I got snipped today. I was also a minor contributor to high healthcare costs due to insurance benefit design.
Vasectomies are very straightforward, generic procedures with few complications. It is a fairly low skill operation. It could be done almost anywhere. However I elected to have it done at a regional academic medical center.
This choice structure was partially influenced by my benefit design. I am insured through work, and I have a deductible with no co-insurance plan. Let’s see where the high cost choices came into play.
I had $173 of deductible left to fill for the year before everything gets covered at 100%. :
I knew this when I made an appointment with a urologist seven weeks ago. My search criteria for the urologist was simple — s/he had to be in-network, and near a major bus line between my house and my office and be able to schedule the elective procedure before my deductible reset on January 1st. This is a very broad criteria set.
I chose a urologist who has admitting and surgery privileges at both the major regional academic medical center and a community hospital that is 15 miles from my house in the other direction. The initial consultation was a specialist visit for a $40 co-pay. That visit’s reimbursement from my insurer was location independent; he would be paid the same no matter where he saw me. Pre-op screening could have been done at either the major regional medical center or a suburban ambulatory surgery center. I chose the major regional medical center as I could grab a bus from work and get it done during a very long lunch. This decision to save half a day of PTO probably cost my insurer an extra $240 because the regional medical center has a much higher reimbursement rate than a suburban ambulatory surgery center.
And then I got snipped this morning at the regional medical center because it was easier for my wife to drop off the kids at daycare and then commute against traffic to the medical center than fight the in-bound commute and then the out-bound counter commute to the community hospital. The snipping went fine and I left the hospital four hours after I arrived for check-in. However, the decision to get snipped at a flagship hospital instead of a community hospital will generate a facility fee that is double the cost of the facility fee of the community hospital.
My set of choices for this vasectomy probably will cost the insurer an extra $800 to $1,000 compared to a low cost and locally available alternative. It won’t cost me anything extra as any choice set would have burned the rest of my deductible.
How could benefit designs be changed to get me to make more cost effective choices without costing me more?
My current insurance is based on a fee for service model. Each medical widget gets paid for if it is deemed necessary. It pays out on each individual procedure without consideration for a holistic approach. There is no incentive passed the deductible and co-insurance (which I had none) for anyone to consider costs.
There are two billing approaches that could have strongly encouraged different choice sets without increasing my out of pocket costs.
The first would be a provider side payment strategy of “bundled payments.” In this system, the provider is given a fixed amount of money for a procedure. In my case, my urologist may have received a payment for $1,176.45 for a non-complicated vasectomy. The bundled payment would cover the initial consult, the surgical pre-op, the actual operation, the facility fee and the follow-up sperm testing. If the total charges came under that amount, the doc makes a profit. If charges come over that amount, the doc eats the loss. This system would have encouraged the physician practice to schedule my pre-op at the suburban ambulatory surgery center and then the actual operation at the community hospital to avoid significantly higher facility fees. Major regional academic medical centers (and their high costs) should be reserved for the strange and high care intensity cases not the ho-hum simple surgeries.
The other approach is “reference pricing” where the responsibility is on me to control my costs for generic, predictable, commonly available and non-urgent operations. Reference pricing is when the insurer looks at the cost of a procedure set within a network and determines that a set fee will be accepted by a sufficiently large number of providers to perform that procedure. The insurance company then says it is willing to pay that fee for my vasectomy. After that I’m responsible for the higher costs. The idea behind this is I’ll be motivated to trade an afternoon off of PTO to save $240 at the suburban pre-op center and my wife will be willing to drive through crap traffic to get to the community hospital this morning in order to save several hundred more dollars. Reference pricing works in providing high quality care while saving money for routine cases.
Right now, hospitals suck at providing transparent pricing to patients, even insured patients. Insurers are slightly better as they know roughly what codes will be submitted for a procedure and can be told be whom, so they can crosswalk that against the individual provider’s reimbursement contracts for a member. The initial estimate from the insurer is only an estimate as providers are idiosyncratic; one doc might like to cauterize, another may like to use clips, and the insurer can’t accurately and quickly price those differences out unless they can run instant claims histories for a given procedure to tease out provider preferences. Bundled payments avoids this information black hole and reduces search costs by placing the cost search and cost management burden on people who deal with the problem every day instead of intermittently. Reference pricing is promising but until hospitals and providers can accurately quote prices for a full set of services, it is still an interesting experiment instead of a ready for wide scale use process.