This is what a summary of costs for open heart surgery and 14 days in the hospital looks like. It does not include doctors, who bill separately, nor does it include in patient rehab and out patient rehab and medications. pic.twitter.com/XiXhNhpZO8
— Jackie Kazil (@JackieKazil) April 24, 2019
I am assuming that these are charges and not contracted rates. But my god, this is a lot of money. Even assuming a net 75% discount to the contracted rate, it is still a lot of money. And it is not the entire cost of the episode as professional fees that go to clinicians are a separate set of bills, outpatient rehab is a distinct set of claims and all the ancillary costs are elsewhere too.
This episode of care is an outlier at whatever contracted rate is applied. It is wicked expensive. And it destroys any cost sharing incentive designs. A deductible only model has the out of pocket maximum met in the first seventy seven seconds of the episode. A copay model that is heavily charges inpatient stays maxes out in a few days at the hospital. A coinsurance model of say 20% coinsurance on surgery charges is maxed out after two or three days in the ICU.
There is no benefit design structure that changes marginal costs or incentives. In this case, open heart surgery is most likely not a shoppable service, so it is irrelevant but there are enough other cases where something is both wicked expensive and somewhat shoppable. Someone with a cancer diagnosis in Chapel Hill can go to Duke or UNC hospitals. Right now the only insurance steering mechanism for that decision is network design. My personal insurance steers me to Duke Hospitals while some of the folks at my gym would be steered to UNC hospitals.
I think that the outlier cases are where the money is and rejiggering cost sharing and steering structures is a possible way to get a little more value and competition.