May 14, 2013|Categories: Analytics and Research
According to the latest census, nearly 85% of Americans have some form of health insurance. We know that the implementation of Obamacare will result in an increase in this number, but we have no guarantee that the additional costs associated with better access to care will be counteracted by improvements in overall health.
Of course, we are hopeful that health care reform will help (and, at least not hurt), but we believe a simpler approach to cost containment would be to bring the most American of pastimes to health care: shopping. Today with the intricacies of, and variancies in, medical billing, patients simply have no insight into the actual costs of care. And the information that consumers can access about the quality of available physicians and facilities is woefully inadequate.
In every other market of the U.S. economy, consumers have the ability to compare prices—but not in health care. Need a colonoscopy? Well, it turns out the cost of that single procedure can vary by a factor of four or more right in your own neighborhood. The athenahealth point of view is that the ability to shop begins with information, and that pricing transparency is a great place to start. (Side note: The idea of transparency has recently been getting increased exposure in the national press).
Health care prices—referred to as “contracted rates” or “allowed amounts”—are largely determined by contractual agreements between insurance companies and health care providers. Let’s put a fine point on this: the charges established by health care providers may have little bearing on what the insurance companies will actually pay. In many cases, providers receive contracted rates under their fee schedule in exchange for participating in the company’s plan. So what are the “real” rates?
Actual commercial contracted rates are some of the best kept secrets in health care, and while we guard individual provider data with our lives, our massive database allows us to compare and benchmark contracted rates across 40,000 providers, in all 50 states. We can access medical billing rates for commercial payers, Medicare and Medicaid, and have done so: the result can be explored in a new app we’ve developed called CodeView.
CodeView displays the maximum, minimum and average dollar amounts that insurers pay providers. Why does this matter? Because having access to accurate price information is essential to decrease cost. Furthermore, as any free marketer knows, having visibility to the differences in prices is key (we won’t get into the issue of private vs. single-payer systems). Those differences, the gaps, are what CodeView really attempts to highlight.
CodeView Data – The Big Picture
On average for ambulatory / physician services, across all levels of procedure complexity, we generally see an expected pattern for pay: Medicaid rates are less than Medicare rates, and Medicare rates are less than Commercial Payer rates. As seen in this first chart, the median cost for a procedure increases as the procedure’s complexity increases:
Note: Complexity is measured numerically here by Medicare’s total RVU, or Relative Value Unit, which typically serves as a basis for how much a provider should be reimbursed for a procedure or service, and incorporates complexity factors.
It is generally understood that commercial payers have a much wider variation in contracted medical billing rates than Medicare for a given procedure. What surprised us a bit with this data is that some providers are actually paid less by commercial insurers than by Medicare, for the same procedures. You can see both of these phenomena in CodeView for procedures ranging from office visits to complex cardiology imaging procedures. Here’s how the 25th percentile to 75th percentile ranges compare for Medicare and commercial payer rates, for a handful of procedures:
It’s hard to imagine the price of anything outside of health care varying so broadly. If you rename a ham sandwich a Croque Monsieur, maybe you can go from $7 to $15… but the variability on display here says one thing: opportunities to decrease health care expenditures could benefit from a little price transparency. Say what you will about governments as payers, but they do drive a better bargain.
To dig further into CodeView data, let’s compare rates for a cardiology imaging procedure known as a Myocardial Perfusion SPECT. (Note: If you’d like to follow along using CodeView, you will have to change the specialty you’re viewing to ‘Cardiology,’ or use this direct link. According to our data, Medicare says a doctor is typically owed between $489 and $531 for this procedure, depending on the region of the country where it was performed. Medicaid rates vary by state, but we typically see that they are 50-90% of Medicare rates; this particular procedure falls on the lower end of that range, as Medicaid payers typically allow between $206 and $294 for this procedure.
The commercial market is where we really start seeing a huge variation. While the 25th percentile seen here (at $407) is below that of Medicare, the median rate from commercial payers for this procedure was $520, toward the upper end for Medicare. And at the 75th percentile for commercial payers’ reimbursement, caregivers received $686 for this procedure, illustrating that many private contracts are paying far more than Medicare.
CodeView: Bringing More Transparency to Healthcare Prices
Here’s the simple, obvious summary: Health care spending across the country is rising. Patients’ responsibility is growing and doctors are on the hook to collect that rising share of revenue. Wouldn’t it be great if patients, doctors—anyone—knew how much a service actually cost? Surfacing this information is just another step in demonstrating the power of athenahealth’s data in bringing transparency and openness to health care. Explore CodeView and you’ll find that we’ve highlighted the most common procedures for several specialties, across all regions of the country.
You can access the CodeView app here. Take a look. What do you see that surprises you? What data do you want to discuss with us?