In 1992, I began what was considered a contrarian newsletter that promised to deliver brief, plain-talk commentaries about current events in the world of healthcare delivery and finance. Healthcare delivery being defined as how and what medical services are provided to patients, while finance refers to who pays the bill.
At that time, the difference between negotiated medical network pricing and regular retail medical pricing was beginning to get absurd and those in the know commented about how someday “medical pricing math” would be a complete fallacy. Back then, I predicted that retail pricing would soon have no real relationship to what was actually being paid and unfortunately, I was right on.
While fictitious medical pricing became the norm some time ago, some recent rumblings about these topics coupled with the new Healthcare Research Foundation forum prompted me to revisit these issues. It’s sad to say that 23 years later I ‘m still hearing the same old story and I think that’s embarrassing coming from a healthcare industry with so much smarts.
A perfect example of this involves the recent press about echocardiograms which shows blood flow through the heart and which “is one of the most lucrative revenue streams we have” according to Dr. E.J. Tapol in San Diego, CA. For these particular tests the difference between what is “billed” and what is “paid” can be up to 3,000%. That’s right, there are providers that charge up to $12,000 for a procedure that typically pays $400 when paid by Medicare, but if they can find a more agreeable payor, like an insurance carrier, they might get more than twelve times that.
Another interesting angle about the electrocardiogram issue involves the price of the technology itself, which has gone from about $1,000,000 to under $10,000 for a machine that does basically the same thing. The problem is that we are flooded with the expensive equipment and few providers have embraced the lower cost options. As Dr. B. L. Lindenberg, a cardiologist from Schenectady N.Y. says, “If I bought the expensive machine, and the patient is insured, I’m going to use it.” Even when the Cardiovascular Association set guidelines to control usage, the utilization gap was soon filled by other types of providers who don’t choose to follow these guidelines. Got a headache? You get an electrocardiogram. That’s a bit glib, but not that far off.
So what we have is a healthcare system where over-utilizing providers charge somewhere between $400 and $12,000 for the same test, using equipment that cost between $8,000 and $1,000,000 and what they get paid is totally predicated on who they are billing. Ahh, gaming at its best!