Thank You Doctor for My Cure – But What about My Costs?

This article proposes that healthcare cost management platforms must enable cost transparency as a critical component in the healthcare system.

The Affordable Care Act (ACA) is a proponent of outcome based healthcare practices. Value–Based Purchasing (VBP), Patient Centered Medical Home (PCMH), Accountable Care Organizations (ACO) are some of the practiced value-based models in support of the ACA vision. The value based models focus on treatment outcomes in terms of patient health and well-being. Within this new perspective, the focus has shifted from questions about how cheap is my treatment to the much more relevant question for what I am paying. In other words, what is the amount and quality of the health outcome that I am buying? As exchanges make consumers far more aware of their choices and as high deductible health plans attempt to elevate the importance of “having skin” in the game, the consumer is now a real actor in this drama. So as with treatment side-effects, patients need to be engaged in medical costs discussions upfront. Otherwise, having a successful knee replacement at the cost of being unable to pay that month’s mortgage is neither a good nor a desirable treatment outcome.

Today’s medical bills are inscrutable to the extent that it is difficult to ascertain what we, the patients, are paying for. Part of the reason is that Americans traditionally have gotten their health insurance through the employers who have covered majority of the medical bills. So the patients have been shielded from the true healthcare costs. But that is now changing with the popularity of high deductible plans. Per the Centers for Disease Control and Prevention’s National Center for Health Statistics’ 2014 National Health Interview Survey, the number of patients under age 65 with high deductible health plans in private health insurance coverage has been increasing each year from 2009 (20.2% through employer and 46.9% directly purchased) to the first six months in 2014 (35.3% through employer and 53.7% directly purchased) (Martinez & Cohen, 2014).

For example, healthcare plans sold through the health exchanges established by the ACA usually have a high deductible. This translates into patients shouldering the bulk of the treatment costs, especially at the beginning of the fiscal year. As pointed out in (Ubel, Abernethy, & Zafar, 2013), for extreme cases such as cancer patients in MA, out-of-pocket costs for breast cancer treatment for women can be as high as $55,250.

Though we talk about the patient at the center of cost transparency, the healthcare system in general will benefit from such an endeavor. It will be helpful for payers to know a priori the reimbursement amount for medical procedures, and to evaluate provider options with cost as a metric. Likewise, it will be helpful for providers to understand the total cost of their referrals. In fact true cost transparency is essential to being able to carry out the comparative effectiveness research essential to establishing “value”. And in bringing a true ability to make choices based on relative outcomes which incorporate the differing values of individuals.

There are challenges to healthcare cost transparency since not all treatment costs are easy to ascertain. For example, physicians affiliated to a hospital may or may not add a facility fee to the total cost. Take the case of a Level II echocardiogram CMS reimbursement that would be $228.02 for a free-standing physician office. In contrast, the same reimbursement to a hospital outpatient department including the facility fee would be $492.22 (Huff, 2014).

So what can be done to improve healthcare cost transparency for patients, providers and payers to understand healthcare costs prior to treatment? We propose the use of a healthcare cost management platform. Such a platform uses claims data (submitted by providers to payers) to calculate costs for a particular treatment in a given US state. Cost is portrayed for specific procedures in different US states. The total cost is broken down by physician, facility, pharmaceutical and others. Furthermore, the platform has adequate data to compare a state’s cost distribution vis-à-vis the national trends. This level of cost transparency helps introduce financial costs as a determining factor for a medical treatment. And assist in informed decision making for patients, providers and payers. In addition unbundling must take place at every level (the day rate in the hospital that included the wash cloth and the foam slippers the patient never used – the cost of hip replacement that doesn’t go down to the detail level of the specfic prosthesus used so we can compare prostheses just like we can compare surgical approaches, surgeons and the facilities they operate in). It is arguable that the cost trends shown using claims data are not real time. In other words, claims data are few weeks/months old. This is a legitimate concern. However, there is a paucity of real time financial data in healthcare so until that is rectified the claims data is our most valuable source.

An example of the recognition of transparency in healthcare financial data can be seen in the law passed in Connecticut. The law requires that after October 2014 all hospital-owned physician practices that charge facility fees to legally notify patients of the fees in advance. But this is an exception. Until such a legislation is passed to proactively a detailed breakdown of all elements of all the healthcare costs surrounding a particular procedure or service, the alternative is a cost management platform using past claims data.

Value based decisions supported by full cost transparency are enabled when a provider uses such a cost management platform to engage the patient and truly participates as a guide in helping the patient decide on a cost-effective treatment plan. This ensures that the patient is cognizant of all the “side-effects” of the treatment (including financial) to make an educated decision. And this also ensures a preferable treatment outcome for both health and finance.

Often the question asked is when and where is a good place to have such discussions? Many literature articles recommend that it should be the primary care physician (PCP) talking to patients about the financial implications of their medical treatments (Hardee, F.W.Platt, & Kasprer, 2005). This is a reasonable viewpoint given that the patient’s initial contact with the healthcare system starts with the PCP. Furthermore, when the cost discussion is initiated by the PCP it may prevent the embarrassment of the patient who is reluctant to raise concerns about decisions that are expensive for fear that they are perceived as questioning the advice of the PCP. WE know that the need to be “liked” by one’s PCP is a vital component of trust and engagement. Also, when a PCP discusses cost options along with patient education about the medical treatment, then it represents a holistic view of the healthcare treatment plan to the patient.

However, to throw a monkey wrench in the above viewpoint, cost discussions with PCPs may become complicated through hidden conflicts of interest when the PCP is working for a provider organization such as a hospital or an ACO. Then the PCP will tend to refer to physician(s) within their organization. Conversely, a PCP might avoid referring a lower cost option if that means sending patients to an outside and/or a competing medical group. All these mean that the patient may not be given adequate medical cost options. But the prior recommendation is still valid – even in such settings, the PCP needs to have the cost discussion with the patient prior to medical treatment to avoid financial surprises later.

Moving from providers to patients the necessity for a cost management platform is equally important. Patients with access to a cost management platform will know a priori the medical cost of using a PCP irrespective of whether the latter is independent or belongs to a provider organization or an ACO.

Lastly, payers with access to a cost management platform can evaluate individual and group provider options from a cost perspective. Also payers can encourage alternative lower cost options for the same medical treatment as long as quality is not compromised. There are a variety of methodologies to assess provider quality using claims data. For example, in workers compensation provider adherence to Official Disability Guidelines represents a quality metric (ODG, 2015). Such quality metrics can be combined with a cost management to provide cost-quality assessment.

In conclusion, the earlier the patient, provider and payer know the medical treatment cost, the better the outcome. A cost management platform can help with the determination of medical treatment costs and promote healthcare cost transparency. Patients can use such tools to determine the financial impact of a medical treatment prior to physician visit. PCPs can use such tools to communicate the cost factors to patients and avoid undesirable treatment outcomes. Payers can use such tools to evaluate network performance and negotiate with providers.

Managing Director


[1]  Hardee, J., F.W.Platt, & Kasprer, I. (2005). Discussing Health Care Costs with Patients. Journal of General
Internal Medicine, 666-669.
[2]  Huff, C. (2014). Physicians and the facility fee dilemma. Medical Economics, 25-29.
[3]  Martinez, M., & Cohen, R. (2014, December). National Health Interview Survey - Early Release Program.
Retrieved from Centers for Disease Control and
[4]  ODG. (2015). Retrieved from Evidence-Based Medical Treatment and Return to Work
[5]  Ubel, P., Abernethy, A., & Zafar, S. (2013, October 23). Full Disclosure - Out-of-Pocket Costs as Side
Effects. Retrieved from The New England Journal of