Understanding Health Care Cost & Quality Terms

I read an interesting article in Becker’s Hospital Review entitled Apples and Oranges: 6 Different Types of Hospital “Costs” and at the onset of the article, I was excited by the opportunity to hear about the myriad of charges that make up a hospital’s final bill they send to their patients. Alas, here we are again without any real explanation of those tricky fees that pop up on, or rather hide within, your medical bills.
 
The author did a good job of listing off the ways different people might refer to hospital costs but does not get specific, except for when explaining the weight and purpose of the prices listed on chargemasters. We thought it might be better for our patient readers to have a place to turn to that puts these commonly used phrases in health care cost conversations, into lay man’s terms.
 

Chargemasters: If you read Steven Brill’s TIME article-phenomenon, Bitter Pill: Why Medical Bills Are Killing Us, you are familiar with this term. If not, a chargemaster is essentially a list of prices that hospital systems develop to point to the costs of various, procedures. These prices are usually very high and do a poor job of reflecting true costs, thus being of very little use to patients in any frame of reference. The real question however, is where do these prices come from? To put it simply, the chargemasters are like M.S.R.P’s for cars. They are marked up, high costs, that no good shopper actually ends up paying.  The insurance companies will then negotiate how much of that price they will pay on a provider-by-provider basis. The CMS however, simply state the costs they will cover regardless of the chargemaster’s prices. Who ends up paying those inflated prices then? The answer is: uninsured patients who do not have payers to help negotiate lower costs.
 
Hospital input costs/hospitalization costs: In the aforementioned article, these are broken down as two separate types of costs. This is funny, because the two terms are hilariously synonymous. Basically, what it comes down to is, if a patient is going to a hospital, they will be responsible for costs associated with their care, referred to as variable costs (i.e.: getting an MRI or meeting with a doctor) in addition to a series of fixed costs, which are literally meant to cover overhead costs of the hospital (i.e.: electricity, facility maintenance, building fees, land charges, cable bills etc.). This means that patients, who are already struggling to pay their medical bills, are also paying rent, cable and utilities for their stints at the hospital. And you thought your apartment’s utility bill was high… The long and short of it is, that it will almost always be cheaper for patients to go to an outpatient provider than an inpatient hospital system, because they won’t have to tack on all the extra fees.
 
Facility Fees: This is another, more commonly used term, to explain fixed and variable costs being tacked on to medical bills. For certain procedures however, the total cost of “global fees” include additional costs known to billing professionals as the professional components and technical components. Using radiology as an example, a patient needing an MRI will meet directly with an MRI tech who performs the scan, but the images will be interpreted by a radiologist, meaning that the patient will be billed for a technical fee and professional fee which goes towards these respective care providers. A way to avoid this is to receive care at an independent, outpatient imaging center, where what you are responsible for as far as payment, is one inclusive price known as a global fee.
 
Health care consumerism is a catchphrase that has been commonly used in our industry, which has made terms like “price transparency” and “self-pay prices” buzz words with common misconceptions tied to them.
 
Price Transparency: This is a term health care writers have been using as if the concept is a messiah of sorts, saying it’s the key to curing our broken world of health care costs. Alas, it will be wonderful, and there is great need for it, but we wanted to clear the air by saying, this is not the end-all and be-all cure. With price transparency, we hope will come quality transparency. With improved access to this information, will come improved patient access to providers and helpful tools. With improved access to these tools, will come an improved patient society, leaving less room for inflated chargemasters and more room for fair pricing.
 
Self-Pay Prices: For uninsured patients, the term self-pay prices or “cash-pay prices” is common vernacular. This is the discounted price that health care providers offer to uninsured patients who are paying upfront for their care.  Why do providers offer these discounted prices? Physicians we have spoken with often feel that if they offer lower costs in the beginning, there is a higher chance of collecting the money in full, without having to chase down payments.  Self-pay prices are important for insured patients too however.  By understanding what uninsured patients are paying out-of-pocket for care, patients in high-deductible health plans are in a better position to shop for low cost care.  Often times, if you work with the health care provider, you can pay self-pay prices and still file the bill as an out-of-network provider with your insurance company and have it go towards your deductible.
 
Quality Care: It is hard to pin a definition on this term, because the truth is, what a person considers high quality is completely subjective.  When grading a provider based on quality, it is important to consider however, a number of components such as:
–       Patient comfort (for their family as well)
–       Patient satisfaction
–       Experienced staff/doctors
–       Up-to-date technology
–       Effectiveness
–       Safety
–       Timeliness
The unfortunate thing about quality care is that a lack of transparency leaves little correlation between quality and cost. According to a Kaiser Health News report, in health care, especially at hospitals, you just aren’t getting what you are paying for.
 
We find ourselves being asked the same questions all the time, from health care providers and patients alike.  These questions include:
–       What denotes high quality in health care?
–       How can we measure quality and how will transparency improve it?
–       Why is there no correlation between health care cost and quality?
–       How much will this procedure really cost me, just give me a ballpark figure?
–       Is WebMD for real? Is an MRI going to fry my insides/Do I have the black plague? (Enjoy this little bit of Buzzfeed fun)
 
Okay, so the last one was a joke, but we know you were all thinking it. These are the questions on the minds of millions, and hopefully these definitions help clear the air. More importantly however, we hope it sparks conversations with patients about improved health care practices, access, costs and quality.