Healthcare Charges Under the Knife

Originally at Miller-McCune.com

August 28, 2009 -- If you paid sticker price on the last new car you bought, you might expect to pay about 15 percent more than you would with some negotiating. If you paid full price on a recent knee surgery, you could pay 500 percent more than market rate. And who knew you could even negotiate?

Such is the nature of health care pricing where charges are determined by hidden costs and who's paying.

Facing the brunt of reform efforts in Congress, health insurance companies pointed a collective finger at doctors recently with a survey by America's Health Insurance Plans, an industry trade group, which detailed a series of exorbitant physician charges. The survey examined out-of-network bills where — as opposed to in-network services — contracts do not exist between the provider and insurer. Also known as full-billed charges, it's what the uninsured face every time they see a doctor.

In some cases, patients received charges 34 times what Medicare pays for the same procedure in the same location, the AHIP survey found.

For example, one doctor billed $4,500 for an office visit when Medicare would have paid just $134. Another doctor billed $14,400 for removal of a gallbladder when Medicare would have paid $656. And a hip replacement cost $40,000 when Medicare would have paid $1,558.

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Out-of-network charges typically represent less than 10 percent of overall health care bills, said Dr. Jeffrey Rice, a former health insurance president who created the Web site Healthcarebluebook.com to help consumers determine average market rates.

"For historical reasons, providers make their billed charges really high because they expect to get paid a reduced amount," Rice said. "You could even get a lower rate than in-network if you negotiate. But you have to do it on the front end and before you get treatment, because otherwise when you get a bill you're legally obligated to pay, and they don't have an obligation to reduce it."

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