How do you know you got a good price for a medical procedure?
This is a common question that I get from family and friends. My insurance said that colonoscopy is going to cost $4000. Is this a good price? Probably not, but it’s extremely hard to know for sure.
First, how do we estimate a good price. The best resources that we have to price procedures is to look for the Medicare reimbursement rates for the procedure. You must take into account both Facility and Physician’s fees when trying to access a ‘good price’, as hospital’s receive both from Medicare.
Facility fees are what hospitals charge to use their building, equipment and resources. Physician’s fees are the fees that doctors, the lab or other personnel charge for a procedure. There is also a difference between in-patient and out-patient services. You’ll have to determine how long you’ll be in the hospital. If you’ll be there overnight, you're considered in-patient, otherwise it’s out-patient. Hospitals generally have different discounts based on the patient type, with in-patient services being discounted more highly.
Even with this information, it’s extremely hard to know what you’ll pay, unless you pay cash before the procedure.
Second, what should you look out for when you receive a price estimate from a hospital.
First, there are lots of services a hospital provides and they are mostly all billed separately, which makes it difficult for consumers to figure out what they will receive. Common procedures like colonoscopies can have 20+ different coding designations, based on the details of the procedure. It’s extremely hard as the patient to know what will actually occur. Clinicians might not even be able to provide you with accurate coding before a procedure.
In addition, note that your doctor could have no idea what a procedure will cost you, because there are so many prices in the system. She could have had a patient last week that had the exact same procedure and received an end bill for $300 and you might get a bill for $5000. The variance can be huge.
If hospitals had only one price for every consumer, California would only have about 5 million hospital prices. We would see that the state of California probably has greater than 50 million prices or at least 10 times more. Because of the complexity of the system, your clinician many lead you astray when it comes to saving money.
Second, consumers can only procure an “estimate” either from the hospital or an insurer for an upcoming procedure, unless they pay cash at the time of service. Even with a pricing estimate, there can be huge discrepancies between the “quoted” price and actual price billed. In fact, the hospitals refuse to guarantee any prices that appear on their websites, estimates given during phone calls or even written pricing estimates.
While some of this makes sense due to the inability to fully predict all the services that an individual will receive, hospitals could provide much better pricing estimates than they do. Many hospitals will only price out procedures that you provide CPT codes for. However, it’s difficult for you to know how a hospital will bundle procedures. Hospitals can bundle differently, but hospitals know how they bundle from historical data and could provide consumers with common bundling for services.
Complex procedures are often billed in different ways, which can lead to huge differences in prices. For instance, some hospitals will bill everything together applying similar discounts to physicians and facility fees. Other hospitals will bill separately for each service such as anesthesia, radiology, and more and then again for facility fees applying different discounts to each separate entity. This is a pain for the consumer to price compare, because you might underestimate the bill by thousands of dollars, if you or the hospital’s financial counselor fail to remember important pricing details.
Finally, it’s difficult to know what was actually billed, since the services are often not explained nor identified with consumer understandable language. It’s also difficult to determine if there are errors and whether those errors are occurring with the hospital or insurer. Since the billing system is so complex, with 15,000+ procedures and hundreds of millions, maybe even billions of prices, across the state, it’s no wonder there are mistakes galore. Roughly 80% of medical bills contain at least one error.
Where does this leave us?
The best way to price out your procedures is to pay cash at the time of service. This is especially true for radiology or lab work. It’s also best to shop around for providers as close to the medicare reimbursement rate as possible. Ask hospitals if they will offer you the Medicare reimbursement rate if you pay cash.
If you have insurance, it’s best to look for providers with the lowest list prices. Since insurer discounts are based on hospital list prices, you will pay less at a cheaper hospital. Price out every single procedure. Be wary, some hospitals increase the prices of procedures in certain departments like radiology and pathology. This means that the surgery you’re getting at your neighborhood hospital could be a good price (let’s say $5000), but a simple lab test could be $500 dollars. Even if you think it’s a small procedure, it’s always best to price it out with the billing department or financial counselor before choosing the service.