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The Keckley Report

The Pass-Through Industry

By August 11, 2014March 1st, 2023No Comments

The following is an excerpt from Navigant Healthcare’s Pulse Weekly. Click here for a complete copy of this week’s article. 

17 days ago, I had total knee replacement surgery. After years of wear and tear, two meniscus repairs and persistent pain, I took the plunge.

This week, I started getting the bills: the whopper $51,829.35 from the hospital for my 55-hour stay. And that doesn’t include professional fees for my surgeon, internist and anesthetist, the 3 medications I now take, the crutches and walker I bought, and the over-the-counter aids I’ve purchased. In all likelihood, the final tally will be close to $60,000. Wow.

I don’t know how to place a value on walking with confidence and without pain. I took the plunge hoping for the best and oblivious to costs. I studied report cards about my surgeon’s performance and infection rates for the hospital we used. I tried, to no avail, to estimate costs, and investigated out-of-market options for a bundled package. In the end, my local option was best, but there were more unknowns than knowns as I went under the knife.

As an industry, we’re accustomed to business models where everything is a pass-through to someone else who’ll pay—an insurance company or taxpayers.  We mark up and pass through everything we do. The buck stops somewhere, and on occasion, doctors and hospitals have to eat some of what’s not paid.

At the bottom of my bill, the hospital noted “We have filed a claim with your insurance carrier. Please take a moment to review the insurance information listed above in order to ensure your claim is billed accurately.” It’s nice of them to forward the bill to the insurance company, but I’d like to sign off on what was charged before it’s sent, and I don’t have a clue what some of the 11 items even mean. What’s the “central service” and “PASR”, and why was there a separate billing for the “laser surgery center,” that’s different, I guess, than the “operating room” charge of $38,092.80. But I intend to find out, and notify both my insurer and providers what I learn.

Last week, the Federal Reserve released its annual Report on the Economic Well Being of U.S. Households finding 1 in 4 face dire economic circumstances. 43% said they could not cover a major out of pocket medical expense, though 84% said they have health insurance. 25% had not visited a dentist in the past year because they could not afford it, 18% had not seen a physician and 15% did not get a prescription filled for the same reason.

A Wall Street Journal-NBC poll released last week found three-quarters of the population feeling “economic anxiety” and a major credit score reporting agency announced it was reducing the negative impact of medical debt collection agency actions against consumers since the practice had become so pervasive (as of July, 2014, 64.3 million Americans have a medical collection incident on their credit report representing more than half of all collection agency activity overall).

So what’s this mean?

It means transparency is not enough. Unless customizable data about prices and costs, outcomes and options is available in easy-to-use sources widely accessible at no cost to consumers when they make decisions, pass-throughs will persist and costs will soar. Transparency is not an end in itself; it is a key element of a solution that equips consumers to make decisions that impact their health and their pocketbooks.

It means more and more attention will be given to the value of a dollar spent in healthcare and the return on that investment: if a similar outcome can be achieved at a lower cost, how fast will consumers acclimate their purchases to value. And if households have to choose between paying for energy, housing, food and healthcare, healthcare is likely to be the odd-man out. After all, the utility company will shut off electricity, but the emergency room will still be open, and ultimately someone else will pay.

And it means the relationship between having health insurance, managing costs and optimizing care needs fresh-thinking: If insurers are part of healthcare’s pass-through economy without adding value, what’s their role?

There’s nothing like being a consumer in the health system to remind one of its strengths while being exposed to its flaws. I am seeing both.


Sources: “Report on the Economic Well Being of US Households, Board of Governors of the Federal Reserve System, July 2014; Patrick O Conner, “Poll Finds Widespread Economic Anxiety,” Wall Street Journal, August 5, 2014; Anna Maria Andriotis, “New Credit Scores to Ease Access to Loans,” Wall Street Journal, August 8, 2014

The opinions expressed in this article are those of the author and do not necessarily represent the views of Navigant Consulting, Inc. The information contained in this article is a summary and reflects current impressions based on industry data and news available at the time of publication. Any predictions and expectations noted herein are inherently uncertain and actual results may differ materially from those contained in this article. Navigant undertakes no obligation to update any of the information contained in the article.

 © 2014 Navigant Consulting, Inc.