I've previously discussed the health insurance billing game in newsletter 017. I encourage you to read that newsletter if you haven't already. I am revisiting that topic because I switched health insurance companies and want to show how medical billing shenanigans cause some people to lose doctors and why you must advocate for yourself.
The market power of providers
In newsletter 017, I discussed how health providers bill your health insurance company dramatically inflated charges for their services, knowing they will receive a smaller percentage of the amount billed. This percentage is prenegotiated based on many factors, including the number of healthcare providers associated with that facility.
Larger facilities with more providers and prestigious facilities can negotiate higher payments from commercial insurance companies. The Congressional Budget Office (CBO) reports that "high prices that commercial insurers pay for hospitals' and physicians' services result from several factors, primarily the market power of providers and the limited sensitivity of consumers and employers to those prices."
In addition, the CBO report states, "providers with market power can credibly threaten to stay out of an insurer's network and still maintain their market share, which strengthens their ability to negotiate higher prices with insurers."
Commercial insurance versus Medicare and Medicaid
Government health services, including Medicare and Medicaid, don't negotiate with healthcare providers but instead establish set amounts for payments of services. These amounts are generally two times lower than what commercial insurers pay.
This discrepancy can result in certain health facilities and their providers relying on higher payments from commercial insurers to balance the lower payments from public payers like Medicaid and Medicare.
Some providers even“opt-out” of Medicare and stop seeing Medicare patients altogether. Other big systems make Medicare Advantage plans out-of-network to garner higher payments from patients and discourage patients in those plans from staying in their system.
Example of inflated billing
Let's examine how the medical billing game played out with my prior health insurance company, Blue Cross Blue Shield Federal Employee Program (BCBS FEP). This example shows what my radiation oncologist's office charged BCBS FEP versus what they were paid from August 3, 2022, through May 30, 2023.
During this period of less than a year, my radiation oncologist charged BCBS FEP $223,899.00, and my insurance plan paid them $75,153.38, just under 34% of what they billed. During that time, I paid $6,604.70 out-of-pocket to my radiation oncologist. My deductible in that plan was $6,000.
Keep in mind that I received proton therapy approximately five days a week for seven weeks during this period. During proton therapy, my radiation oncologist charged BCBS FEP an average of $5,082.00 each day I was treated. My insurance company paid them, on average, $3,388.70 for each day of treatment.
So, even though my radiation oncologist billed my insurance company at rates inflated by about 64% overall during those nine months, neither blinked an eye. This type of absurd billing is standard in the American medical system. Even though I've been in medicine for over 30 years, I still can't wrap my head around this game.
This “smoke and mirrors” is akin to the direct-to-consumer pharmaceutical commercials on television where you have happy, healthy people cavorting on a playing field, in a park, or attending a theater while an upbeat jingle plays in the background. All the while, an announcer is telling you the drug may cause you to be deaf or blind and may even kill you. It’s like a Saturday Night Live skit. How have we become so numb to all of this?
By the way, Skyrizi’s “Nothing is Everything” is by far my favorite jingle. If the Grammys introduced a new category for pharmaceutical jingles, I think it would win:-)
Mayo Clinic business strategies
So, now let's see what happens when I switch insurance companies and need another positron emission tomography (PET) contrasted tomography (CT) scan. With my prior insurance company, I would simply pay a lower rate for a PET scan if I stayed in-network than if I went out-of-network.
But with my new insurance, there is an additional third tier called "designated," in addition to in-network and out-of-network. Even though my radiation oncologist and Mayo Clinic are in-network with my current plan, United Healthcare Choice Plus, I only get the best deal on a PET scan if I choose a designated imaging center.
I found this out after I attempted to schedule the Choline C-11 PET scan ordered by my radiation oncologist. In 2012, Mayo Clinic became the first and only facility in the United States (U.S.) to receive U.S. Food and Drug Administration (FDA) approval to make and administer Choline C-11 with an on-site cyclotron.
I know of at least two other facilities in the United States that have subsequently been granted FDA approval to make and administer Choline C-11, but facilities with an on-site cyclotron are an exclusive club. This exclusivity means Mayo Clinic can charge whatever they want for the test.
So, in Jacksonville, Florida, a city of just under one million people, Mayo Clinic is the only facility that offers the Choline C-11 PET scan. However, they are not a designated imaging center under my health insurance plan.
I discovered that the Mayo Clinic would bill my insurance $14,217.00 for the scan, of which my out-of-pocket cost would be $7,890.44 despite having already met my deductible. Mayo Clinic charges $7,377 for a base PET CT scan and $6,840 for the Choline C-11 tracer they inject into your vein. That is some serious cost per ounce.
Choline C-11 is expensive due to its short half-life of 20 minutes requiring production by an on-site cyclotron, but how does Mayo Clinic justify charging more for a base PET CT than the radioactive tracer?
In contrast, a stand-alone imaging center, Precision Imaging, charges $1,500 cash price for a base PET CT scan and still makes a profit. Precision Imaging is not without significant overhead as it has five imaging centers across northeast Florida.
That comes across as greedy Mayo Clinic, but that is your image issue, not mine. They, of course, would try to blame the pricing on my insurance, but Mayo is the one that sets the base price. Mayo Clinic Jacksonville has more overhead than a few stand-alone imaging centers, including current costs of more than doubling its campus’s footprint.
Mayo Clinic Jacksonville is now adding to its overhead by enlarging its campus from 2.8 million square feet, not including parking structures, to 7.5 million square feet. Projects include a $432 million five-floor addition above the existing Mayo tower, a $233 million oncology unit, and an $8 million expansion of its emergency services department.
Have you ever been to the Mayo Clinic Hospital in Jacksonville? It’s shiny and well-appointed, like a Ritz Carlton hotel. You can order breakfast, lunch, and dinner a la carte off of glossy menus. Do you have a craving for fine dining while waiting to be discharged? No problem, call downstairs to the M Brothers at Mayo Clinic fine dining restaurant and have it sent up.
In 2009, the Mayo Clinic started limiting the number of Medicare and Medicaid patients it admits. At that time, critics pointed out “that low Medicare spending by Mayo and others is driven by the lack of diversity and poverty in their patient population. They say Mayo's low-cost image is belied by the high rates it charges insurers and private payers." Sound familiar?
In late 2016, Mayo Clinic Rochester’s chief executive office (CEO), Dr. John Noseworthy, in a speech to clinic employees bottom-lined it by saying, “We’re asking … if the patient has commercial insurance, or [if] they’re Medicaid or Medicare patients and they’re equal, that we prioritize the commercial insured patients enough so … we can be financially strong at the end of the year.”
The squeeze on unprofitable patients continued in 2022 when the Mayo Clinic sent letters to all Medicare beneficiaries who received care at its Florida and Arizona facilities warning them that it is now out-of-network “with most Medicare Advantage plans.” This and similar business decisions by the Mayo Clinic forced some patients to leave physicians they had seen for over a decade.
Because the Mayo Clinic is a nonprofit designated as a 501(c)3, it is required annually to report top salaries in a public document called a 990 form. That form, released in December 2022, shows the CEO of the Mayo Clinic in Jacksonville made a total of $2,089,014 in annual compensation. Wow! Between its campus's more than half-billion-dollar expansion and its CEO's salary, it’s no wonder those Choline C-11 scans are so expensive.
Another Pylarify scan and why it’s not optimal
I told my radiation oncologist that doing a Choline C-11 scan would be cost-prohibitive for me, and he decided I should do another Pylarify scan.
In the previous newsletter, I described why a Pylarify scan is not optimal for me since my previous Pylarify in May was normal despite having a PSA of 63.21. At this point, I'm not arguing with him and will go with what he says, even though it isn't optimal.
Cash prices versus inflated billing
My health insurance company emailed me a list of designated imaging centers offering the best price for a PET scan. Upon seeing that one of the imaging centers, Precision Imaging, posts cash prices for all their radiology tests, I began some price comparisons.
I recommend you look at these cash prices for radiology tests because you'll be shocked at what a for-profit medical center can charge for a study and still make a profit. These low cash prices drive home the greed in this medical billing game because you can compare what facilities can charge and still earn a profit versus the ridiculously inflated prices associated with health insurance billing.
However, cash prices can vary dramatically from facility to facility. For example, Precision Imaging charges a cash price of $6,500 for a Pylarify scan - $1,500 for the PET CT and $5,000 for the radioactive tracer. In comparison, my radiation oncologist charges a cash price of $9,262 for a Pylarify scan - a price difference of $2,762.
Based on my current health insurance plan, I have decided to use Precision Imaging for the Pylarify scan since my out-of-pocket expense is only $312.90. By comparison, if I were to undergo a Pylarify scan at my radiation oncologist's office under my current health insurance plan, even though I have met my deductible, my out-of-pocket expense would be $1,400.
Even though Pylarify is not the optimal PET scan for me, I am interested in seeing how an independent radiologist reads the scan, given that my radiation oncologist retracted the results of my last Pylarify.
Conclusion
These billing numbers are all over the place and reflect the complexity of the market power of providers, the limited knowledge of consumers about medical pricing, negotiated prices, varying premiums, copays, and deductibles, and the various levels of greed involved - capitalism at its finest:-)
In the next newsletter, I’ll give you the results of my latest PET scan. Fingers crossed.
Until then, stay healthy.
Much love,
Keith
Dear Keith,
A frightening good substack. I remember when I first came to Medicare, I saw all those high "original" (left column on bills) charges. There was a woman who did a column on Medicare and related in the Beaches Leader. I contacted her and she gave me the same lesson you did, tho in broader terms. It is a game. My favorite primary left UF Health Primary for Mayo Primary, and across the board that primary takes no Medicare patients, even tho have top-notch supplement insurance. And, if I ever had to go to the Mayo Clinic in JAX, the auto uncharge for Medcare is 15% t 40%. ()I don't believe even my supplement would cover the upcharge.) I will have to wtch for the ad you mention. But even as a kid, I remember: "Plop, plop, fizz, fizz, oh what relief it is" (Alka-Seltzer). In teaching a science communication course, I had the students design and carry out an experiment on "Tums absorbs seven times its weight in excess stomach acid." (No one got close to that answer.) And I too have used Precision. Carry on, brave one.