December 2019, Volume XXXIII, No 9

Cover story two

An inconvenient truth

Transparency in pricing

s an independent primary care physician who has been in private practice in internal medicine for 20 years, I’ve observed a looming black fog slowly roll across the health care skyline. In the past, it seemingly hovered in the distance, going unnoticed by most, but it now consumes all visibility. That black fog prevents price transparency.

Being in private practice—and providing personalized health care on a fee-for-service basis with no annual fee—gives me first-hand information on the business side of medicine, rather than merely relying on what the media reports say. The way health care is paid for is not only shocking, but it’s the only industry where both the individual and the provider are left completely in the dark about the cost of care.

Patients pay significant monthly premiums for health care coverage in hopes that they will be receiving the best care possible by a variety of providers “in network.” That restricted network is a group of medical providers in either private practice or large health systems who negotiate their fee schedule with the insurance carrier. These negotiations can take months or even years to achieve and are rarely in favor of the patients. What’s more, they’re also rarely in favor of the private practice groups. I’ll expand more on that topic later.

The exam—and the bill

Let’s discuss the current relationship between a physician and patient before we go further. In the right setting, a physician would see their patient, assess the symptoms, and treat as their medical degree, knowledge, and experience deemed appropriate.

The insurance carrier is telling the physician how to practice medicine.

Instead, physicians are forced to weed through tens of thousands of codes per appointment to meet the negotiated terms of the insurance contracts, rather than use their expertise on best care for the patient. These thousands of codes were created for the sake of giving a physician permission to treat their patient and to have a service covered. I want to emphasize this point: in the current system, the insurance carrier is telling the physician how to practice medicine with financial incentives. It’s incredibly unsettling to understand that medical care is being highly regulated by an executive in a corner office of an insurance company whose measure of success is making money, rather than the family physician you see in the exam room.

These contracts mean that physicians have no choice but to spend more time on coding than they do on individualized care. Behind every 15-minute appointment addressing the patient’s symptoms is another 15–30 minutes of coding or analyzing how to work around the terms and conditions of the insurance company to treat the patient appropriately.

What’s more: the insurance company will often mandate that less costly methods of care are prescribed, instead of allowing the physician to decide—or the insurer will not allow the physician to order an approved test at a high value, low-cost location that is out of network. This means doctors either are forced to lump every patient into a standardized medicine practice, or find ways around coding and billing to treat their patients. But neither the physician nor the patient has any knowledge of what these services will cost.

If we applied this health care payment model to any other business, it would be considered vehemently foolish. Imagine if Apple had a third party dictating prices, giving permission to offer certain features, deciding who can buy and how often, and creating a complicated way of pricing their products using complex codes that required consultants and expensive software. Not to mention that, under this scenario, neither Apple nor the customer would know the price until weeks after purchase. But this is what happens in health care, so is it any wonder prices are out of control, or that physician creativity is suppressed?

The growth of large systems

Let’s circle back to that discussion about private physician groups versus large health systems. As a private practice physician, I know what my costs are to run the practice. I also know that I can run a profitable business with my current prices listed for my patients clearly to see before they schedule an appointment. This is operating on a cash-based system, not in agreement with any commercial insurance companies, resulting in significantly lower overhead costs.

However, when I operated under contracts with insurers, I knew for a fact that the large health systems got paid, on average, at least 40% more than I did for the same services with the same quality. I was told by a large local insurer in a face-to-face meeting that it was because they have better contracts due to how large they are. I took away from that meeting one undeniable truth: insurance companies reward volume-based medicine that costs more than patient-focused care that costs less. I thought the economy of scale would allow the large companies to be less expensive, but not in health care. What’s more: employers and individuals are paying these inflated prices because there is no price transparency.

The decline of small practices

Independent clinics are selling out, not because they are more expensive to operate, but because they get great buyout offers and physicians are better compensated when they work for the larger health systems. Private practices have a hard time getting contracts from the insurance companies—the payors say, “We don’t need you because you are small.” I’ve seen this firsthand. The black fog grows thicker by the day.

Physicians who become employed by the large health systems lose control of their practices. They are forced to treat patients in a certain standardized way and get financial incentives to do so. They lose the ability to individualize treatment, or they may be penalized for doing so. This is misnamed as pay for performance. Sure, it sounds great—but the reality is that medical care becomes very generic.

I remember being financially penalized for taking a patient off a medication that caused potentially life-threatening side effects. My medical assessment that the value of my patient’s life was greater than standardized medicine protocol by the insurance company resulted in a financial timeout in the penalty box.

One of my former partners was listed by a large insurance company as being in the bottom 10% of physicians because he was ahead of the rest of us with new medical recommendations. The insurer was not up to date and so he failed the “pay for performance” test. As I mentioned earlier, physicians are spending more time doing computer work instead of seeing patients to get paid by the insurance companies. Physician burnout is on the rise and patients feel like they are on an assembly line.

Physicians ... spend more time on coding than they do on individualized care.

It’s a myth that insurance companies are looking out for their customers by negotiating discounts. This spurred the trend of the high-value clinics selling out and the large health systems becoming larger, thus increasing the cost of health care for patients. But many still wonder why costs are rising. Personally, my own health care premiums are increasing an average of 10% to 15% every year, and my choices are decreasing. Being a physician, I know that salaries for doctors and nurses are not rising that fast. Additionally, the industry is seeing the costs of technology decrease; so where is all that money going?

Price disparities

Here are a couple of real examples taken from actual claims data. Cardiac stress echocardiogram: an employer paid over $7,000 through the insurance contracted prices. A local independent high-quality cardiologist charges $500 for the same test using the same machines in a more patient-friendly environment. Another patient of mine paid $2,300 for a knee MRI as he was in his deductible, but an independent imaging center charges $613 for the same service, using the same machines and physicians.

Price transparency

The solution to all of this is simple: price transparency. We need health plans where patients care about the prices, and patients and doctors have easy, immediate access to the prices. If a patient needs an MRI and one location costs $4,000 and the other one costs $600, the patient and the ordering physician need to know the cost before ordering it.

If legislation were to provide any sort of aid in clearing the black fog, they could start by implementing laws that would require price transparency for bundled services. Here’s an example: when I shop for a vehicle, there is a base price with a few added features bundled together. I don’t get a listing of all the separate parts of the car. Tying this into a medical example: an average cholecystectomy should have one price. Listing 30 separate charges for this service is both inefficient and insane, but that’s how it’s done today.

Summing up

Patients pay large monthly premiums to see their physicians, who have spent months negotiating contracts with insurance providers. Large health systems are paid more for the same services than small private practice physicians because the volume is advantageous for the insurance company. Physicians are directed to treat quickly and with the least amount of intervention possible, and neither the physician nor the patient has knowledge or access to what these services cost the patient.

The black fog has done one thing well: kept people from seeing what’s really behind the curtain of the insurance company practices. It’s time to take a stand, rip back the curtain, and begin implementing real change with price transparency that will bring autonomy back to the patient/physician relationship.

Merlin Brown, MD, a board-certified independent primary care physician with Southdale Physicians, believes that his fee-for-service practice allows him to provide quality medical care, develop long-term relationships with adult patients, and charge them only for the services they need. He has been in private practice in internal medicine for 20 years. 

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Merlin Brown, MD, a board-certified independent primary care physician with Southdale Physicians, believes that his fee-for-service practice allows him to provide quality medical care, develop long-term relationships with adult patients, and charge them only for the services they need. He has been in private practice in internal medicine for 20 years.