Medical Overcharge? Calculate Exactly by How Much.

Few people reading this have avoided the unpleasant experience of a gotcha medical bill, where the charged amount is more than you expected, or the insurance-covered portion is less.? As both medical providers and insurance sellers continue their endless search for ways to make more money, it stands to reason that the frequency of unexpected bills will only increase. ?I don’t have a Palpatine-like talent to emit blue lightning from my fingertips that compels billing personnel to charge me less, but I do have a way to get detailed information that closely approximates how much it cost your clinic or hospital to provide the care.? Information is not The Force, but information is power nonetheless.

Last year after receiving an expensive bill for an office visit, I decided to find out not why it was so high but by how much.? Google searches easily answered the why, but the how much proved more elusive.? A couple of searches mentioned a name: Stephen Brill.? It’s then that my pattern recognizers kicked in and I recalled reading his sad and elucidating piece in a March 2013 issue of Time magazine.

In this article, the longest in TIME magazine’s history at that time, Brill laid bare a vital fact: your “real” medical costs are knowable, with a little work.? I define “real” as an accurate approximation of how much it cost your healthcare entity to actually provide the care.? Brill used this to good effect in pointing out the yawning gap between the actual cost and billed amount for hundreds of procedures he looked at.? Brill asked dozens of medical provider and insurance personnel (CEOs, CFOs, hospital administrators, and the like) a simple question: why do you charge so much, compared to what it actually costs?? He never got a substantive answer from anyone.? He did hear plenty of deflections, obfuscations, gaslighting, and sometimes obvious falsehoods.

Where to find your real costs?? Read what TIME’s managing editor, Rick Stengel, wrote regarding Brill’s piece:

If the piece has a villain, it's something you've probably never heard of: the chargemaster, the mysterious internal price list for products and services that every hospital in the U.S. keeps. If the piece has a hero, it's an unlikely one: Medicare, the government program that by law can pay hospitals only the approximate costs of care.

Medicare maintains the website CMS.GOV (CMS = Centers for Medicare and Medicaid Services.)? At CMS.GOV there exists a public-facing and free query engine called the Physician’s Fee Schedule, or PFS.? It points to a database that contains in excess of 10,000 procedures, identified by CPT code (Current Procedural Terminology code), that lists the estimated actual cost of care for each procedure.? If you know the CPT code for your procedure, it is a simple matter to obtain this estimate.

How accurate is the estimate?? Quite accurate, based on the estimate’s components.? There are three:

• Physician work: factors include the time it takes to perform the service, the technical skill and physical effort, the required mental effort and judgment and stress due to the potential risk to the patient. ?This component accounts for an average of 51% of the total relative value for each procedure.
• Practice expense: includes supplies, non-physician labor, equipment expense, and indirect expenses such as utilities, rent, etc.? This component accounts for an average of 45% of the total relative value for each procedure.
• Malpractice expense: includes the expense for paying malpractice insurance premiums.? This component accounts for an average of 4% of the total relative value for each procedure.

Medicare is mandated by Congress to estimate the actual cost of services and only reimburse providers that amount.? If you wish to do a deeper dive and learn about the work of the RUC (determining committee) and RBRVS (method of determining cost), there are great summaries available here and here and here.

These are step-by-step instructions for determining actual cost for your procedure using the PFS.

1. You need to know the CPT code(s) for the procedure you are searching.? They may appear on your provider’s bill.? If not, you can obtain them from the provider’s billing department.? It will typically be a five-digit integer code.? It may also include modifiers (‘A’, ‘SL’, ‘23’, etc.)
2. Navigate to https://www.cms.gov/medicare/physician-fee-schedule/search. Click Accept near the bottom of the page.
3. Fill in the fields as follows.

• Year: choose the latest.? Should be the default.
• Type of Information: Pricing Information.
• HCPCS Criteria: Single HCPCS Code.
• HCPCS Code: the CPT code you’re searching.
• Modifier: All Modifiers.
• MAC Option: Specific Locality.
• Specific MAC Locality: 0620200 MINNESOTA if the service was provided in Minnesota, or as appropriate.

4. Click Search fees.

5. Results of your search should look like the pic below.

• If your code has modifiers, choose the matching line (mine had none.)
• Non-facility vs. facility: if your procedure was performed in a smaller clinic or office, choose Non-Facility Price.? If in a large clinic or hospital setting, choose Facility Price.? The Facility Price will be lower because large organizations can rely on economy of scale to save costs, and the RUC has taken that into account.? For some procedures like mine below, there is just one price.

You will probably be surprised (or shocked) by the gap between the PFS price and the amount you’ve been billed for the same procedure. ?You may wonder if there’s a billing error.? Possible, but unlikely. The billed amount can exceed the PFS price by 100%, 200%... 400%. That implies the provider is profiting by approximately that amount per procedure.? Not bad, if you’re the provider. ?Sadly, in the US, there are no legal restrictions on what providers can charge you.? This probably explains in part why in the US the number of folks burdened by medical debt exceeds 10^8 (that’s 100 million.)? And, medical debt is the largest cause of bankruptcy in the US.? The bill you might be holding in your hand right now is a microcosm of this, in real time.? But I risk digressing to a topic that could be the basis for another article.

It’s important to note that there may be legitimate costs a provider incurs that are not accounted for in the PFS price.? An example could be underpaid or unpaid bills that a clinic or hospital has to absorb.? This happens often in emergency room care, where many patients can’t afford to pay even the PFS prices.? If such legitimate costs existed, a provider would have every reason to tell you if you asked.

To illustrate how to use PFS information for comparison purposes, I looked at five of my most recent medical procedures.? The first two are the result of a skin cancer screening; the last three are the result of dealing with a stubborn sinus infection.

You might have noticed the PFS amount is different for the same code, 99203, in different instances.? There are at least two reasons for this.? The procedures happened in different years, so the estimated costs probably went up over time.? The more important factor is facility vs. non-facility.? The office visit on 23 Oct happened in a smaller clinic, so non-facility would apply and the cost would be higher.

On looking at many codes, I observe that providers typically demand a payment far in excess of the PFS amount (MinuteClinic is a rare exception, asking for just a 140% profit before insurance and a 25% profit after.)?

Now that you’re armed with information, how can you use it to reduce your bill?? I don’t have the qualifications to give medical advice, or legal advice, but in a future article I’d be happy to relate what I did in a couple of instances where I reasoned that the billing was unethical.

You against your medical provider: it’s still a David vs. Goliath interaction.? But now at least you have a taconite pellet to put in your wrist rocket.