High deductible plans, IBNR and non-patient centered care

My wife had scheduled an elective but needed surgery for late December, 2016 (just days before I left her with the kids to go to North Carolina**). We had good insurance through my former employer.  The individual deductible after the health incentive bonus is $600 and then there is a 20% co-insurance for the next $10,000 in expenses.  By a rough estimate it is 83% to 85% actuarial value coverage.  It is somewhere between a Gold and a Platinum plan.  Up to the surgery, she had spent less than $50 in deductible so she still had a lot of deductible to satisfy before the co-insurance kicked in.

Any an-patient surgery for a non-bundled case will produce at least three sets of claims. The first claim is the surgeon’s professional claim.  It compensates the surgeon for their skill and time.  The second claim is the anesthesiologist for their skill and time as well as the good drugs.  The third claim is the facility fee from the hospital.  It is the rent for the operating room, recovery room and then room and board.  This is the simplest billing situation.  There are numerous situations where the claim situation will be far more complex.

And now let’s see where this split system produces a very patient unfriendly experience that has a root cause of increasing cost sharing obligations.

The week before the surgery, the surgeon’s office pre-authorized the diagnosis and procedure codes.  They also received an estimate of how much cost sharing my wife was subject to and the split between deductible and co-insurance.  Before the operating room reservation would be confirmed, the billing manager told my wife that she would have to pay her estimated cost-sharing for the surgeon’s professional claim.  This was deductible plus some co-insurance.  My wife was surprised and asked why.  She was told that with increasing deductibles the surgeon’s office does not want to chase patients for co-pays and deductibles that they won’t see.  My wife pulled out a credit card and made the payment.

A week later, she checks into the hospital, gets her surgery and is released the next afternoon.

All is good and then we get into claim processing cycle heck.

In the middle of January when I am home for a week from Duke, we get the first bill from the anesthesiologist.  The topline number looks fine, and I expected to see only the co-insurance apply.  Instead all of her deductible was applied and then co-insurance was applied to the increment.  This is odd.

My wife asked me to look into it.  I happened to have worked at the insurer in question for years and I know a couple of things about claims. I saw that the anesthesiologist belonged to a group that tends to cycle their claims quickly.  They submit claims multiple times a week.  My guess is the claim arrived by Christmas Eve sat over Christmas then hit payables to generate a partial payment to the provider and an Explanation of Benefits for us within fifteen business days.

The surgeon is not obligated to bill quickly.  He belongs to a group that tends to both bill slowly and bill complexly.  Any claim that he submitted for my wife’s surgery either had not arrived or had not worked its way through the pre-payment cycle when the anesthesiologist claim was initially satisfied.  The claims system never saw that my wife paid her cost sharing to the surgeon before the surgery.  So the claims system applied the full deductible to the anesthesiologist bill.

We called UPMC and we called the surgeon and we called the anesthesiologist.  Everyone agreed that this scenario was the one that was most likely to have occurred.  The anesthesiologist’s office wanted us to pay the inflated bill in full and they would refund us eventually when their claim got adjusted.  We declined that gracious offer to float them interest free cash.  Instead, we were told to wait for the surgeons’ bill to clear claims.

On Tuesday, I’m again in Pittsburgh for the week.  We received the hospital facility explanation of benefits and bill.  It again had her deductible satisfied and then co-insurance kicking in for the rest.  I was somewhat amused.  My wife was very frustrated.  Again, we were hitting timing problems.  The two technical charges were most likely getting backed out and reconciled so for a time, her cost-sharing bucket had been emptied out as the professional charges were getting cleaned up manually.  During this window, her hospital claim went through and was charged the rest of her deductible again.  Each of her claims hit maximum deductible the first time through.

These timing issues are not unusual.  All claims were received and then processed initially within sixty days of service.  That is well within typical expectations. Most commercial contracts will allow providers to submit their initial claim for a service within at least a six month window.  Claims will usually take at least a week to process internally and can sit for months if there is something odd going on.  All claims in and out within sixty days is the system operating under normal specifications.

We will be able to resolve the problem without too much more  frustration because I used to be a claims system plumber.  I know where things can go loopy.    Most people don’t have a claims system plumber of any sort much less the specific claims system in question in their immediate families.

This is not patient friendly.

The root cause of this failure is the lack of provider trust that they will get paid all of their contracted amount in an environment of higher individual cost sharing obligations.  If they perform a service and don’t get paid, they are out either the time and effort to collect or they are completely out of some increment of the money.  Their fix (which is completely rational from their perspective) is to require pre-payment of the estimated individual cost-sharing ahead of time. If the patient does not pay, they are not performing the surgery.  If they underpay slightly, the surgeon is out very little money and if they overpay, the surgeon cuts a check in sixty days.

This would work, well enough, if there was a guarantee that both the surgeon’s technical claim was subitted ten minutes after the surgery was completed and that it was guaranteed to pay first.  Deductible and out of pocket accumulators would be properly credited and every other related bill would be paid correctly with the appropriate cost sharing attributed.

There is no way under the current fee for service model that this can be guaranteed.  Most of the time, it won’t matter or it won’t be noticed but weird stuff will happen that is patient unfriendly.

This problem is resolved under bundle payment systems where the provider is taking on performance and cost risk.  It could also be managed better if the surgeon in an acute care episode was forced to act as the general contractor.  They would take on no performance or financial risk but they would be charged with coordinating both care and the financial arrangements with the other billing and service providers.  At that point all of the associated claims would hold until the general contractor claim went through even if the order of arrival was random.

But as long as we are in a system of higher deductibles and cost-sharing and a system where there is significant incurred but not reported claims that just have not arrived yet, it will be patient unfriendly.


** I had to include this line in order to get her permission to tell this story

31 replies
  1. 1
    Esc says:

    Something a bit like this happened when I had a baby last year. When she was a few weeks old I got a text message encouraging me to pay the bill for the pediatrician who saw my daughter in the hospital. I ignored it until they sent me a paper statement 6 weeks later, and my bill had dropped from about $160 to $16. I should double check that I didn’t overpay anyone else.

  2. 2
    Cermet says:

    WTF?! Ten years ago (and I hope, not again within the next ten) I spent five or six days for major heart surgery and paid, maybe $400 total to all sources and it was a one time payment well after the fact. Times are a-changing.

  3. 3
    dr. bloor says:

    This was an inconvenience for you. OTOH, I took a 5-7% income loss each year before I started pre billing on deductibles. Chasing money is a time-consuming pain in the ass which I don’t get paid for, and often unsuccessful. Some of that time is spent explaining to people what a “deductible” is and why they owed me money even though they’re “insured,” a fact that neither their insurance companies nor their HR departments thought to explain to them.

    And no, I don’t want any part of “bundling” or “general contracting” responsibilities so that you don’t have to spend 20 minutes on the phone clearing up confusion created by your insurance company.

  4. 4
    What Have the Romans Ever Done for Us? says:

    This happens to me all the time for relatively simple visits…anything beyond a normal physical results in multiple bills to the point where I start to wonder if the various parties are just sending me a bill for $50 every time they feel like they need a little extra walking around money. Medstar is the primary culprit in my area. The bills from them never even really tell you what you’re being billed for. I’m convinced I’ve double paid bills…and let me tell you they never send you a check back in that scenario like the anesthesiologist said they would. Maybe because you’re insurance billing savvy they would have played ball with you but the rest of us never, ever get that money back. It’s not a loan, it’s theft by complex billing.

  5. 5
    Buskertype says:

    @dr. bloor: heh “20 minutes.” yeah right.

  6. 6
    a non mouse says:

    As both a doctor and a patient, I get it. Jan 2014 I needed ortho surgery, had it scheduled for a Thursday. $5K family deductible. Surgeon wouldn’t schedule until prepaid, I pulled out my credit card.

    Day before surgery, I get my IUD replaced by my partner. We bill daily (hospital employed medical group), so that bill was sent to insurance the next day (surgery day). The hospital and anesthesia groups must have sent in their bills before ortho, since the EOB showed his CPT was after the deductible. Got a check from his group about 5 weeks later. I’m lucky enough to be able to float that…although by sticking it on the CC, I passed the float off a smidge.

    And speaking from the business side, I don’t want to float YOU the loan. My staff deserves to be paid. And, practically speaking, I may not know exactly what I’m going to do as a surgery – I may plan a laparoscopic hysterectomy, but your pelvis is filled with adhesions, so I convert to an open procedure. Guess what, different CPT codes, different reimbursements.

    The system sucks.

  7. 7
    Jim says:

    This is another reinforcing story of why we mere mortals have so much trouble with medical bureaucracies. And why single-payer is so attractive. I’d like to have one of our representatives go through the same process, try to figure out what’s going on, and explain it to us in as clear a way as you just have. Neva. Gonna. Happen. In the meantime, hapless consumers get the short end of the stick.

  8. 8
    Wayne says:

    I pay my monthly premium to an insurance company.
    Why should any checks be paid directly to any of the doctors, hospitals, etc. Why is the insurance company not the funnel through which all funds go? Wouldn’t that fix this issue?
    Seems the doctors and hospitals want to keep those with the most knowledge (insurance co.) out of the loop and try to confuse those with the least knowledge (consumer) in the loop.
    Also, I have friends who have received dunning letters from collection agencies one month after receiving the initial bill. So you could have a situation where collection agencies are hitting you while another doctor may not have even submitted his claim.

  9. 9
    WereBear says:

    @dr. bloor: And no, I don’t want any part of “bundling” or “general contracting” responsibilities so that you don’t have to spend 20 minutes on the phone clearing up confusion created by your insurance company.

    How about seven months on the phone?

    I’ve spent the last seven months calling every week, often multiple times, just to get ordinary stuff done. Blue Cross/Blue Shield apparently hires people who cannot follow through; and every time I get a number that will let things get done, it lapses…. and I have to start all over again.

    The entire system sucks — money out of everyone’s pockets. I can only imagine what it is like for someone with a rage disorder, because it is threatening to trigger one of mine.

  10. 10

    @dr. bloor: Agreed… what the provider was doing made perfect sense from their point of view. It is unrealistic as hell to expect someone to take a 5% to 10% loss in income without them doing something about it.

  11. 11
    La Caterina (Mrs. Johannes) says:

    I had a diagnostic procedure in January 2016 before I’d met my deductible. Luckily the GI doc did not require an up front deductible payment. A few weeks later the anesthesiologist starts sending me statements of his charges (couple thousand dollars for a 7 minute procedure) including a disclaimer “THIS IS NOT A BILL”. I got my EOB, which clearly stated the payment to the gas passer was negotiated with my carrier. Then they start dunning me for the excess charges above the negotiated payment. Luckily, IAAL, so I sent them a certified letter explaining they had agreed to accept what my carrier paid. Single payer is the only solution for this mess.

  12. 12
    dr. bloor says:

    @Buskertype: I had to deal with precisely the same problem on my own high deductible insurance policy last year. Fifteen minutes, actually.

  13. 13
    dr. bloor says:


    Seems the doctors and hospitals want to keep those with the most knowledge (insurance co.) out of the loop and try to confuse those with the least knowledge (consumer) in the loop.

    No one has any interest in keeping anybody “out of the loop,” it’s just three separate parties (insurer, provider, patient) exercising different priorities in a flawed system.

  14. 14
    Kevin the hen says:

    “…patients are the health care system’s free labor” patient un-friendly is only scratching the surface. What you missed out on (luckily) was that everyone that participated was in network. Imagine if the anesthesiologist was out of network? This happens more times than it should, there’s even a name for it – “drive by doctoring”. That makes unwinding the mess of EOBs, deductibles (from different pools) and coinsurance even worse. And no Dr. Bloor there’s no chance in hell that any encounter w/ an insurance company or a medical billing department takes only 20 minutes – unless you’re talking about the amount of time on hold during the first call

  15. 15
    WereBear says:

    @Kevin the hen: “…patients are the health care system’s free labor”

    Corporations everywhere have changed to the free and increasingly exasperated labor of their customers. I have lost track of the number of times I have figured out, then explained to customer service workers, how their system works. And then instructed them, step by step, what to do, and how to do it. Then called frequently to make sure it was getting done.

    Yet this expertise is useless on the open market because of my age. Go figure.

    They don’t want anything to work. They just want the money. And not paying and not training and not supervising their own employees works for them.

  16. 16
    WereBear says:

    And, after the seven months, they have decided my diagnosis was not medically necessary. After telling me I had to have a diagnosis before they would treat me.

  17. 17
    gvg says:

    People who are sick can’t call hospitals and insurance companies for hours nor understand processes that are out of their expertise. bills don’t explain anything. I can’t even recognize most of the labels so all I can be fairly certain of is that I did go to the doctor and something was done on that date. what I call an exam or surgery is something else in jargon on the bill/explanation of benefits and usually has different parts.
    I am profoundly grateful that nothing came up while I was going thru chemo. I paid a lot of $40 copays for almost every visit and one $200 fee for the original surgery. I paid on the visit and that was the end of it. One test was questioned and not paid for immediately. I got a letter from the hospital explaining that and that they had resubmitted further info to the insurance. Must have gotten through because I never heard more. This is not the usual insurance experience though. I had a coworker who had been in hospital billing. He used to say a bad day here was better than a good day there. He also found when his father died, and he reviewed all paperwork, that his fathers insurance company had been over billing or not reimbursing as promised. Since he knew what he was reading, he got his mother thousands of dollars back. The elderly are supposed to navigate this mess? The sick? When I was on chemo, my thought processes were NOT clear. I was told they wouldn’t be before hand. Lots of drugs not to mention medical conditions impact mental alertness. Most people aren’t experts. Its a good set up for fraud and exploitation.

  18. 18
    Graeme Murray says:

    Here’s my healthcare story. I’m 72. In 2008 I had a massive heart attack and in 2012 I had a 9-hour surgery to install artificial valves. I see my family doctor every month and my cardiologist twice a year. I’ve had multiple imaging procedures.My family doctor sends me to specialists as needed. I take 6 expensive little pills every day. I can get home care if needed. All this costs me nothing because I live in Canada and paid slightly higher taxes during my working life. My story happens every day in every other advanced nation on Earth except America.

  19. 19

    When I read about this, I am so so glad I live in Canada.
    This fall, I had emergency surgery and a seven-week hospitalization – three weeks surgery recovery plus four weeks recovery in a different hospital from the debilitating illness that led to the surgery. I will need two additional surgeries in the coming few months. As well as the surgical team, I saw physiotherapists, occupational therapists, hematologists, urologists, and several other medical specialists, and I have had four CT scans already with more to come.
    My bill for all this was $90 a week for the television hook-up in my room.
    I can’t imagine the nightmare that I and my family would have been in, if we had been billed or charged co-pays and deductibles from every specialty that I saw and every procedure I underwent.
    Thank you Tommy Douglas, for Canadian medicare!

  20. 20

    This kind of thing is one of the reasons I’m glad I’m with Kaiser. When I go to see my doctor, I make a copayment when I arrive at the office. If I need to stop at the pharmacy on my way out, I make a copayment when I pick up my prescription. Other than that, I don’t do any paperwork or pay any bills. No muss, no fuss, no bills coming in years after a procedure because the hospital has changed its mind about how much something cost. I don’t see why it hasn’t completely taken over.

  21. 21
    Pete Gaughan says:

    @Roger Moore , don’t gloat. We’re also Kaiser, but because of my employer’s cost-cutting we’re now in Kaiser’s “Consumer Choice Plan”, with individual and family deductibles and OOP maximums. So we’re reading bills just like everyone else now.

  22. 22
    Kelly says:

    Back in the 90’s while my first wife was undergoing multiple rounds of ultimately unsuccessful cancer treatments we would get 6 figure bills from providers with notes that because the bill was 90+ days outstanding it would be sent to a collection agency. When we’d call eventually someone would say “never mind it’s still under negotiation with your insurance. We can’t tell our billing system to stop sending the notes but we’ll take care of it.” They never sent us to collection but it was a completely unnecessary stress at an already dark time. Several poor phone answer supervisors had to listen to me lecture them that I’d done IT work for accounting systems for decades and only complete morons would be unable to add a “under negotiation flag” to a billing system.

  23. 23
    WereBear says:

    @Kelly: They don’t want it to work. There’s nothing in it for them.

  24. 24
    Kelly says:

    @WereBear: At least once I offered to fix it for free.

  25. 25
    Scott says:

    You know a lot of folks spend time at work dealing with these issues. Anybody ever estimate how much is lost due to dealing with insurance issues?

  26. 26
    Alex in NYC says:

    @dr. bloor: 1) You’re discounting the hassle on people. 2) Stop being so self-centered and reread the post. Dave didn’t knock the doctors. He knocked the system (in that you all have incentive to pre-bill for the deductible, but then the process messes it all up). And, he was making the point that he understands this stuff, but we don’t so we either spend a ton of time or (and?) we overpay because we don’t understand the $ issues. But thanks for making this all about you.

  27. 27
    SC54HI says:

    @Graeme Murray: My husband is Canadian and this has been our experience for his parents. Further to this point, in 2011 my in-laws were hit by a drunken driver as they were getting out of their own parked car. MIL, miraculously, had minor injuries but FIL had to be life-flighted to a Toronto hospital, was in acute care for 3 months or more, followed by rehab for 2-3 months. Had this been in the US they’d be beggared & on the street most likely due to the horrific medical costs. Because it was Canada, they got ALL of the medical care they needed WHEN they needed it, and were not beggared in the process.

  28. 28
    Tom V says:

    @20 Roger

    Also Kaiser here: My wife died of cancer last year. We did have the deductibles and the out-of-pocket maximums. They overcharged us on some of the procedures, but a couple of months later a $2000 reimbursement check arrived, so I am very happy. Kaiser also has a “Believe You” policy. There was a lot of confusion over switching from my wife’s plan to Medicare. In the middle, the switch hadn’t gone through and I was worried I couldn’t prove coverage if I needed care. Kaiser was prepared to provide care even though I couldn’t prove I was covered! Only way to go.

  29. 29
    Dmbeaster says:

    I had the same experience several years ago for surgery at UCLA for angiosarcoma. On the morning of surgery, UCLA hospital demanded a cash payment of the deductible to proceed ($3,000?, but dont remember). Pretty weird but not a problem with a credit card. The payment then never showed on the billing by anyone. I complained and asked for billing showing the credit for the payment, and that all bills were run through the carrier (Blue Cross, which negotiates the bill before application of deductible payments, so the payment should not be applied to bills not first presented to the carrier for adjustment). In response, they just sent me a receipt acknowledging the payment, but nothing else. I refused to pay the balance still outstanding (a little less than $1,000), and wrote a detailed letter to them. They never responded, but just gave it to a collection agency. I provided all of the billing, the payments I made including the receipt for the pre-payment, and my calculation that it looked like I was overbilled. No response from anyone ever, although the collection agency never did anything.

    I regularly negotiate fees now before services provided based on cash payment, since they are usually pre-deductible expenses. The whole medical billing and costs system reminds me of buying something in Tijuana. As a lawyer, I have handled a dispute between an MRI clinic and its accounts receivable factor. They had 13 different prices for the same service, based on who it was and the insurance applicable — a range at the time from $500 to $1,200.

  30. 30

    Basically, you now need a lawyer, or at least a paralegal, to manage your medical billing.

    If we had anything like a government responsive to the needs of the people in this country, the whole medical system would now be subject to intense and intrusive regulation. As it is, well…

  31. 31
    Fred Fnord says:

    @dr. bloor: Yes, three different parties with three different sets of priorities. But two of them have extensive domain knowledge, and the third does not, and a great deal of the time that means that the one to get shafted is the patient. And both the insurance company and the medical service provider are very sympathetic up to but not including the point at which they would start to feel any actual pain.

    I spent a total of over 100 hours over the course of six months trying to get $5000 back from my insurance company for a procedure which they pre-approved but which they later claimed was different than the one that they had preapproved although it had the same name. (I don’t know, that’s quite possibly true. How would I know?) The doctor told me that if I didn’t pay I was going to be reported to a credit agency and blah blah and was basically unwilling to spend much time dealing with my insurance company (or for his staff to). The insurance company told me they wouldn’t pay because it wasn’t medically necessary and blah blah. I only eventually won by getting the state insurance board (you know, the one that the ‘cross-state-lines’ Republicans want to get rid of) involved. Meanwhile, I EARN MORE THAN $50 AN HOUR. Which means that I was paid worse for my time in medical billing than I would have been for doing my job.

    So yeah. Okay. It should not be your problem to deal with insurance companies. And it shouldn’t be the insurance company’s problem to deal with doctors. I guess if everyone in the US just got training as a medical billing provider we could provide full employment, and hey, if my sample is representative, it’d even pay $50 an hour.

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