How much do health care prices really cost you?

Imagine a supermarket with no price tags and a shopping cart full of items you don’t understand and aren’t even sure you need. The clerk adds a few more, rings it up, but instead of handing you the bill says, “I’ll mail it to you in 30 days.”

That’s still the general state of medical care in the United States, says Torben Nielsen, consumer transparency GM for Cambia Health Solutions, the parent company of highly rated Regence Blue Cross and Blue Shield of Oregon, Utah, Idaho and parts of Washington. It’s a top-down system that often withholds the tools consumers need to make smart decisions before deciding who to see and what health care to buy.

Instead, insurance companies quietly negotiate various rates with different health providers, with both groups resistant to the idea of divulging prices for proprietary reasons and because they aren’t the same for all consumers. “They don’t have just one price,” says Dr. Jeff Rice, founder and CEO of Healthcare Blue Book, one of the first online pricing tools. “They have a whole bunch of different prices.”

For example, one California hospital bills $182,955 for an uncomplicated appendectomy; another, $1,529. The median price is $33,611. Same procedure; similar patient type, but a 120-fold price difference. In the opposite corner of the country, one Maine hospital charges $1,483 for a colonoscopy; another $4,041. It’s not just hospitals. The same discrepancies show up in doctor offices and clinics nationwide. Ask the typical doctor or nurse how much you’ll pay for services, and they can’t tell you.

However, industry observers say old mind-sets are rapidly changing as more consumers demand to know costs upfront. Ninety-one percent of Angie’s List members answering a recent online poll say knowing cost before scheduling surgery or treatment is somewhat or very important. At the same time, 49 percent of members polled don’t think providers are good about communicating costs unless they’re proactive about requesting them. “Both the insurance company and the provider should be able to get the prices [for patients],” Rice says. “Information might not be right at their fingertips and it’s usually a range. [But] if a provider can’t tell you what their price is, then in general, they aren’t going to be the best value.”

Many states and insurance companies are following Rice’s lead and getting on board with powerful tools to help consumers find pricing. A few even highlight the specific provider offering the lowest price, not just a generic range of prices. Maine, for example, publishes prices — real averages of payments received, not simply inflated charges.

Employers, too, are taking control, particularly self-insured companies, which assume direct financial responsibility for the cost of medical claims and hire a third-party administrator to process them. Sixty percent of workers now are covered by self-funded plans, according to a 2011 benefits survey by The Kaiser Family Foundation and Health Research & Educational Trust. These firms are at the forefront of demand for better pricing tools so employees can make better choices.

If a consumer is bound and determined to get price information, they can on most procedures, says David Kelleher, director of The Employers’ Forum of Indiana, which addresses challenges such as price transparency. “It can be time consuming,” he admits. “We’ll never have a perfect system, but we can aspire to something better than we have today.”

WHY PRICING MATTERS

You might ask, “Why should I care about prices? I know what it’s going to cost — a $30 copay and even in a worst-case scenario, my annual deductible is under $1,000 and I pay just 20 percent after that.” But experts say you should care for many reasons, not the least of which is this: Your low copay, low-deductible health plan is a dinosaur, and extinction looms. The number of people with so-called “traditional” health plans — defined as having no deductible or one less than $1,000 — declines every year and now stands at 78 percent, according to the nonprofit Employee Benefit Research Institute in Washington, D.C. Meanwhile, in seven years, high-deductible plans have increased from 10 percent to 23 percent of all plans.

In particular, the growth of high-deductible plans coupled with health savings accounts shows no signs of slowing. These consumer-driven health plans have “no place to go but up,” says Paul Fronstin, a senior research associate with EBRI. “Employers are ... turning to them as one way to control their costs.”

Consumer-driven plans get their name because they shift more of the costs to patients. If consumers are footing the bill, so the thinking goes, they’ll be more conscious of price. Conscious health care decisions not only impact a company’s bottom line, but they also affect family budgets, says Dr. David Lee, Anthem Blue Cross and Blue Shield vice president of provider engagement and contracting. From 1996 to 2009, he says, the average out-of-pocket cost paid by American consumers for medical expenses rose 73 percent to $795.

Medical debt also caused 62 percent of all bankruptcies in 2007, a 50 percent increase from 2001, according to a study by researchers at Harvard University and The Ohio State University. Two-thirds of the filers were insured when they first became ill or injured, but large medical bills combined with a disabling illness often triggered the loss of jobs, insurance and, ultimately, bankruptcy.

Researchers anticipate the medical bankruptcy percentage will continue to grow because Americans are shouldering more of the cost of their care. This isn’t because they’re uninsured, but because they’re underinsured, defined as having outof- pocket medical costs of at least 10 percent of income or deductibles exceeding 5 percent of income. “The medical problems cascade into other problems and you end up [in] bankruptcy,” says Robert Lawless, professor of law at the University of Illinois and a contributor to the Harvard study.

‘LITTLE VISIBILITY’

Augustin “Augie” Hong knows what it’s like to face high health care costs. The San Francisco financial analyst woke up with severe abdominal pain, asked his wife to drive him to the nearest ER, and underwent a successful appendectomy. Hong didn’t worry much about the final tally for his three-night ordeal: $59,283 including $5,264 for the doctors. After all, he had insurance.

Then, he says, a representative with highly rated Anthem Blue Cross told him they’d pay only $31,409 because the hospital he used was “out of network.” Hong says he settled with doctors for $4,000, which still left him about $23,000 in debt. He took his case to the CEO and after showing proof of income, settled the bill for $2,000 for a total out-of-pocket cost of $6,000. “I want to pay my bills, but I want to pay bills that are fair,” he says.

Going to an out-of-network hospital was his mistake, he admits. “But in my defense, I ended up waiting for over 24 hours just to have surgery and in that time, my insurance was on file,” Hong says. “Nobody told me I was out of network. When I asked the people at the hospital, they said, ‘This will be covered under your insurance.’ That just wasn’t the case.”

Dr. Renee Hsia, an emergency room physician, led a team of researchers that found inflated charges for appendectomies in California.(Photo by Photo by Adm Golub)

Two years after the debacle, Hong says he isn’t angry with Anthem Blue Cross or the hospital, which he declined to name because he feels like the experience would have been the same at any out-ofnetwork hospital. But Hong says the health care encounter opened his eyes to the pricing conundrum. “There is very little visibility,” he says. “No other industry works like this.”

While Hong recovered from his crisis, the brush with medical debt shook him up. “You always hear hospital bills are the No. 1 cause of personal bankruptcy,” he says. “I can now see why that would be the case.” His advice: Prior to an emergency, find out which hospital in your area is in-network.

Hong’s initial question, however, remained unanswered. What is a fair price for an appendectomy? Hong’s friend Dr. Renee Hsia, an assistant professor of medicine at the University of California, San Francisco and an emergency room physician at San Francisco General Hospital, tried to find an answer and came up empty. She and a team of researchers studied 19,368 patient records statewide with similar cases and found hospital charges ranged from $1,529 to $182,955, with the median at $33,611. Their findings were published earlier this year in the Annals of Internal Medicine. “There is no method to the madness, no logic to the structure,” she says.

‘UNACCEPTABLE OPAQUENESS’

Even if Hong had selected an in-network hospital, he still could’ve been hit with out-of network charges from a radiologist, anesthesiologist or other specialist. Candice Butcher of Salem, Va., is CEO of Medical Billing Advocates of America who fell victim to this kind of charge at highly rated LewisGale Medical Center’s ER when her then 2-year-old son fell and cut his head. “They put two staples in his head,” she says. LewisGale is in her network, but the physician assistant who did the work wasn’t in her network, and the resulting charge for the stapling was about $727. “I appealed directly to the ER physicians group, stating that I had gone to an in-network hospital,” she says. The group cut the bill 30 percent.

Like many hospitals, LewisGale outsources its ER staffing, says spokeswoman Joyce Sutton, and that company bills patients separately. TeamHealth of Knoxville, Tenn., is the contractor at LewisGale and one of the largest providers of hospital outsourcing in the nation. It bought the previous contractor and did not handle Butcher’s case. TeamHealth spokeswoman Tracy Young says that, in most cases, they charge the hospital’s negotiated insurance rate and respond promptly to appeals.

Butcher is just one of many patients who’ve opened a bill and been shocked by these charges. The New York State Department of Financial Services investigated more than 2,000 consumer complaints in 2011 regarding surprise out-of-network charges. It found “unacceptable opaqueness” in the health insurance market and accuses emergency department out-of-network specialists of taking advantage of patients in crisis. “These providers charge excessive fees, some that are many times larger than what private or public payers typically allow,” says the department’s report.

Elmer Streeter, director of corporate communications for highly rated St. Peter’s Hospital in Albany, N.Y., says emergency out-ofnetwork charges can be confusing. But he points out that by federal law hospitals can’t ask about an ER patient’s ability to pay. Consequently, hospital staff won’t know if services are in-network — or not. “We can’t go over the specifics of payment until after treatment,” Streeter says.

The Affordable Care Act prohibits health plans created or issued after March 23, 2010, from requiring higher copayments or coinsurance for out-of-network ER services. However, the ACA does not apply to “grandfathered” plans created or issued before the new law went into effect. Also, the act allows out-ofnetwork providers to “balance bill” patients, charging them the difference between the amount they billed and the amount they received from the patient’s plan.

A SIMPLE QUESTION

To member Ed Hayes of Chicago, it seemed like a simple question to ask on his first visit to a new doctor for stomach problems: “How much will this cost?” But he says the staff of gastroenterologist Dr. Barbara Jung, who has one negative report on the List from Hayes, wouldn’t answer his question. “I was told they had no way of providing it,” he says. “It was the demeanor of the desk agent that got me. It was like, ‘How dare you ask me that.’” Then, he says, he got a bill for $460, or $287 out of pocket after his insurance adjustment.

Ed Hayes of Chicago battled eight months to reduce what he felt was an inflated medical bill. (Photo by Jay Madden)

Hayes disputed the charge because he says Jung coded his visit as if it were an extensive exam, which he felt was egregious for a 15-minute visit that yielded the advice, “Take Miralax [an over-the-counter drug].” After eight months and more than 20 calls, he says he got his bill reduced to $128. “It’s like buying a car and you sign a paper agreeing to pay whatever they want to charge,” Hayes says. “It’s absurd that this can happen.” Jung didn’t respond to requests for comment.

The bottom line is cost matters, Hayes says. Although his out-ofpocket maximum is a relatively low $500, he wants to spend his money wisely. If I’m comparing doctors, I need to know the cost,” he says.

FIGHTING ERRORS

Clara, who lives outside Aspen, Colo., watched her son, Christopher, die of esophageal cancer at the age of 46. With the pain of loss came the baffling medical bills. She hired three billing and medical advocates to help, and they found $150,000 in errors and overcharges. “It’s all exaggerated and based on the fact that they can make money if you don’t know what you are doing,” says Clara, who asked that her last name be withheld for privacy.

One of the most offensive charges, she says, came from Vail Valley Medical Center in Vail, Colo. She says they charged her son $135,000 for 20-minute radiation treatments five times a week for five weeks. “I thought that was outrageous,” she says. Vail Valley spokeswoman Lindsay Warner declined to comment about the case, citing federal patient privacy laws. But Warner said an audit committee reviews complaints about billing accuracy, and the hospital offers payment plans to all patients and financial help to patients who can’t pay.

Holly Wallack, owner of Administrative Solutions Plus in Miami Beach, Fla., says she confronted Vail Valley with evidence of errors and double billing and got the total charge reduced to $65,000. “I’ve never seen a bill without a mistake,” she says, adding that double billing is rampant. For example, if a patient has one surgery to remove tonsils and adenoids, it will be billed as two separate procedures with double charges for everything from anesthesia to gloves and sponges, even though surgeries were performed together.

Advocates typically work on contingency, charging 15 to 35 percent of the savings, Wallack says. “I usually ask for a $70 to $240 deposit upfront,” she says. “If I don’t save them anything, they get their money back.” To help avoid errors, she recommends calling providers and insurance carriers to confim cost estimates and medical billing codes for the procedure.

HAPPY TO NEGOTIATE

Patients at Gastroenterology Associates of Cleveland Inc., which is highly rated, fall into two broad categories: those with small copays or deductibles and those with no insurance or with highdeductible plans. The former rarely ask upfront about costs, the latter almost always do, says practice administrator James Andrassy. “The savvy ones who are self-pay will say, ‘What kind of deal can I get if I pay cash?’“ he says. Andrassy says he’s happy to negotiate. “[But] we can’t go less than what Medicare pays us,” he says. His staff will also estimate costs upfront. Rather than dodge the bill later, he suggests patients ask about reduced rates and no-interest payment plans: “I’d rather work with a patient ... than give it to a collection agency.”

Dr. Cathy Yoder examines patient Linda Speziale at Southside Family Medical Group in Indianapolis.Yoder works with her patients to find the least expensive prices for lab work and scans. (Photo by Brandon Smith)

Family physician Dr. Cathy Yoder, owner of highly rated Southside Family Medical Group in Indianapolis, says she’s also seeing an increasing number of patients with high-deductible plans. She says she encourages patients to shop for the lowest-costs. “The places people can save on health care are tests and labs,” she says. “I give them the phone numbers to price-check. There’s a huge difference in lab costs.”

Highly rated Henry Ford Medical Center in Detroit offers price specialists who will work with patients to create estimates based on their insurance. The specialists receive about 10,000 calls a year, says Gail White, manager of Henry Ford’s Network Financial Clearance Department. “Patients want to make the right medical choice, and in order to do that, they need information,” she says.

TRANSPARENT FUTURE?

Obstacles to price transparency remain legion, and probably never will go away completely, says Rebecca Palm, co-founder of CoPatient.com, a Portland, Ore.-based billing resolution company that offers free medical bill analysis. She likens it to the U.S. Tax Code. “If you want to look up the tax rate for your income bracket, it’s pretty straight-forward,” she says. “But there are thousands of pages of fine print that can influence how your tax rate gets applied — if you have a house, kids, and 30,000 other factors. It’s that behind-the-scenes complexity and not just that list price that contributes to the problem.”

Palm says the reasoning behind rising deductibles is to make patients have some skin in the game. “The question is still out, ‘What tools do they have to actually become better consumers?’ That is something we need to think about and focus on.”

Employers are perhaps the biggest driving force behind transparency, and insurers are taking notice. According to a 2012 survey by consulting firm Towers Watson and the National Business Group on Health, 15 percent of employers require their health plans to include price information. Another 22 percent plan to do so next year.

Aetna’s price estimator tool allows members to see the fees it negotiated with each doctor in its networks: Doctor X’s negotiated rate is $750 per colonoscopy, Doctor Y’s rate is $900. Cambia Health is doing the same thing in the Pacific Northwest.

A few states have even taken steps to help consumers get pricing on some procedures. Maine requires insurance companies to share payment data, which it compiles and publishes online. The information can be narrowed by ZIP code and hospital. However, the site is limited to about 30 procedures. The program is modeled after one in New Hampshire, one of five state efforts singled out in a 2011 Government Accountability Office report on the state of pricing transparency. The other states are California, Florida, Massachusetts and Wisconsin.

While many private and government entities are making strides in pricing transparency, it’s still an imperfect system, says Anthony Wright, executive director of the nonprofit Health Access California, which lobbies for transparency. “We haven’t fixed the core problem, which is that the prices in health care have no relation to either what the services cost to provide nor to what most people pay,” he says.

Chris Riedl, head of consumerism and product innovation at Aetna, says while the numbers of patients price shopping are still small, they are growing quickly, especially for services like CT scans, colonoscopies and MRIs “where quality is relatively comparable across the different provider types.”

After surprise health care prices for his own family, Dr. Jeff Rice founded Healthcare Blue Book, a national online tool to help consumers find fair prices for health care.(Photo by John Walker)

For many other health care services, cost is one of several factors they consider. “Convenience, location, friendliness of the office staff, these certainly are heavy influencers,” she says. “Health care decisions are very personal.”

This year, Jeff Rice celebrates the fifth anniversary of Healthcare Blue Book, the web-based tool helping consumers find local or national fair prices for health care. He founded the company after being charged $200 for a simple cholesterol test that should have cost about $20. “As a physician and managed care executive knowledgable about the system, I still got completely taken advantage of,” he says. “I thought, ‘If I just told patients what I knew about health care, they could save a lot of money.’” To help patients negotiate costs, Healthcare Blue Book analyzes insurance payments to doctors and considers the average of payments for a procedure the “fair price.”

Rice says that getting costs from a health care provider continues to require persistence, however. Two years ago, his son, Jack, needed foot surgery. He knew the surgeon he wanted to use and called the hospital to get an estimated cost. “Once they figured out what my health insurance was and my network, they said it might be between $15,000 and $25,000,” Rice says. He followed up with the surgeon to see if he could do the surgery at another facility outside the hospital, and the doctor said yes. “I called them, and they named the exact price: $1,550."

— with additional reporting by Gretchen Becker and Michael Schroeder