by Marty Makary
Why does our health care system treat ordinary people like criminals when they are out-of-network? Dina was in pain and trying to survive a scary situation. Out-of-network patients are ordinary, hardworking, insured Americans who are terrified that their medical condition might be serious. They are not cheaters.
Soon after checking in to the emergency room, I warned Dina, she would be given a famous form to sign. The single document was really two contracts blended together for a reason. It would get her to agree to two things with one signature. First, that she agrees to be treated. No problem there. Second, it would say she agrees to pay 100% of whatever is charged. That could be a problem. Federal law requires a hospital to care for urgent and emergent patients whether they agree to pay or not (the EMTALA law). Patients should obviously pay a fair price for their treatment, but too often this is a rigged game. The hospital charges don’t have to be reality-based. The amounts they accept from insurance companies don’t have to be disclosed. The price the patient will pay is not shared before treatment takes place. This isn’t like other consumer transactions in which people pay for services.
Sure enough, within 15 minutes a hospital representative came by her room in the emergency department and asked her to sign the form I predicted would rear its head. But this one was on an iPad, which made it impossible to modify. I told the hospital representative they needed to find a paper form for her to sign. And in the meantime, I had her write on a piece of paper I pulled off the copy machine that she consented to be treated and sign the paper, what we surgeons call a battlefield consent form.
After a lot of commotion, they printed the form. Sure enough, it included a clause that said she would sign away her financial life before seeing any of the bills. She crossed out the clause and then signed. She had a minor operation, recovered quickly, and went home a few days later.
Weeks after Dina left the hospital, the bills started pouring in. When you added them up, Dina’s out-of-network bill came in at $60,000. Dina called the billing office and asked for help understanding her bill. She spoke to someone in a call center that wasn’t even located in the same state as the hospital. Per the typical routine, the call center representative couldn’t provide any insight. But she did manage to pile on the guilt for Dina’s out-of-network status.
Dina signed an authorization form so I could step in and negotiate for her. As was the case when I had intervened on behalf of my sister’s friend Heather, the hospital would accept the form only via fax. I had to drive to a UPS store to send it. After jumping through hoops, including paying a $25 fee to get an itemized bill (again, payable only by a paper check sent in the mail), I finally got someone on the phone. Time to play the game.
What they didn’t realize is that I had been able to find out how much the hospital would have taken from an insurance company for the same procedure. I used a website called HealthcareBluebook.com, which shows the typical rates hospitals get paid for various common operations. The site showed me that the fair price, the one the hospital actually takes from in-network patients, is about $12,000.
The hospital had charged Dina a 500% markup. Her crime was being out-of-network. Did it cost them more to do her operation? Absolutely not. I steeled my nerves and got ready to haggle as if I was back in the Egyptian bazaar in the heart of my beloved Cairo.
The hospital had charged $60,000 and demanded the full price. That wasn’t reasonable.
“Would your hospital be willing to accept $12,000 for the same service for an insured patient who is in-network?” I asked the representative on the phone.
The woman got upset. “We can charge someone out-of-network as much as we want,” she told me. “The law says we can.”
Testy. That’s to be expected. The Egyptian vendors at the bazaar always make a show out of being offended, too. It’s how the game is played.
I asked to speak to the director of revenue cycle for the hospital. At first, they said I could not. I had to talk to a supervisor and explain that I was a doctor. The director called me back a week later.
I told him that Dina didn’t have a contractual obligation to pay, which she didn’t, because she had struck out the clause saying she’d pay whatever they charged. I added that the law prohibited collections agencies from hurting her credit if they did not have a contract for services.
The hospital director then made a big show of offering Dina financial aid. But mind you, this wasn’t an act of generosity. The Affordable Care Act requires hospitals to have financial assistance policies, and sets parameters for what a hospital can do. The rules say hospitals are not allowed to discourage patients from receiving emergency care by such stratagems as requiring up-front payments. They’re also not allowed to charge patients who qualify for financial aid more than they would charge a typical insured patient.2 There are various ways this can be interpreted, according to the consumer advocacy organization Community Catalyst. Hospitals are required to publicize the policies far and wide—online and in print copies that are on display for patients and visitors.
The hospital director acted as if he was doing Dina a favor by offering financial assistance. He built the gesture up as an act of kindness, then proposed a 10% discount. Never mind that the bill had been marked up 500%. That’s like a merchant at the bazaar telling a tourist she can pay $90 for the trinket that’s priced at $100 but worth a buck.
He also said they could put her on a monthly payment plan. How generous.
I told him it would be only fair for Dina to pay the hospital the same amount it accepts for other patients: $12,000.
“I can do $30,000,” he said. With five words, he slashed the bill in half.
I asked the director what an in-network insurance company would have paid for Dina’s bill. As I expected, he said he wasn’t allowed to disclose his discounted rate with any insurance company.
“Look, if Dina can pay $30,000, I’ll write off the difference,” he said, trying to close the deal.
“She can do $12,000,” I replied.
“How about $25,000?” Surround him with camels and pyramids and he’d be right at home in the bazaar.
“She can do $12,000.”
“How about $20,000?”
“She can do $12,000”
“How about $19,000?”
I said no, thank you, and have a nice day.
Sure enough, Dina’s bill got sent to collections. When the collections agency called, I had prepped her to ask the agent to send her a written record of her obligation to pay the bill. Dina had deleted the portion of the agreement that said she had to pay whatever they charged. The bill collectors never called back.
My friend, who had no legal obligation to pay anything, instead made a $5,000 donation to the hospital as a part of its fundraising drive. That’s enough to get her name on the facility’s wall of generous donors. I went back to the surgeon who did her operation and it turns out he had no idea what the markup was and how the patient was shaken down. Dina paid the surgeon’s part of the bill, but he sounded embarrassed by it all.
And, frankly, it is embarrassing. Health care doesn’t have to be so different from any other business in America. Imagine you see an orange in the supermarket with no price on it. You take it to the register to get a price check.
“How much for the orange?”
“You have to buy it to find out,” the cashier says.
You’re hungry, so you buy the orange. But you recoil when you see the cashier has charged your credit card $500. And there are no returns.
If that happened at the grocery store, you would be outraged. But that’s how our current health care system operates. You can’t see the price until after you’ve had the service or operation or test. That’s understandable if you come in to a hospital with trauma or sepsis in the ICU. But most health care services delivered in the United States are predictable, that is, “shoppable.” That is, you come in for a knee replacement and you leave with a knee replacement. So why can’t people get a price quote for
medical services?
What if hospitals published a menu of prices for the common nonemergency procedures they offered? Dina could have been diagnosed and given a price for the procedure she needed. She could have accepted the price and agreed to pay it. Or perhaps, because she did have time, she could have checked nearby facilities to see what they charged for the same operation. She could have shopped for the best deal, just as she does in other aspects of her life. It would have been a fair transaction that helped her understand health care costs. And the openness would also spur hospitals to compete with one another based on cost and quality. It would bring down the prices.
Dina’s experience is repeated every day across the country. It happened to Jeffrey Rice, too. He decided to do something about it.
Healthcare Bluebook
Jeffrey founded Healthcare Bluebook after he became a victim of the game. I could see the power of his company’s work after my experience with Dina. I traveled to Nashville and met him at a diner that oozed Southern charm and hospitality.
Jeffrey’s story began when his 12-year-old son hurt his ankle and needed elective surgery to lengthen his Achilles tendon. Jeffrey is not your average Nashville dad. He’s a doctor who practiced medicine and worked in hospital administration. In addition to his MD, he also has a law degree from Duke University.
His son needed a standard procedure. Jeffrey looked up the billing code and called the hospital to ask how much it would cost. The first place he called said it would be $37,000, but not to worry, his insurance would pay most of it.
That didn’t sit right with Jeffrey. He had to pay the first $5,000 himself because of his deductible. He became curious about the system and asked how they came to their price. He knew of other, much more invasive procedures that didn’t cost as much. Since he had the billing code, he wondered if they could cut through the fluff and explain why it cost so much.
The hospital representative got flustered and said she would call him back. When he got the return call, the price had dropped to $15,000 once she factored in a possible network discount. Again, the hospital employee assured him his insurance would pay everything above his $5,000 deductible.
Jeffrey said “Thank you” and called the surgeon who would be doing the operation. “Do you do this same operation at any other facility?”
Surgeons often work at multiple hospitals. And sure enough, this surgeon said yes. The surgeon directed him to a different facility and assured him that the operation would be the same quality at either place. Jeffrey called the new facility for a quote and they told him $1,500. His son had the surgery at that facility and everyone left happy.
Jeffrey mulled over the experience in the following months. He couldn’t let it go. The first price quote had been almost 25 times as much as he eventually paid for the same procedure. He had medical and legal degrees and had worked in both hospital and health plan administration, and he had barely managed to navigate the system to get a fair price. How would anyone else have a chance? When you buy a car, you can check the Kelley Blue Book to see the fair price. But nothing like that existed in health care.
Jeffrey decided to start his own company showing the “fair price” for common medical procedures and tests. Healthcare Bluebook collects pricing data from partnering employers who self-fund their health care, reviews all the prices that different patients pay, and uses them to establish a fair price amount.
Employers that partner with Healthcare Bluebook are able to flag the price gougers in the market to their employees and point them to a fair-priced provider. Jeffrey and his team categorize every medical center and doctor in an employer’s area based on their markups. Each medical facility gets a rank of green, yellow, or red, rated on prices and a composite quality score.
Bluebook has an incentive program that rewards employees with a bonus check of $50 if they choose a facility with a green rating. If patients choose an MRI test at a facility where it costs $400 instead of another imaging center where it costs $1,500, the patient gets a check. Patients still have total freedom of choice but get rewarded for shopping wisely. The business model is genius: If an employer saves $20,000 as a result of a patient’s choosing a fair-priced hospital over an overpriced hospital, why not share the savings? Using this model, patients and the employers paying for their medical care are aligned in a way that doesn’t discourage patients from seeing any provider they want. Healthcare Bluebook cracks the code on aligning the patient with an incentive to choose fair-priced care without compromising quality.
Getting patients to shop wisely is a milestone in health care. A large study by the group RAND found that when patients who are not paying for their medical care can choose between lower-cost and higher-cost care, they choose the more expensive care. They assume the more expensive, the better, a correlation that may work in other industries. But that’s not the case for many types of treatment in American health care.
Employers love Healthcare Bluebook and pay for the service because they may be saving the difference between $37,000 and $1,500, just as Jeffrey did when he shopped for a hospital for his son’s operation. More than 4,500 employers have now signed on to the service, and the number is growing. Healthcare Bluebook makes it easy for your employees to both know the fair price for medical procedures and find the nearest health care providers that offer fair prices. Patients shopping for care will seriously disrupt the business of medicine in America.
A Legislative Beam of Hope
One day I received a call from a Florida legislator who read my last book, which is about accountability in medicine. He asked me to talk to their legislators about the potential impact of transparency to transform medicine. They were interested in making health care prices public. That phone call led to three trips to the state capitol in Tallahassee, where I met Representative José Oliva, as well as Speaker of the House Richard Corcoran, Senator Rob Bradley, and a host of bipartisan members. Unlike other political leaders I had encountered, these legislators were serious about using sunlight as a disinfectant. They wanted to disrupt the money games of health care with transparency. “We heard from people whose lives were radically changed by high bills,” Representative Chris Sprowls told me.
Ultimately, with strong support from Governor Rick Scott, the elected leaders passed a milestone law. It requires hospitals to show the average amount they are being paid for procedures, not just how much they charge. This is game-changing, because other attempts at price transparency have required hospitals to show only sticker prices, not the discounted amounts they have been secretly accepting. The prices are now viewable at FloridaHealthPriceFinder.com. So, for example, if you need a knee replacement, you can go to the site and see that the average cost in Florida and nationwide is about $35,000. The site doesn’t have facility data published yet, but it’s coming. Florida is doing something big.
During one of the hearings for the bill, Florida health care lobbyists urged the legislators to publish only charges—the sticker price, which is much higher than what they’d accept from an insurance company. They didn’t want to publish what they actually got paid.
That would be “comparing apples and automobiles—they are radically different things,” Sprowls said. “They’re not even in the same genre. Chargemaster prices are imaginary numbers that rarely get paid.” I was impressed that he and his colleagues had a command of this distinction—one at the dark heart of health care’s cost crisis. We spend enough money on health care in the United States that we should be able to cover every citizen. “It’s the waste that strains the system,” Sprowls added.
Price transparency alone will not solve all the problems of predatory screening and unnecessary medical care. But it could save the health care system hundreds of billions of dollars currently being wasted on the game. In the words of senator and physician Tom Coburn, getting price transparency right is the first step in fixing health care because it ushers in quality transparency. We need to see prices, so patients and health plans can determine whi
ch facilities are operating in a way that’s efficient, and which are just trying to maximize their profit. It’s common sense.
Those who want to do their part to solve our health care crisis should work with their state representative to pass the same price transparency law that’s now taking effect in Florida. New Hampshire has done the same, seeing the futility of requiring sticker prices to be public and instead requiring what is actually paid to hospitals to be information that is available. FAIR Health is one New York–based nonprofit also advancing transparent pricing for health care.
From all my experience traveling to Washington, D.C., Oklahoma, Wyoming, and Florida and visiting with people on the front lines of health care, I’ve become convinced that American businesses and households want honest medical care at an honest price. Doctors have earned the trust of patients over centuries, but now that trust is threatened. Dr. Jeffrey Rice, and current Speaker of the Florida House José Oliva, make me optimistic about American health care. It’s my hope that these disrupters and others will make markets rational and efficient rather than secretive and predatory.
CHAPTER 13
Buying Health Insurance
The limo driver pulled the shiny black Audi A8L up to the office of a small lumber manufacturer in North Carolina. He put the car in park and walked around to open the back door. David Contorno stepped out, dressed to the nines. Contorno was not a Wall Street banker or high-powered attorney. He was the company’s health insurance broker.
Contorno left his chauffeur to wait by the car. Upon entering the office, he strode confidently toward the meeting room, flashing his perfect smile and shaking hands along the way.
Contorno was there to do what he did so well: explain why the price of health insurance was going up—and get his clients to renew their health insurance contract. Though Contorno had the title of independent broker, he, like most brokers, got paid tens of thousands of dollars in kickbacks from health insurance carriers for every renewal or new client he secured. Perhaps as a result, he adapted his sales pitch to subtly guide the lumber manufacturer to renew at the higher rates. He had mastered the art of steering employers to the insurance options that brought him the highest return. He failed to mention other insurance options, including buying insurance plans or the popular option for an employer to self-insure their employees’ health care expenses. For Contorno, getting businesses to renew was relatively easy, and his bank account reflected that.