Bad Bills

Kudos again to Elisabeth Rosenthal of The New York Times.   Over the past few years she has written several enlightening articles about the high costs (and prices) of our health care system.  In a recent analysis, she turned her attention to the bills themselves.

Ms. Rosenthal notes that, through her prior work, she's learned a lot about what medical bills mean, yet she admits that she has trouble understanding some of the bills she runs across.  Moreover, as she says, "I continue to be baffled by how we’ve come to tolerate the Kafkaesque stream of nonexplanations that follow health encounters."

She quotes the executive director of the American Medical Billing Association:

"There are no industry standards with regards to what information a patient should receive regarding their bill.  The software industry has pretty much decided what information patients should receive, and to my knowledge, they have not had any stakeholder input. That would certainly be a worthwhile project for our industry."

Think so?

The problem, of course, is that patient bills have been the afterthought.  Since health care providers get most of their revenue from third party payors, billing systems have been designed to meet their needs, not patients'.  That has resulted in a medical billing arms race, so to speak.  The payors, concerned with over-utilization and potential fraud, insisted on ever-more detail, while the providers increasingly used fancy billing software to squeeze every potential dollar out of each patient encounter.

As long as insurance was paying virtually all of the bill, patients didn't much care; either they didn't get a bill, or the resulting bill showed little or no remaining liability.  Now, though, we're in a world of high deductible plans, coinsurance, and unexpected out-of-network charges (a recent Kaiser Health poll found preventing such charges the third highest priority, and some states are already starting to act, such as New York).

If consumers didn't care about those pesky bills before, they do now.

A 2014 report from the Consumer Financial Protection Bureau concluded: "Medical bills can be a cause of confusion and uncertainty and can result in collections tradelines for consumers who are uncertain about what they owe, to whom, when, or for what."

The CFPB says that slightly more half of collection efforts on credit reports are from health care providers.  Medical bills are much more likely to be sources of complaints than non-medical bills.  No wonder: a fifth of those with "collection tradelines" have only medical bills -- and 50% of those have otherwise clean credit reports.  In many cases, the CFPB found, consumers with outstanding medical bills aren't even aware they are in collection.

The ironic thing is that, for all their supposed sophistication, medical bills are often wrong.  Estimates of how incorrect they are range from 49% to 90%.  It shouldn't be surprising that, in addition to those armies of provider and payor billing specialists, there is a growing industry of medical billing advocates to help consumers deal with their medical bills.  These aren't people to help you get better care, mind you; their role is simply to try to level the billing playing field with the providers and/or payors.

It's crazy.

I've come to realize that health care suffers from Stockholm syndrome.   We've been held hostage by our consumer-unfriendly billing processes for so long that we've come to accept them, whereas the plain truth is: it should be easier.

In a new report, PwC calls current health care billing an "inefficient antique," or, even more colorfully, "A horse-and-buggy in a world contemplating driverless cars."  They conclude: "The system needs more than patches, bolt-ons and retrofits: It needs structural change."

They're right.

I am not a billing expert.  CPTs, HCPCS, DRGs, RBRVS, ICD-9/ICD-10; it's all just jargon to me.  I know only enough about the various coding schemes to know that I don't have much desire to know more.  More importantly, I shouldn't have to.

We're not going to scrap the massive investments in billing and claim processing systems overnight, but we can do better for patients.  Here are a few suggestions on how to start:

Change Charges: The era of fee schedules and negotiated rates has made provider charges largely irrelevant.  Many providers have allowed their charges to get wildly out of relation to either their costs or to their negotiated rates, which mean they can reap windfalls when they can find suckers who actually have to pay them.  

My first suggestion: make charges more realistic.  Providers, throw away your inflated charge structures and replace them with price lists you wouldn't be embarrassed to disclose.  Which leads me to my next point... 

Disclosure: Medicare and many states have mandated disclosure of charges for common services.  Of course, few consumers actually look at those, and even if they did, the charges bear so little resemblance to what they will end up being charged that they are often more misleading them helpful.   

So let's make it a rule: at time of service, providers have to disclose their charge for that service.   

Providers have been hesitant to do this, complaining that they don't usually know what the patient's insurance plan will allow or what the remaining patient obligation will be.  Fair enough.  But providers should know their own charges.  If they are way out of line with the insurance allowance, well, shame on them. Providers should act as though the patient is buying direct and tell the patient how much they think their service is worth.  It would be interesting to see how often patients agree.

Oh, and if the services in question come in part from other providers, their charges need to be disclosed at the same time.  If it happens in your office or your facility, you're responsible.  

Simplify: Yes, I know there are tens of thousand of codes that can be used in delivering health care services, and ICD-10 is about to explode that number.  More clinical detail may be helpful in a Big Data world, but all that complexity is at cross-purposes with helping consumers understand their care and its cost. 

My third suggestion: shorten the list of services.   I bet most providers could narrow their set of services to a much more manageable list, at least on the consumer-facing side.  I mean, how many types of office visits should consumers have to understand?  

The above don't require huge systems changes, but they would require a significant mind-set shift for providers:  treating patients like they are, in fact, the consumer.   Walmart gets it, retail clinics get it, and PwC says the affluent and millennials are most likely to demand it.  Which providers are arrogant enough to think they don't need to change?

The fact that health care is complex does not inherently make it unique from other goods and services.  We shouldn't just accept that its bills can't be easier to understand.  Getting consumers to take more responsibility for their health is hard enough; bills shouldn't make it harder.

At the risk of overextending this literary metaphor, instead of settling for a Kafkaesque medical bill, we should be aiming for more of a Hemmingway style ("simple, direct, and unadorned").