Patients are often surprised by their medical bills. How can they better understand their actual financial commitment?

June 17, 2019

Whether due to a facile understanding of the differences between charges and allowables or what they owe for medical services provided to them, the morass of billing nuances can be a nightmare. In fact, there is a bi-partisan legislative effort afoot with a proposal introduced by Senate Health Committee Chairman Lamar Alexander (R-TN) and ranking member Patty Murray (D-WA), which includes nearly three-dozen specific bipartisan provisions to add transparency to healthcare pricing and reduce “surprise” medical bills.

Aside from the disparity between charges and payments (e.g. Why Healthcare “Transparency” is a Myth and What Consumers Can Do About It), patient responsibility (e.g. what you owe) can be murky and surprising if you have multiple “participants” or entities involved in the delivery of your care.

More Than Just a Single Doctor’s Bill

Let’s say that you have a “knee surgery” performed. Different entities help your orthopedic surgeon to deliver care and perform the surgery. Because there are several people involved in the surgery, you will likely receive multiple billing statements from differing providers who participated. Participants to your “knee surgery” would include your orthopedic surgeon/physician, maybe an assistant at surgery, the surgery center or hospital where the surgery is performed, anesthesia to keep you down while the doctor is busy rebuilding your knee, and possibly durable medical equipment (e.g. equipment supplied to aid in your recovery – maybe crutches in this instance).

So, you’ve had your procedure, and all went well. Dr. X is awesome! You’re home and rapidly recovering from your surgery while re-gaining use of your leg. You have physical therapy once a week, and you’re healing well. Now arrive the bills for your surgery; you receive your doctor’s bill for his efforts (e.g. taking apart and rebuilding your knee). You see how much was billed, how much you owe, and the piece of the billed charge your insurance company did not pay. You decide you’re good with the cost and happily write a check to your doctor’s office for his efforts. Now you can get back to competitive bocce ball!

Two weeks later, however, you receive another bill. The surgery center’s charge arrives and you think, “…wait, I just paid Dr. X for this surgery. Why am I getting this bill?” You had your surgery performed in an “outpatient” ambulatory surgery center (ASC) owned by Dr. X rather than surgery in the hospital. The surgery center, even if owned by Dr. X, is a separate entity. Thus, it bills the insurance company (and you) for the performance of the surgery in the ASC (otherwise known as the “facility charge”). So, you call the doctor’s office and tell the staff of your dissatisfaction with this apparent surprise bill. (As a side note, if your doctor has an ownership stake in the surgery center, he is obligated to let you know this fact before the surgery is performed.)

That same week you receive a bill from Sleepy Time Anesthesiology (STA). Who are they? Before you cry “fraudulent billing,” you learn that the ASC has a contract with Sleepy Time to provide anesthesiology services to the surgery center. Dr. X neither owns STA nor sets their billing rates/charges, and, again, they are a separate entity from your doctor. So, you have a third bill and further financial obligation.

Next, you receive a bill for your bionic crutches. This is from Walk Fast Medical Equipment (WFME), a company that supplies durable medical equipment (DME) to the surgery center for patients, post-operation. Again, Dr. X does not own WFME but uses them to supply DME to the patients on whom he performs surgery.

In summary, you’ve had one “knee surgery” and received four bills; three of which are probably surprise bills (the surprises might be those charges outside of the doctor’s charge). As with all things medical billing, the charges are irrelevant (see Figure 1).

Figure 1

Gorke Healthcare

Each participant in your surgery has agreed upon “allowables” that they accept as payment from your insurance company for the service performed. Dr. X billed your insurance company $5,000, but he has agreed with your insurance company to be paid $1,250 for “knee surgery.” (The $1,250 is what is allowed; the amount you owe is predicated on your contract with the insurance company. In other words, if you have a high-deductible plan, you may pay the entire $1,250, but Dr. X can not “balance bill” you or collect the difference between the charge and the allowable.)

As noted in Figure 1, STA charged $2,000 for the anesthesiology services, but has a $1,000 allowable. Likewise, WFME billed your insurance company $250 for your bionic crutches with an allowable of $125. Last, the surgery center, owned by Dr. X, billed $5,000 for the surgery, and the insurance company approved $2,500. When the “allowables” are summed for the patient’s responsibility, instead of owing $1,250 for the surgery (the doctor’s allowable), the patient owes $4,875 for his entire “knee surgery.”

How to Better Understand Total Medical Costs

Patients who have surgery can better figure out their financial commitment and obligation by:

  • understanding all of the entities participating in the delivery of care; if you are not told by the surgery center’s staff or surgeon, ask which entities are involved
  • understanding what the insurance company will approve (e.g. pay) for the services performed
  • understanding the financial commitment based on the individual insurance policy (e.g. in this case, a $10,000 high-deductible plan means the patient will pay all of the services out of his pocket)

The call for healthcare pricing transparency is starting to gain traction. In the meantime, consumers must keep their heads on swivels and ask questions about their financial obligation.

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