Transparent Healthcare Costs: All-Payers Claims Databases
Donna Marshall, CEO
August 24, 2018
Two recent articles caught our eyes: the first, by Chris Skisak, Executive Director of the Houston Business Group on Health, is “Simple, transparent & efficient – Fixing our broken health care system”; and the second is a Wall Street Journal article, “What does Knee Surgery Cost? Few Know, and That’s a Problem.” Mr. Skisak needed bilateral cataract surgery but getting a clear answer to the question, “How much will it cost?” was anything but simple. In the second article, the featured hospital spent 18 months just calculating the cost of a routine knee replacement.
Employers pay the bulk of healthcare for working Americans and their families, to the tune of nearly $1.2 trillion in 2017. So, how is it that we don’t ask how much we will be charged for services when those dollars might be used for wages or company infrastructure instead?
In the WSJ article, employer Jeff Weiser of Wieser Brothers contracting company says he is puzzled why the healthcare industry does not track costs and prioritize efficiency in procurement and service delivery. Mr. Weiser’s company is a member of the nonprofit employer coalition in Wisconsin, The Alliance, and welcomes the newly negotiated 30% savings for this surgery at Gunderson Health Care of LaCrosse.
What is Costs vs. What You Pay
Mr. Skisak wanted to know how much he would pay. To his dismay, his clinicians and the surgical center informed him they would bill far more than Medicare would allow. Medicare sets rates — much as The Alliance set a rate for knee replacement surgery in Wisconsin. Medicare rates are published online, just like products at any online retail site. Mr. Skisak was finally informed that the physician would bill more than three times what Medicare would pay for and that the surgical center would bill more than 10 times the Medicare cost: more than $10,000 compared to the $979, even though the doctor and surgery would never get paid that amount from Medicare. This is a common, but not harmless, practice: commercial plans and people without insurance are stuck with these high charges that bear no relationship to the real costs.
In fact, many commercial health plans negotiate a rate that is a “percent of charges” for inpatient services. So, employers are falsely reassured that they are getting a great discount, but that discount is calculated on a mysterious and ever-increasing price basis. The hospital in Wisconsin admitted to raising their rates 3% per year for the last decade, resulting in average charges of more than $50,000 for knee replacement. The real cost? Just over $10,000, according to their own study.
What will you be charged for common tests and procedures? Are you motivated to save yourself and your employees thousands of dollars?
All-Payer Claims Database (APCD)
Most U.S. employers and employees cannot find out common charges for common procedures. The healthcare industry has not been willing to make these data available, and there has been little consumer pressure to reverse this practice. Enter the role of the All-Payer Claims Database (APCD). An APCD aggregates, analyzes, and reports paid claims from health plans, Medicare, Medicaid, and third-party administrators. It maintains the privacy of individuals while identifying costs and utilization by facility, procedures, location, public-vs-private payers, and the quality of services.
What states have APCD resources? At last count, according to the APCD Council, only 17 states have mandatory APCDs in place, four have voluntary efforts, three are in implementation, and six have expressed interest.
Colorado employers and consumers have the good fortune to have access to the Colorado All-Payer Claims Database. On their free public website you can find the costs of the top 25 procedures. Median costs for knee replacement surgery, hip replacement surgery, obstetric services, and imaging services are displayed by facility. Check this out at www.civhc.org (see example below, showing costs for knee replacement at various hospitals in the Denver metro area).
The median costs for knee surgery in Colorado varied from $19,760 to over $58,000 per case. Sadly, expensive care is often more costly because of lapses in patient safety, inefficiency, or price gouging.
Why APCDs Matter
As purchasers and consumers, we deserve to know how much healthcare services will cost. Whether it is a true cost, a negotiated cost, or the median cost, that information should be readily available. Mr. Skisak says “as an individual concerned about the future of healthcare in this country, I believe the entire process can be made more simple, transparent, and efficient. But nothing will change if the government, employers, and consumers continue to allow these charges and pay these fees without question.” If you’re interested in learning more about smart healthcare purchasing and APCDs, contact the team at Knowledge Benefits.