Doctor Billings Gone Wild

Today’s Managing Health Care Costs Indicator is $56,890

That’s how much a New Jersey physician billed Aetna for a bedside consultation, according to a lawsuit quoted in this month’s Managed Care Magazine (free registration required)  The physician, and a number of others cited in this article, were ‘out of plan,’ and therefore not subject to Aetna’s fee schedules.

New Jersey has a consumer protection law which makes it difficult for health plans to allow patients to be balance billed for the difference between a health plans allowable rate and the amount billed by a physician.  At the same time, there are no limits to the amount a physician is allowed to bill.  This is a well-meaning consumer protection, but it’s unbalanced, and can lead to dramatic high bills – and high costs for all insurance rate-payers.  New Jersey should couple this regulation with billing caps, but these are not surprisingly opposed by physicians. 

Aetna alleges that some physicians have set up arrangements where they refer to ‘out of plan’ colleagues or facilities which can bill unlimited amounts, increasing total revenue. (That would be increasing total cost, from the perspective of those concerned about health care inflation).

A physician who does bariatric (weight loss) surgery lucidly explained how health plan fee for service rules and ongoing negotiations encouraged him to have a high “rack rate,” the initial billing rate before discounts or negotiations:

Typically, we bill $24,000 and we expect to get half. That means we get paid $10,000 to $11,000 for the same services we charged $24,000 for last year.  So then we bump our charges up to $30,000.

This surgeon does not participate in any health plan – so all of his billing is ‘out of plan’ and not subject to health plan llimits.  The health plan medical directors interviewed complained that out of plan physicians rarely offered substantial discounts off their billed charges.

The CommonHealth blog  is collecting stories from the Boston market, and reported last week on a $23,000 estimate for an infant circumcision.

There is no perfect answer here, and there are times when health plans arbitrarily set fee for service rates too low.  But the kind of unbridled billing described in the Managed Care article contributes to health care inflation.   Overbilling makes health care less affordable, and is not a victimless crime.