Friday, December 17, 2021

How and Why I Was Overcharged by Penn Medicine and My Blue Cross Health Plan: A True Story (rerun)

This week, I’m rerunning some popular posts while I prepare for today's live video webinar: Drug Channels Outlook 2022. See you soon!

Click here to see the original post and comments from September 2021.

Sometimes, a little knowledge can be a bad thing.

I want to share with you, dear reader, the strange but true tale of my recent foray into the wonderful world of hospital price transparency for routine lab services.

I discovered—with great effort—that the rates my health plan negotiated with the largest local health system in Philadelphia were greater than the self-pay, cash price. Ultimately, my baffling and unexpected out-of-network bill required me to pay more out-of-pocket than the total cash price.

This tale neatly summarizes why so many people hate our healthcare system—and why the average patient will have trouble benefiting from transparency regulations. FOOL ME

My Philadelphia-based company purchases pricey Platinum PPO health insurance from Independent Blue Cross (IBC). Penn Medicine, the health system of the University of Pennsylvania, and its physicians are in-network for my IBC plan.

Recently, my physician ordered some standard tests for my annual physical. I used the lab conveniently located two doors down the hall from my physician’s office in the Penn Medicine building.

Three months after my appointment, I received an unexpected bill from Penn Medicine, for $244.93. The bill showed only four figures:
  • The hospital’s total charge: $6,783
  • A plan payment: -$280.30
  • An unexplained “insurance adjustment”: -$6,248.25
  • My out-of-pocket obligation: $244.93
I was puzzled. Where did these numbers come from? Why did I owe 46.6% coinsurance on the total payment? Or maybe I owed 3.6% of the total charges?

The answers required a surprising amount of work.


My first call was to IBC. I discovered that Penn Medicine’s outpatient laboratory services are out-of-network. Surprise! I’m on the hook for a 50% coinsurance.

Yet I wasn’t being asked to pay 50% of anything on my bill. Hmm.

Since this is Drug Channels, I dug deeper.

As you may know, CMS’s Hospital Price Transparency rule took effect on January 1, 2021. Hospitals must report previously hidden details about their third-party contracts, along with the cash price for many services. Click here for helpful New York Times advice on finding your own hospital’s figures.

Most hospitals have simply ignored this rule. Fortunately, Penn Medicine is one of the few hospitals that have bothered to comply with this government regulation.

I found Penn Medicine’s data on its Transparency in Pricing web page. Here’s what I did with these data:
  • I downloaded the page’s “Outpatient All Other” price file. The workbook contained six separate worksheets, each titled with an inscrutable abbreviation: CCH, HUP, LGH, PAH, PPMC, and MCP. Each worksheet contained the hospital’s standard charges, negotiated prices from multiple insurers, and a “self pay/uninsured” billing amount.
  • I went to my IBC patient portal and downloaded an explanation of benefits (EOB) for the lab tests.

    Good news: The EOB listed 20 tests along with the hospital’s charges, the amount paid by IBC, and my 50% coinsurance.

    Bad news: The EOB omitted the Current Procedural Terminology (CPT) codes, so I couldn’t readily match the charges to the excel file.
  • I visited Penn Medicine’s online electronic health records (EHR) service. After some sleuthing, I was able to find the CPT codes for my lab work. There were 22 CPT codes listed. I copied the text to a spreadsheet and used some Excel tricks to extract the codes.
  • I used vlookup—my favorite Excel function—to find the self-pay prices for the CPT codes from the six Penn Medicine pricing worksheets. The worksheet labeled “PAH” had charges and payment figures that matched some of those from the EOB. (So PAH stands for pathology?) Other self-pay figures appeared only on the “CCH” worksheet. (I still have no idea what that abbreviation means.) Confusingly, three of the CPT codes were combined into a single listing on my EOB.
  • I discovered that IBC didn’t cover three of the tests, though my physician believed they were relevant to my personal medical history. Neither IBC nor I owed any payment to Penn for these tests.

I was able to locate the self-pay amount for 15 of the 19 tests that were paid by IBC. Here’s what I found:
  • Total charges for the 15 tests were $3,457.00. Recall that charges are the hospital’s self-defined, inflated list price.
  • Negotiated rate reflects the discount negotiated by Independence Blue Cross. The total was a mere $330.68. That reflects a whopping 90% off the list price.
  • Adam’s coinsurance equaled 50% of the negotiated rate, or $165.34.
  • Self pay price equals the total amount I would have been charged—and Penn Medicine would have received—if I had not used my insurance. This was $163.66.
The table below summarizes my findings:

[Click to Enlarge]



So, what did I learn from all of this fun?
  • Independence Blue Cross negotiated rates that were more than twice the cash-pay price. Um, great job? For prescriptions, a pharmacy benefit manager (PBM) won’t reimburse a pharmacy above its cash list price. (For better or worse, that’s why GoodRx exists.)

    If it’s any consolation to IBC, the rates for UnitedHealthcare and Cigna were an astonishing nine and seven times the cash price, respectively.
  • My out-of-pocket costs would have been lower if I had paid cash instead of using my “insurance.” IBC agreed to pay Penn Medicine rates that were 202% of the cash price. So, my 50% coinsurance was (slightly) greater than the total cash price. Huh?
  • Transparency won’t help the average patient for a long time. My description above makes it clear that few patients will or can undertake what I described above. What’s more, my knowledge yielded no benefit, because Penn Medicine wouldn’t reverse the insurance payment and accept a cash payment.

    Plus, there’s no realistic way that I could have learned about the difference in payment before my tests. I would have had to: (1) contact my physician and get a list of CPT codes, (2) download and analyze an incomplete pricing data set, (3) call Penn Medicine to obtain cash prices for the missing CPT codes, (4) explain that I wanted to pay out-of-pocket. Even if I had done all of this, I still would have had no negotiated pricing data for some of the tests.
Warren Buffet recently observed: “Medical costs are the tapeworm of American economic competitiveness.”

As my experience demonstrates, the tapeworm always wins.

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