Most employees think they need to pay top dollar for quality healthcare. However, this isn’t the case.
Price is not an accurate measure of healthcare quality. From misaligned incentives and poor care coordination to complicated provider-network contracting, it can be extremely difficult for employees to navigate this cost-quality disconnect on their own. As a result, employees may: 1) overpay for quality care; or 2) overpay and NOT receive the quality care they deserve.
There are four reasons for this disconnect between cost and quality in healthcare:
- Misaligned Incentives: There was a famous study published in the Journal of the American Medical Association that showed that hospital revenue increased if a patient had an avoidable complication. In other words, the more surgical complications patients had, the more the hospital got paid because they either had to have a longer hospital stay or were readmitted after being discharged.
- Poor Care Coordination: The Dartmouth Institute of Health Policy reported that having more physicians involved in care increased cost, but didn’t always lead to better access or quality of care. Patient outcomes actually suffer because having more physicians involved increases the likelihood of miscommunication and mistakes.
- Unnecessary Specialists: Having specialists involved in a procedure increases the cost of the procedure and doesn’t always increase the quality of care. For example, The New York Times published an article entitled “The $2.7 Trillion Medical Bill” that revealed that the number of anesthesiologists who perform sedation during colonoscopies has doubled from 2003 to 2009. Typically, colonoscopies use conscious sedation, which is administered by the gastroenterologist. Having an anesthesiologist administer conscious sedation doesn’t reduce complications or improve the outcomes –it just adds to the cost of care.
- Provider-Network Contracting or the way doctors, hospitals and insurance networks negotiate their contracts is largely separated from quality of care. This quality and cost disconnect can be seen in four ways:
- Technology Disconnect: You might think newer medical technologies provide better results and are more expensive – but this isn’t always the case. For example, an MRI with a 3-tesla magnet provides higher image resolution than a MRI with 1.5-tesla magnet. Yet In the Dallas area, the contracted rate for a 3-tesla MRI is $866 at one hospital, while the contracted rate for a 1.5-tesla MRI is $2,300 at a different hospital. Employees are actually paying 200 percent more for lower-resolution imaging. Why is this the case? Provider-network contracting.
- Inpatient vs. Outpatient: Contrary to popular belief, outpatient surgery can be more expensive than inpatient surgery. For example, an arthroscopic knee surgery can be performed by an orthopedic surgeon as outpatient/same-day surgery or as elective surgery with an overnight stay. Yet having the same surgery, at the same hospital with the same surgeon might cost $7,000 as an outpatient procedure and only $1,900 for elective surgery. Why? Because of the way the contract is structured between the hospital and the insurance network. An overnight stay is contracted at a fixed medical/surgical day rate between $1,500 and $2,500, while outpatient surgery is contracted as a percent of charges. In this case, the total cost is 50 percent of the total billed charges which might total $14,000 or $7,000.
- Hospitals vs. Surgery Centers: Where you have a test or procedure may also drive the procedure cost. For example, if an arthroscopic knee surgery is performed at a hospital as an outpatient procedure, the allowed amount for the facility might be $6,600. The same surgery performed at an ambulatory surgery center (ASC) might charge $1,900 because the ASC has a lower negotiated rate with the insurance carrier. The fee for the anesthesiologist and the surgeon would be the same, regardless of where they do the surgery. Even if the ASC has the same name as the hospital, it might be a joint venture that bills through a separate tax ID number than the hospital.
- Difference Among Hospitals: The procedure price may also differ based on the hospital where it’s performed. For example, a single-level disc fusion for a herniated disc with a 1- to 3-day hospital stay costs $18,800 at Hospital A, $13,500 at Hospital B and $7,200 at Hospital C. All three hospitals could be in the same town or even in the same area with the same surgeon. The difference in cost is the result of how the hospitals negotiated with the insurance network.
The Takeaway: By doing their homework and working with their Compass Health Pro consultant, employees can save on their out-of-pocket costs, and still receive high quality healthcare. Price is almost never a good way to determine the quality of healthcare services.Price is almost never a good way to determine the quality of healthcare services. Click To Tweet
To learn more:
- Watch Dr. Bricker’s webinar, “You Don’t Have to Pay Top Dollar for Top Quality Healthcare”
- Watch Dr. Bricker’s webinar, “The Healthcare Quality-Cost Disconnect”
- Read Compass blog: Healthcare Quality – Cost Disconnect
- Watch Dr. Bricker’s webinar, “Are You Paying Too Much for Preventive Care”
To learn more about how Compass helps employees at more than 2,200 employers become empowered healthcare consumers, please watch this short video: