Hospitals Charge Consumers and Employer-paid Benefit Plans as much as 400% of Medicare

All the buzz about reference-based pricing isn't so appealing when you learn that consumers and employers are charged up to 400% of what Medicare pays for the same hospital services

When you study our website, it becomes as clear as the nose on your face that there exists significant price variation for healthcare services from hospitals, ASCs and other healthcare suppliers. That’s the main reason SurgeryShopper.com exists. It’s time to shine a light on the unsung heroes if healthcare who have invested a great deal of effort, time and expense to create bundled case prices for surgeries. 

But one thing is for sure: asking a hospital or ASC to post their line item charges for a bandage or a surgical supply, or even an implant pass through cost with a markup isn’t going to make a dent in pricing transparency. That’s a silly as selling and pricing a loaf of bread by the line item ingredient.

Maria K Todd, MHA PhD | AskMariaTodd™

We spoke with Maria Todd of AskMariaTodd™, an expert with more than 3 decades of contracting with employers and health, travel assistance and workers comp insurers for bundled price surgeries around the USA and abroad.  Here’s how she explained what’s happening and the challenge we all face. 

“Imagine if you went to the grocery story and instead of paying for one complete, finished loaf of bread,  you got a bill for each pinch of salt, cup of flour, fraction of an ounce of seasoning, ounces of proteins, and more, with an embedded and opaque markup to cover the cost of managed care contracts analysis and negotiations, broker and producer commissions and fees, TPA and PBM kickbacks in cash and in kind, and more.” It becomes very difficult if not impossible to see what the price of the finished product is (in this case a surgery procedure) and there’s little transparency on what happens when the hospital or ASC submits a bill to an ASO or TPA. What the hospital sends in is an artificially manipulated price because of Medicare regulations and how health plans draft their provider contracts.”

Todd explains that the TPAs and benefits industry isn’t the only one working behind a curtain of veiled secret practices with perverse incentives. “I know of a hospital that charges high rates and likes it that way,” says Todd. An eager to please, fellowship-trained, board-certified orthopedic surgeon, and a native son,  returned to his home town and applied for privileges at the only hospital in town, and separated by 45 miles from the hospital to the north, located above 4000′ and the other hospital 35 miles to the south.  A competing orthopedic surgeon who has no access for new or returning patients sooner than 90-days out has been successful in preventing the hospital from allowing the newcomer with plenty of availability to receive a credentialing and privileging application packet. 

“There’s been no explanation either,” she says. The city is growing at a rapid pace, and the established surgeon charges high fees and offers only access to his Physician Assistant (at the same price) if you need to be seen right away. Meanwhile, the newcomer surgeon is having to augment his income with locum tenans work in another state just to feed his family and stay afloat, even though he can consult with patients sooner and operate to ameliorate pain and mitigate opioid pain medication use sooner. He has privileges at an ASC, but must drive 35 miles south if a patient requires admission.  Why does the hospital do this? Because they want to keep the status quo despite the fact that the hospital is not for profit and the failure to send the application and process it according to established medical staff privileging criteria is probably also an antitrust issue on several levels. It maintains higher prices to the community at large, restrains the new doctor from access to patients through the essential market force – the sole community hospital – and limits his ability to compete fairly in the marketplace.” Todd was so pleased that bundled price orthopedic surgery cases by this surgeon at the ASC are available through surgeryshoppers.com

As a result, many employers have no way to discern if the hospitals in their network are high-priced or low-priced or if there’s a better deal that can be negotiated by going directly to the CFO or CEO of the hospital or ASC. A recent RAND Corporation report used data from three sources — self-insured employers, state-based all-payer claims databases, and health plans — to assess $13 billion in hospital spending in terms of hospital price levels, variation, and trends from 2015 through 2017 across 1,598 hospitals in 25 states. By analyzing health claims for more than 4 million patients, the researchers discovered that average relative prices paid by private insurance plans were often 150% to even 400% higher than those charged to Medicare.In this report, prices reflect the negotiated allowed amount paid per service, including amounts from both the health plan and the patient, with adjustments for the intensity of services provided. These negotiated prices are then compared with Medicare reimbursement rates for the same procedures and facilities to determine relative prices. “This tells me that Reference-based pricing is not a solution because the reference basis is unreliable, at best”, said Todd.

“Take a surgical procedure as simple and as frequently performed as a tonsillectomy, and tell me why there’s a price variance of more than $13,000 in a 90-mile radius.  One employer I work with saved $13,000 per case on tonsil removals and hernia repairs resulting in a $100,000 savings of plan trust dollars on two tonsillectomies and four hernia repairs, by asking their employees to drive slightly over an hour to get to the less expensive facility.” Todd says, “What’s more ridiculous is that the full-service, in-network hospital was also an hour away and on the same street, just 20 city blocks in another direction off the same exit from the interstate!” 

So the plan participants would have had to go the same distance to travel to access surgical care, but the ASC was not in-network. Why wasn’t the ASC in network? “Because the PPO contract terms and conditions were not acceptable to the ASC,” Todd explained.  The employer was introduced to the out-of-network ASC that charged $13,000 less than the hospital by a benefits consultant at church; a direct deal was made on a list of 220 bundled price surgeries, and the savings commenced.”  Now the employer waives the copay and deductible and contributes $100 to the employee’s HSA as a shared savings reward. and pays for mileage, 2 nights in a hotel and adds $55 per day per person (max 2 people) for meals and incidentals if they will turn left off the highway instead of right when they need any of the 220 surgical procedures in the special, out-of-network contract. “Problem solved, savings realized,” says Todd.

So there you have it. Surgeryshoppers.com is an excellent and useful source of information to help consumers, freelancers, employers, TPAs, health sharing ministries, benefits advisers find prices for all kinds of surgery procedures and connect directly with providers with the assistance of its concierge staff. ♦

In the news

SurgeryShopper.com has suspended most operations due to COVID19 travel restrictions and our participating health facilities' limitations to accommodate all but essential and urgent cases. We'll resume service based on our re-assessment scheduled for May 1, 2020.

In this ‘time out” period, we’ll be doing some website overhaul, and working on adding new provider listings, and other “rainy day” tasks that can be accomplished by team members working from home.

If you’d like to plan or inquire about a procedure upon our resumption of services, our telephones are still fully staffed around the clock utilizing our quality assurance backup contingencies, so call anytime. 

TIP: If you know you need to plan an elective surgery or shop prices, get started ASAP. Once hospitals and outpatient surgery centers resume normal operations and replenish supplies in high demand, elective scheduled surgery will be overwhelmed. In the event of price increases, lock in your price quotes, reserve your surgery and consultation appointments, and arrange any needed financing for summer surgeries as soon as you are ready.

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