse staffing ratios, hospital-acquired infections, and disparities in care and costs. Health plans will be required to disclose the percentage of premiums that actually goes to paying for patient care as opposed to administrative costs.”
    So is the plan talking about costs to the patient or just costs to operate? Will the patient really care if their insurance is paying the bills? Will the posted price apply to all patients or just the cash pay ones? This part may appeal to those paying their own bills but is it going to make any difference to affordability? Does the patient really care what part goes to “administrative costs” as long as they’re happy with their care? Does anyone care if the company making the product they buy has higher admin. costs than another company? And how much choice will the patient have depending on the number and proximity of hospitals?

  18. “Uninsured patients in IL (that don’t qualify for Medicare/Medicaid) who receive hospital services will now get x percent off list price (depends on hospital/chain). It’s a step, but still fails to provide transparency (kind of like WI requiring hospitals to post a price list).”
    K, here in NC, because of bad press, our own state hospital system was so embarrassed by their 3-4 times up charges over what they accepted from insurance had to start giving discounts as well. From what I’ve seen the discounts are off the up charges, so they’re still doing ok. They also enjoy the tax supported services of the AGs Office as their collection agency. If WI requires hospitals to post prices, what prices are they posting? Under contract they can’t divulge what the insurance company pays them for services. This was my frustration here in NC, BCBS and UNC Hosptials would not tell me what the charge for cataract surgery was, but UNC could tell me that they charged the unisured $7500 per eye and Duke Hosp. charged $15000 per eye. In Canada I got an up front price of $1700 per eye. So, what is customary and reasonable for extortionists these days?

  19. “est anyone forget, CMS contracted with 3M to develop ‘ICD-10-CM’ and ‘ICD-10-PCS’, supersets of the original ICD-10 developed by WHO. AFAIK, the rest of the world uses subsets of ICD-10.
    Can anyone explain why the US “needs” so many more codes than any other countries use? (Deny, delay, dump, and data mining don’t count.)
    Uninsured patients in IL (that don’t qualify for Medicare/Medicaid) who receive hospital services will now get x percent off list price (depends on hospital/chain). It’s a step, but still fails to provide transparency (kind of like WI requiring hospitals to post a price list).

  20. The “medicare cost-shifts to the private sector” story is a favorite of the hospital associations, but I don’t believe for a minute it is true — why should a hospital accept less from one payer just because another one pays more? They’re trying to enlist a bunch of us as lobbyists to get Medicare to pay more. It begs the questions “what costs exactly, and are they reasonable?” I’m a beginner in this particular area, but it appears to me that Medicare’s fee schedule pays OK for a tightly-run organization. Could it be on the low side? Sure. Is it anything drastic? Hmmmmm.

  21. Nate writes:
    > If we carved office visits out of insurance and
    > patients paid the discounted service with their
    > debit card after the doctor billed us, but while
    > in office I think we would all be ok with that.
    That’s be a good start. I think the only reason it hasn’t been done this way up until now is the lack of tech in the doctor’s offices. On the carrier side, there was a chicken & egg probelm — no sense in building so much as a real-time enrollment verification system when most doctors’ offices don’t have the tech to take advantage of it.
    > It would be nice if we had a president and
    > media that could sit the public down and explain
    > the advantage of tax favored accounts for routine
    > care versus the inefficient usage of premium or
    > taxes.
    OK, but then there’s the question of whether the tax-favoredness of tax favored accounts is an advantage at all under a market-oriented system. It drastically distorts the apparent price of medical services compared to anything else (like running shoes or fresh veggies or nicotine gum).

  22. I come across a number of references to “Obama’s plan” for health care. Has anyone bothered to read that plan? It’s available (pdf) if anyone’s interested.
    My reading of the plan is that it describes many challenges, some suggestions and an outline of a public discussion. This is from the first page.
    “Health care systems in many parts of the country deliver high quality care to the populations they serve at half the cost of other equally renowned academic medical centers in other parts of the country. 12 The key is to provide information, incentives and support to help physicians and others work together to improve quality of care while reducing costs.”
    That “12” refers to a forty-five item bibliography which in this case is “Dartmouth Atlas Project (2006), The Care of Patients with Severe Chronic Illness,
    Before Daschle got canned there was a lot of speculation about “Obama’s” plan which conflated Daschle’s publicized plan with the administration, but even then nothing was carved in stone. Whatever plan squeezes its tortured way through the sausage grinder we call government in America will be the product of serious discussions such as the one in this comment thread.
    The quote above tells me that if there is any “plan” it is to discover why Mayo and a few other operations get more bang for the buck (measured in outcomes, not profits) and apply those practices more widely where possible. I don’t read any public or private agenda. What I see is “…information, incentives and support to help physicians and others…” Anything further is in the eye of the beholder.
    Attempts to attribute this or that idea to the president distract from any discussion. From all that I have seen of Obama since he took office he is an imminently pragmatic politician and will drop an idea in a flash if he senses it is not politically feasible, even if it is close to his heart.

  23. “The Medicare fee schedule that the government reimburses under massively shifts costs to the private sector.”
    The costs are “shifted” because they can be, not because that’s the correct cost but because the system can’t bring itself to control feeding from the profit trough – it’s called a workaround not a shift. I’m not convinced that Obama’s “plan” is workable and the fact that he(his team) are choosing to pick the higher rate demonstrates the failure of a two tier system when you’re trying to control costs – it just won’t work, especially when you don’t regulate all prices/fees.

  24. Very simple answer. Set UCR to the Medicare fee schedule. I mean, if the government is reimbursing at that rate it MUST be UCR, right?
    And if Rockefeller is saying the health plans are crooks for underpaying he must be ok with paying what he authorizes, right?
    I’m sure the doctors will find this acceptable.
    Oh, one little nasty problem. The Medicare fee schedule that the government reimburses under massively shifts costs to the private sector.
    That’s right, the amounts the health plans use as UCR is higher than Medicare…. And that’s the same fee schedule Obama and his friends want the new “public” plan to use when competing with the private market.
    Truth hurts don’t it.

  25. All this talk about how we’re going to continue to pay the same rates for healthcare because sure’nuff all the players will be able to “justify” their “costs” based on present financial mindsets. Hell, healthcare CEOs will still want their millions as part of the cost structure. Seems the VA can negotiate their drug prices and I bet a lot more. How do you think every government controlled health system does it? How did Tiawan transition to single-pay with a 6% gdp heathcare bill – which by the way they say should be closer to 8%. As long as we continue in insurance speak there will be no solution. Here’s what we do as we eliminate private insurance – freeze all charges. That will give us time to sit down and negotiate what the proper charge for service/drugs should be. We won’t have to negotiate private insurance premiums because there won’t be any.

  26. we have been invited to participate in several real time adjudication working groups and have received offers to buy different claims paying software which is built on a real time architecture. Running over a quarter million though, I’m not looking to buy new software.
    Real time administration also scares me. TPAs use to sell a skill set, we accurately administered our clients benefit plans and protected their financial interest. A good adjuster was more valuable for what she didn’t pay then what she did, before the progressives go crazy I am talking about fraud. It only takes 1 bad provider to kill the financial viability of a self funded plan.
    As computers have advanced auto-adjudication became all the rage. Admin fees plummeted as adjusters went from doing 80-100 claims a day to just short of a thousand. Some TPAs have 90%+ auto adjudication rates meaning an adjuster never even looks at the claims. Employers in their short sighted zeal to save $2-$3 PEPM lost ten times that to fraud.
    Medicare is a perfect example of auto adjudication, the system is designed to process as many claims as fast as possible, fraud detection is done post payment with data mining. Any individual, you don’t even need to be a doctor to bill Medicare, can play with the system and learn it’s weaknesses. Once you figure out how to exploit it, remember it’s just lines of code and like any software has holes, you can rip it off with impunity.
    Auto adjudication is the main reason Medicare has a 10% fraud rate. This is the fallacy of government efficiency. CMS payments to Medicare beneficiaries is around 2-3% or $140 to $210 per year. For an older group like that and being a government plan, they are always a pain to work with, for me to process the claims I would need $30-$40 PMPM or $360 to $480 a year. That would entail an adjuster looking at every claim and having a set block of lives. We like our adjusters to get to know the members who’s claims they process. Being the government they look at auto adjudication costing $120 to $270 less and go that way. 10% fraud and abuse though is $700 per year. What they save in administration they lose 3-5 times over.
    Real time processing will be implemented and work for CDHP plans where the member acts as the watchdog. We are already using debit cards and hopefully ACH usage will expand. I would never trust a hospital or DME supplier to hit my clients accounts real time. The concept lacks the needed checks and balances.
    If we carved office visits out of insurance and patients paid the discounted service with their debit card after the doctor billed us, but while in office I think we would all be ok with that. We could have that up and running tomorrow, we just need to get the public to buy into CDHP plan designs. It would be nice if we had a president and media that could sit the public down and explain the advantage of tax favored accounts for routine care versus the inefficient usage of premium or taxes.
    Has anyone read the reform proposal in Minn? Save 200 million over 2 years, offer better coverage, and replaces Medicaid with private insurance. Providers also get a raise as they get private insurance rates versus Medicare rates. Amazing no one has mentioned it…..
    off to another round of showers and some deep soul searching

  27. “…if people started asking in your restaurant how much it cost to put that meal in front of them…” etc.
    Yes, I see where this is going.
    Uh, they never asked. They voted with their feet. If they didn’t get their money’s worth they never asked about costs, wages, profits or the rest. They simply took their business elsewhere.
    I don’t think medical care makes for a good comparison. When I put my life and health into your hands there’s a lot more at stake than whether or not the waitstaff wears dirty aprons. Besides, most patients have no clue how much is at stake money-wise. I certainly don’t. And my point earlier was that I think very few people in the business know either.
    If health care in America were the world’s gold standard this discussion would never be taking place. Statistical outcomes, unfortunately, put the US way down the charts in too many areas. There is a reason for the growth of medical tourism. Perhaps a growing number of potential patients are doing exactly what customers in the food business do… taking their “business” elsewhere.
    As for profits, I’m all in favor of profits. Whatever the market will bear, I say. I want surgeons to have vacation homes and yard men. I want RN’s to take their spouses out to eat at expensive restaurants at least once a week. I want housekeepers to have well-funded benefits including PTO and generous matching of retirement plans. Hell, I want so much profit to flow to health care professionals they can’t figure out how to spend it all.
    But I don’t have the same enthusiasm for golden parachutes for executives leaving operations that are barely skating by. And I have very mixed feelings about the kinds of waste and abuse I described above. And I still have a bad attitude about yet another layer of profits added to all of the above generated for share-holders in the insurance business by rationing health care, using what they call “risk pools.” It’s this overlay of profits, not the well-deserved good lifestyles of health care professionals, that gives me a problem.
    Mine was not a full-service table cloth operation. I worked in a cafeteria, a narrow segment of the food business that runs on very tight margins where pennies count. I have served gracious people dividing a vegetable plate between two people drinking water to save money. And I’ve seen others who want full-service food and and service for cafeteria prices.
    Perhaps when it comes to health care I’m in that second group, just like when I eat out. But just as I contribute to ministries feeding the homeless or together with my wife became a foster parent or work now at a senior-care agency for $7.50 an hour, I also want to see a health care system in place that makes me feel good, a system that doesn’t make me feel that by using it I’m denying care to the many hard-working people we call the “working poor.” Those were the people on whom I depended for a good living for three or four decades. And it is high time they receive better medical care than in the past. I watched too many people endure too many medical problems (and in a couple of cases die) because consulting a doctor was saved for life and death emergencies.
    As you see, this is for me more than an academic discussion.

  28. John Ballard writes:
    > But it seems in the medical field the same
    > words have different meanings, particularly
    > the words “cost” and “profit.”
    They have the same meaning, John, but almost nobody in medicine knows what it costs to provide a service, mostly because up until now they haven’t had to. Aggregate costs and margins (no, no, no, we don’t make a nasty-old profit, we earn a margin so that we might continue wth our mission) are easy enough to figure out on a facility-wide basis. But that’s no so helpful to individual patients.
    You’d probably be annoyed if people started asking in your restaurant how much it cost to put that meal in front of them. Then suppose they decide executive chefs should make a lot less, line cooks are paid about right, and dish dogs should make more? Couldn’t you get those spices cheaper? And my cousin Vinnie will haul off that grease a LOT cheaper than what you’re paying your guy. You see where this is going.

  29. Nate writes:
    > Clearing ACHs and checks does work amazingly
    > efficiently and accuratley. We should look at
    > building on that.
    Pharma claims are adjudicated in real-time now, billions of `em a year. Granted those claims are pretty simple, but still. There’s no technical reason this can’t be done for office visits.
    > Happy Tom to forced me to admit to wanting
    > a tad bit of regulation, I need to go shower now.
    Welcome to the dark side of the force. We have to shower all the time over here. And we hold our noses a lot. 😎 See how skinny its gotten? It used to look like this 8^)

  30. A socially and financially responsible practice will set its charges high enough to capture the maximum amount of reimbursement from its highest paying third party payer, and then discount its charges for the uninsured and out of network patients. More practices do that than most realize. It’s unfortunate that the bad apples give everyone a bad reputation.

  31. How about…
    ►Health care Professionals furnish care
    ►Sooner or later everyone becomes a patient
    ►Insurers and administrators do the best they can to ration care and manage costs as best they can
    The two biggest revenue streams are taxes and premiums.
    Co-pays, deductibles and other out of pocket expenditures provide a few crumbs.
    Unpaid expenses must be absorbed by all of the above.

  32. Getting doctors to, bill is not the right term as they are not seeking compensation, record their transaction would probably best be accomplished by educating the consumer.
    My understanding of provider side EDI, I’ll admit upfront to being very bitter and angry about this, is for roughly $100 a month or so they can bill all their claims via EDI. With that assumption there is no cost to your doctor to “record” your claim for you. Based on this patients are told you have a deductible of $x. Make sure your doctor records your claim so you get credit.
    That would be my preferred method, not 100% perfect but a nice balance of functional and non intrusive.
    Knowing the IRS, CMS, and Government in general I would expect a mandate that doctors bill all services rendered.(secertly I hope the ^*^&*^ providers are required to bill by law and have to pay $1.00 a claim to do so…what goes around comes around buddies!)
    If it would get the commie/socialist to vote for it I would be ok with compulsary billing through a government clearing house with responding payments also cleared via a Fed like entity. Clearing ACHs and checks does work amazingly efficiently and accuratley. We should look at building on that.
    Happy Tom to forced me to admit to wanting a tad bit of regulation, I need to go shower now.
    rbar gave me a headache trying to answer his question
    Provider is the vendor of care
    Patient is consumer of care
    Insurance is vendor of insurance
    provider is consumer of insurance as agent in fact of patient unless patient does not assign thus remaining consumer
    unless….insurance is consumer of care being that they purchase it on behalf of patient…..
    Or do insurance vend care through their contracted provider?

  33. > But can anyone convincingly tell me who,
    > ni health care, the vendor is, and who
    > the customer?
    Well Dr. rbar, you are * a * vendor and you vend medical services. That much is certain. As for the term “healthcare” it is far too ambiguous a term to have enough meaning to answer your question.
    > I am not sure whether most markets are “fair”
    This is the topic Social Choice Theory — what does “fair” mean in the first place? Fairness is socially constructed.
    Nate said:
    > I would prefer the old scheduled reimbursement
    > where you don’t have any PPO, just pay $x for
    > an office visit no matter who the provider is.
    Hmmmm. Didn’t you say the other day that x should be zero dollars but should be required to file a claim with an insurance carrier in order to keep track of deductibles and gather data of various kinds? If you have no PPO-ish thing, how will we get docs to file the paperwork for the great majority of encounters? I’m not trying to be facetious here. The patient gets nothing, the doc gets only what he can get out of the patient. I guess we could contractually require the PATIENT to file something, but I have an idea how that’d work. Would this be government regulation or what?

  34. After spending my entire life in the food business trying to squeeze a nickle or a dime out of every revenue dollar discussions like this make me want to scream and pull out my hair. I have poured over more balance sheets and P&L statements than I want to remember. Words like “price, cost, market, waste, overage, depreciation, capital expense, operating expense, depreciation,” and a string of others are an everyday part of most business vocabularies.
    But it seems in the medical field the same words have different meanings, particularly the words “cost” and “profit.”
    In order to establish a charge for a service, what ever happened to figuring out costs, then adding to those costs a realistic profit? Does anyone ever keep track of labor costs? Disposables? Utilities? Uniforms? Depreciation? I could go on, but I give credit to the reader to understand where this is going.
    It seems to me that the word “charge” or “fee” is not based on real monitory considerations, but on what the rest of the marketplace is charging and what they can get away with vis a vis the insurance companies and the government, which are the two principal revenue streams.
    Someone, I’m sure, is keeping up with the number of indigent cases being charged off as well as a breath-taking number of impossible to collect charges that originate with uninsured or underinsured cases… all of which will be “written off” as noncollectable or “community contributions.” I’m not crazy enough to think that the actual costs associated with these expense will magically evaporate, but why don’t all bills have a line item for “your share of otherwise noncollectable expenses”?
    My mother’s few encounters with hospitals and doctors and her last year of life in a nursing home gave me a shocking insight into the fees and charges tracked by CMS. As her designated agent I saw Medicare and Medicaid charges that blew me away. Without going into detail, she took virtually no medicines and the drug bills I saw ran to the thousands. I didn’t know how many hospice companies were in the business until the time came, and for the three weeks she lived after hospice was added, they collected over four thousand dollars. I know we all have rent to pay and I am more than pleased with my mother’s care and treatment. But for crying out loud, it can’t have COST (and I use that word in the old-fashioned sense of “time+materials+training+transportation+professional fees+incidentals”) as much as appeared on the bills I saw. I hate to sound cynical, but Medicare has a charge for hospice, and I think what happens is that the bills are calibrated to collect every dime of that amount, even if actual costs getting there were not incurred.
    I doubt that my complaints as a consumer will carry much weight in this forum, but it makes me feel better to air them here. But please know that as a taxpayer and recipient of medical care I need to have a better attitude about what I’m seeing and learning. And the only way for me to have a change of attitude is to look behind the curtain and find the same responsible stewardship of time, people and resources that occupied my energies as a manager in the private sector.
    I realize that medicine is more complicated than cooking and selling food. But even rocket science keeps better financial and accounting records than I’m discovering in health care.
    (Which reminds me of another possibly related anecdote. As a non-medical agency hourly caregiver to seniors I’m getting an up close and personal view of where we’re all headed if we live long enough. Less that two days ago I was on duty in a nursing home when a very sweet and professional lady came for forty minutes of “speech therapy” for my client. This man was literally a rocket scientist in his working days, who at eighty has a mind and ability to articulate ideas sharper than me. He has learned the rules of the nursing home to keep his doctor satisfied, so he allowed himself to be subject to speech therapy to be in compliance. All the while I couldn’t help thinking how very unnecessary that forty minutes of professional time was spent. The reason, of course, had nothing to do with the needs of the resident but those of the professional, once again running up the approved Medicare package as far as it would go.)
    I try not to rant too often as I read THCB but sometimes it just gets up to my craw and has to come out. Please accept my apologies. I’ll work on reading and restricting screeds to my own blog.

  35. As a person too young for Medicare with a chronic disease, I carry only accident and surgical insurance. Many times at a doctor’s office a test will be suggested. I will ask the necessity everything comes straight out of my pocket. I get a revised suggestion.
    Just a thought.

  36. Hmmm, the health care system is in a mess. Lots of work need to be done to revamp it..

  37. Everyone here is arguing in economic terms … and yet someone has to prove that economic theory is really helpful here. It’s like fluid dynamics … with certain model assumptions, you can make some simple modelling/predictions (like the Hagen Poseuille law), but as soon as there is a little turbulent flow, things become so complex that they are hardly predictable.
    I am not an economist. But can anyone convincingly tell me who, ni health care, the vendor is, and who the customer? Is a health insurance company a consumer (purchasing from HC providers they choose), or a vendor? The patient no doubts consumes HC … but what exactly does he consume, and who purchases? If a doctor refers “his” patient to another physician or for a test, who is buying and who is selling? And so on …
    I am not sure whether most markets are “fair”, esp. when we are talking about complicated products. If you buy a new bumper, you probably overpay wildly (I don’t know what a new car would cost if you bought it in spare parts). People may pay 99 dollars for an air ticket, while a walk up passenger may pay 8 times that. If you have a physical exam and a chest x-ray at a walk in clinic, you probably pay only a fraction of what you’d pay for the same in the ER. If you get your hospital bill, what are you exactly paying for, and what are the rates/prices? If you get an extra dessert or an additional set of vital signs on your ward, should you be charged extra? If you have a little rash at the hospital, should you (your insurance) pay for the dermatology consult that your attending called in?
    If you have an easy, clearly defined product that can be measured easily, and enough competing vendors/suppliers, competition works.
    I am currently working as a specialty doc in a very heavily competed area … and how do we compete against each other?
    1. Access time
    2. Shiny facilities (creating overcapacities)
    3. New products (more subspecialties, robotic surgery complementary medicine).
    4. Patient satisfaction …. sounds good, right? But how about the patient who desires unreasonable disability? Unreasonable testing? Unreasonable handicapped parking stickers?
    Theoretically, price competition could work in a large competing HC system vs. patient with insurance system. Have a large, comprehensive network that requires their providers to practice “lean medicine” (at least that’s waht some folks on this site call it) based on guidelines and physician judgment, and they will be at the very least 15% cheaper than any other provider system or combination of providers … but this is unpopular with restricted physician choice and unfeasible with the current tort law.

  38. The part of CDHP we really need but have yet to receive is pricing transparency. With the internet there is no reason this can’t be accomplished for minimial spending.
    A member/patient should be able to go to their insurance company website, enter zip, CPT, and receive back the allowable expense.
    They should also be able to go to their providers website enter the CPT code and see what their doctor charges.
    We have laws that mechanics and every other industry has to tell you what their rates are, no one even bothers to ask what their doctor charges.
    This is all mute with ICD 10 comming down the pipeline. We need to be reducing CPT codes not adding thousands of them.

  39. I would really prefer not to. This is a great example of what happens when politicians and pundits who have no idea what they are talking about get on their soap box. This is such a non issue it’s laughable. Fineing insurance companies, specially those down the ladder who didn’t control the data does nothing but drive up the cost of health insurance.
    Personally I can’t stand Ingenix, those SOBs want to charge us over 6K a year for the data.
    Ingenix use to, or what they claimed to, sell was the aggregated billing rates of providers. They never claimed to nor sold anyone UCR reimbursement rates. If you bought the data you would get a huge data set, enter first three of the zip code, CPT code, any modifier, and it would break down what providers bill by percentile. In 890 80% of providers bill $88.72 or less for 99213. 90% bill $95.33, 70% bill $84.90, 60% at 83.10. The purpose of UCR was if someone went non network the provider was paid a fair charge. In each insurance policy the carrier would specify at what percent they paid UCR. Compare 60-80% reimbursement, the spread is only $5. Compare that to what providers actually get paid though and they are twice as high a PPO contracted rates.
    In 890 actual PPO allowed for 99213 for some of my clients is $38.97. Between my payment and member payment provider collects $38.97. If it was a non PPO doctor and we cut them back to 80th percentile then paid it at 50% the provider gets $44.36 from us plus what ever they collect from the member. Who exactly is the victim here? The provider gets paid more to considerably more depending on what they collect from the member, the member is receiving a higher benefit then if they went in network. The only person losing out is the insurance company and those paying premium to them.
    When you know the facts it sure changes the appearance of things doesn’t it? Provider reimbursement has not increased in line with CPI per procedure. The rate they bill has taken off like crazy, the only logical reason for them billing an amount they know they will never collect is to drive up UCR and government reimbursement, those without insurance or stuck out of network get screwed as a product of that.
    I don’t see where insurance companies have done anything wrong, now that the facts are on the table if anyone can show me where they are screwing the public please do.
    Back to this being a waste of time and proof our government is incapable of regulating anything, all this lawsuit does is put the final nail in the UCR coffin, and hopefully save me 6K per year. Providers destroyed the usefulness of UCR by artificially increasing their billed charges. A number of insurance companies have stopped using UCR and gone with the considerably more logical Allowed Expense, EME, contracted rate or their flavor of paying non PPO providers at the same rate as PPO. The allowed rate in plan is the same as out of plan just paid at a lower percentage. Why should a non PPO doctor be paid more then a PPO, counterintuitive incentives there.
    Personally I would prefer the old scheduled reimbursement where you don’t have any PPO, just pay $x for an office visit no matter who the provider is.
    So problem is solved, UCR is dead, government fined insurance companies for doing nothing wrong, the real problem of phony provider billing is ignored, and insurance just got a little bit more expensive. Typical day in American HC reform.
    Are we to assume no author wanted to admit writing this post? I can see why but found it humorous.
    “sells tools to help health plans cram down the amount they pay providers,”
    Only on THCB is an evil insurance company cramming down payment when they pay $44.36 instead of the lower $38.97. In your effort to cram reform down our throats has lower been redefined as greater? I really need to get a progressive to English dictionary.

  40. Matthew (I suppose) said:
    > price discrimination is a symptom of a failed market
    I dislike this term because it implies all by iteslf that some kind of government intervention 1) will improve on it, and therefore 2) ought to be undertaken. For non-economists, in a “Pareto efficient market” everybody willing to pay at least what it costs to make just one more widget (or whatever) can buy it. This makes no claim that the efficient market is “fair” — that is a separate topic. Whilst some markets approach perfect efficiency, few of them do. And at least in theory, a monopolistic market could be perfectly efficient if the monopolist could do price discrimination perfectly.
    Even in an efficient market, there is a battle over what’s called “surplus utility” or “the extra happiness created when we can trade with each other instead of living as isolated individuals”. Under monopoly, the surplus utility will all flow to the producers. In a perfectly competitive market, the surplus utility flows entirely to the buyers. It has been the public policy of the USA to encourage competitive markets where possible. But businesses want to avoid competition to the extent they can — this is why the government makes it illegal for them to talk to each other about pricing.
    Medicine will never be a competitive market. The question always before us is “what shall we collectively do in the face of this?”. We are in the process of replacing the old social bargain with another one. It is messy.
    CT IPA Doc writes:
    > In most markets a few health plans […] set
    > the fees they pay to thousands of disaggregated
    > providers. Economists call this an oligopsony.
    Right. The balance of power has shifted over the past couple of decades away from sellers towards buyers (and their agents). The power of the government-protected medical cartel has been countered, ironically by another branch of government! This has completely destroyed the old social bargain that granted monopoly pricing power to (broadly speaking) doctors, but also demanded they practice perfect price discrimination and then some (EMTALA is a remnant of this).
    > using the Ingenix database to artificially
    > reduce the amount they pay
    This is hilarious! Is there a “natural price”? No. Charges are almost always a fantasy price designed to maximize out of network income and possibly manipulate Medicare.
    In the case of the New York lawsuit, the question is “artificially reduce the amount they pay whom?” This is about out-of-network providers after all. Here’s what I think is going on:
    0) Insurer determines that under all its contracts, it pays $100 for a specialist visit in that locale. (It is more complicated than this, but let’s just go with it for now).
    1) Insurer tells patients “if you go out of network, we’ll pay 80% of Usual, Customary, and Reasonable charges and you’re responsible for the rest.” What it really means is “We’ll pay 80% of what we usually pay and you’re responsible for the rest.”
    2) Patient goes out of network, and gets a $300 bill from a specialist.
    3) The Explanation of Benefits form says Usual, Customary, and Reasonable charges for this service are $100, we’ve paid $80, you’re responsible for $220.
    4) Patient screams at doctor: “Where do you get off charging me $300 when the going rate is $100?!?!?!?!”
    5) Doctor says “I don’t deal with that insurance company because they under-pay and use flawed data. They don’t know what the going rate is. They’re ripping us both off.” Manages to direct anger towards insurance company, and cuts bill to $250 to mollify patient. Politicians get involved because the patient paid $170 out of pocket because the evil insurance company underpays doctors. Doctors are expertly manipulating the political process to keep patients price-insensitive and shift pricing power back to the cartel.
    The New York attorney general has found a leverage point in the unfortunately-continued use of an old term that means almost nothing. Or literally nothing.
    Seems to me insurers should jettison the archaic UCR terminology and tell people “If you go out of network, we’ll give you $60 for a PCP visit or $100 for a specialist visit and you’re responsible for the rest.” They used to say “if you go out of network, you’re on your own” but nobody liked that policy. In either case though, let docs post prices in their lobbies, negotiate with patients one at a time, and do their own collections.
    I hope Nate weighs in on this…

  41. One needs to go back to the early days of Medicare when the “price” for reducing physician opposition to this 1965 legislation was that physicians be allowed to charge usual, customary and reasonable fees.
    Between this concession to physicians, the numerous incentives provided to hospitals when Medicare was started, and liberal coverage for medical technology, the last 40 years have truly been the “gilded age” for the health care industry as the incomes of all types of health care providers have skyrocketed in comparison to the rest of the US economy.
    Why is this changing? Because the US economy cannot afford to continue to see the rate of health care spending increase at a much higher rate than the rest of the economy. Many of us won’t be able to afford health care if this isn’t brought under control.
    This is true not just for health insurers, but for state and federal government and employers. There is a true crisis brewing as leaders in the field see a bleak future for US health care unless costs are brought into line.
    Like it or not, cost containment is needed in health care. The days of “actual charge”, “usual customary and reasonable”, and “cost-plus” health care arrangements are over as the industry is forced to confront the affordability (and sustainability) issue. The adjustment process will be painful.
    The challenge will be to work through the debris of these financial battles and find ways to maintain and improve the quality of health care.

  42. Let’s get real about how the marketplace works. In most markets a few health plans (Blue Cross, Aetna, CIGNA, United, etc.), Medicare and Medicaid set the fees they pay to thousands of disaggregated providers. Economists call this an oligopsony. There is little price competition by providers because they don’t set the price. In most instances it makes no difference what providers charge, because the plans set the price as to what they’ll pay, and it’s always the lesser of billed vs. allowed. UCR means almost nothing. The difference between the rate charged and the rate allowed by the plans can differ by factors of 5-10 in some cases (anesthesia). Plans will often cover providers who are “non-par” with a specific healthplan if members have out-of-network coverage. One fraud here is that plans charge higher rates for this coverage, while using the Ingenix database to artificially reduce the amount they pay, while sticking the members with much higher out-of-pocket costs. UnitedHealth, especially, has a great reputation among providers for not living up to the rates in their contracts or reducing rates after contracts have been signed. Providers may be “par” in a PPO which offers a “wrap around” network to plans with inadequate provider networks, but many plans do not pay rates per PPO contracts, either. Should we be surprised by such behavior when all these plans are responding to their real customers, their shareholders?