Blue Cross North Carolina’s Price Tool Could Shake Up Medical Industry

Leslie Goldfarb of Charlotte had been talking to two surgeons about knee surgery and worrying about her out-of-pocket costs.

When she recently read about a new online database from Blue Cross and Blue Shield of North Carolina, she checked the average reimbursement for those surgeons. One of them averaged about $1,500 less in total costs associated with the arthroscopic surgery she’s having. And Blue Cross pays about twice as much if the same doctors do the procedure in a hospital – costs that pass through to her with a high-deductible plan.

She used that data to schedule her surgery.

“You don’t have to legislate medical costs to come down,” Goldfarb said. “All you have to do is make the information available.”

That’s the idea.

Until recently the cost of medical care had been a closely guarded trade secret and patients had little reason to care when health insurance covered most of the expense. Now, however, as patients become responsible for more of their medical costs, such information is seeping out through online tools.

How that will play out in the medical marketplace remains to be seen, but Blue Cross’ North Carolina disclosure is creating national buzz. A recent post on said it could “represent the dawn of a new age in health care.”

“Transparency in general is a good thing,” said Dr. Dan Murrey, a Charlotte spinal surgeon who is CEO of OrthoCarolina. “It’s crazy that a patient can get more information about which mobile phone to use than which health care provider to use.”

Like other Charlotte health executives, Murrey has mixed feelings about the value of the Blue Cross public data. They say it starts a good conversation but can be misleading.

For Cary radiologist Stephen Loehr, it provides evidence that his costs are lower than most of his competitors. His typical reimbursement from Blue Cross for an angioplasty for vein blockage performed at his Cary facility is $2,494.

Many outpatient facilities collect two or three times that amount, and hospitals can cost even more. For example, the Duke University Hospital system takes in $12,123.

“I still work at Duke Regional and do the same procedures there,” Loehr said, explaining that the hospital is a better option for high-risk patients. “It’s the same procedure except the price. In a hospital, the patients stay overnight – it’s a $1,000 hotel room.”

Pulling the veil

Blue Cross, the state’s largest insurer with about 4 million customers, is the latest to pull back the secrecy veil by publishing costs for more than 1,200 nonemergency procedures.

Rather than cite average prices for procedures as other sites do, Blue Cross lists prices tied to reimbursement rates it has negotiated with individual providers. The data show tremendous price variation within the state for some procedures. For example, the cost of a hammertoe correction in North Carolina ranges from $404 to $6,864 for doctor’s offices and surgery centers. Hospital costs for the procedure range from $4,518 to $13,252.

Murrey, whose practice recently opened an ambulatory surgery center in Charlotte, says the numbers illustrate how much some patients can save by having procedures done in an outpatient setting. Patients may be scheduled for a more expensive hospital setting based simply on location or their surgeon’s next available slot, he said.

However, patients with risk factors, such as heart trouble, high blood pressure or diabetes, may need to be in a hospital where help is at hand if complications occur.

“It will force us to have a real conversation about whether it’s worth it to go to one facility over another,” he said.

But Murrey, like executives from Carolinas HealthCare System and Novant Health, says the numbers can be misleading. Even within a category, such as hip replacement, some cases will be more complex than others, which contributes to differences in average reimbursement.

For instance, two doctors who are partners in a Carolinas HealthCare practice and receive the same payments from Blue Cross are listed as having significantly different averages for the same procedure, said Dr. Roger Ray, Carolinas’ chief physician executive. That could only happen if one had more complex cases than the other.

And while the surgeon’s name is attached to some procedures, the totals listed include everything associated with it, such as anesthesiologists’ fees, medication and facility fees.

But Goldfarb, a Blue Cross customer, says the public database she found through an article in the Observer was more helpful than anything the company provides on its member website. Her concern is that Blue Cross is focusing on public relations moves, such as the North Carolina database, while falling short on the demand for basic customer service.

Competitive pressure

While the Blue Cross-negotiated rates don’t directly apply to those who are insured by other companies, such as Aetna and Cigna, the data is a benchmark. Health care advocates say that having access to a procedure’s cost could change the way patients and doctors make decisions.

“This is the direction that we’re going in,” said Lynn Quincy, associate director of health reform policy at Consumers Union, the advocacy arm of Consumer Reports magazine. “We’ll see more and more of this, and consumers will get used to it.”

Less clear is what impact pricing transparency ultimately will have on medical costs and health care premiums.

“Our goal is that those on the lower end – providing good health care at an affordable price – will be proud of that,” said Blue Cross spokeswoman Michelle Douglas. “And the providers who are at the higher end will … get more in line.”

One high-priced North Carolina provider has already contacted Blue Cross to request a reduction in its insurance payments, Douglas said, declining to provide more details.

The site has had 8,000 unique visitors and nearly 18,000 price searches since it was released three weeks ago, Douglas said.

Quincy said the tool could be revelatory to physicians as well because they typically refer patients to one another without regard to price.

Accessing medical prices has not been feasible, or even legal, because contracts between insurers and providers are confidential. Doctors are prohibited by federal antitrust law from sharing their private insurance payment terms with other doctors.

“Doctors almost never know the cost,” she said. “The patient eventually sees a bill, but the doctor is almost worse off because they never see what the patient is charged by other doctors.”

Categories: Cost and Quality, Health Industry, Insurance, Reporting Consortium