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The price is right: When patients want to haggle

If you don't know the answer to "How much does this cost?" you'd better find out, because more patients want to negotiate the price of care. But how do you set that price without getting into financial -- and legal -- trouble?

By Myrle Croasdale, amednews staff. May 6, 2002.

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As Priceline pitchman William Shatner might tell you, a lot of people like the idea of naming their own price for services, whether it's for airline tickets, hotel rooms -- or a visit to your office.

More often, doctors are seeing patients who want to negotiate the price of care, with the increasing popularity of defined contribution plans and the increasing preponderance of high deductible plans. According to a recent poll taken by Harris Interactive Health Care News, 13% of consumers have asked their doctors for a discount in the last 12 months.

"In the last three to six months, I'm seeing more patients coming in with defined contribution and medical savings account plans. I'm seeing big momentum in this direction," said David McDonald, DO, a family physician in Renton, Wash.

These people aren't coming in unprepared, either. There are Medicare fee schedules on the Internet for the public to peruse. And while doctors know most Medicare fees don't cover their costs, consumers don't and they may not care.

So what do you do if a patient starts to haggle with you? What would you charge? How do you even get started figuring that out?

Fortunately, analysts say, most doctors have time to figure this out. But eventually, they say, physicians are going to have a lot more patients asking them, how much does this thing cost, anyway?

"I believe when this reaches critical mass, in, say, three or four years, there will be whole new set of equilibrium pricing on routine care," said J.D. Kleinke, a Denver-based health economist. "Physicians haven't been in a free market before. A lot will be offended by this, and a lot will jump right on it. With the lack of hassles, it's cash on the barrelhead."

Making things clear

An estimated 1 million people have what are being called health savings accounts, medical savings accounts, defined contribution plans or consumer-driven health plans. Whatever you call it, analysts claim that up to 35% of the work force could be carrying these types of health coverage in the next five years. These plans typically pack deductibles of $2,000 to $3,000 per person.

You can count on these folks asking for discounts as they reach into their wallet for that $100 bill, because they already are.

Harris Interactive Health Care News states, "Our new data strongly suggest that rising out-of-pocket costs are likely to result in much more consumer negotiation over health care bills and prices over the next several years. This new research finds that a sizable minority of the public is already talking to the providers of health and medical services to try to negotiate lower bills."

The doctors who most often see this trend at work now are those who have already converted to all-cash practices, having given up managed care, Medicare and Medicaid after becoming tired of reimbursement struggles.

Their first rule of negotiating is: Don't do it.

Doctors who have made the transition from filing insurance claims to patients paying at the front counter agree that the simplest way to short-circuit the haggling process is to make it clear up front what your fees are.

Whether you post them in the waiting room, have a sheet with fees at the front desk or explain face to face with the patient that you charge so much for every 10 minutes or a specific amount for a certain procedure, any of these methods is a way to set the ground rules for talking money with patients.

"No one likes to have to haggle, not the patient, not the office," said Michael Harris, MD, a urologist in Traverse City, Mich., who has spent the last three years moving out of the managed care and government payment system.

Doctors who do this say most patients are glad to not have to negotiate.

They just want to know what they're getting into as they go. Maybe a blood test can be put off until they have the money for it or when they come in for their follow-up visit.

Dr. Harris said he feels his patients come to him because they want good medical care, not because they're looking for cheap prices. Because they're paying for it themselves, they expect to get their money's worth.

"When patients are paying cash, you have to provide value," he said, making the doctor-patient relationship all the more important.

Setting your price

Of course, before you can post your price list, you have to determine what you should charge. And that is a process that can be filled with financial and legal pitfalls.

Those who participate in Medicare and have multiple health insurance contracts can talk to their patients directly about money, but they've got more rules governing what they charge. Doctors can't consistently charge less than what they bill Medicare or they'll wind up in federal court on fraud charges.

Contracts with insurers may stipulate that doctors won't bill others less than the agreed-on rates with the particular insurer, so that would need to be honored.

But lawyers agree that in all these circumstances, a doctor needs to have the ability to respond to an individual patient's economic situation. All these rules shouldn't prevent treating an indigent patient for free, but a pattern of charging less than what the practice bills Medicare is a fast route to legal nightmares.

That said, most physicians are glad to have patients willing to pay cash. They just need to know how much they can conceivably knock off while still getting enough to keep the office running.

Often patients who pay cash and don't ask for a discount pay the highest rates of all -- rates set to capture the maximum reimbursement rates from commercial insurers or Medicare.

And many say discounting too much isn't worth a doctor's time.

For example, Dr. McDonald, a founder of SimpleCare, a network of 600 physicians who operate all-cash practices, estimates that the overhead for handling insurance claims is equal to $30 for every 10 minutes spent in the examining room, a cost he calls fairly consistent across specialties throughout the United States.

Yet Elizabeth Woodcock, a consultant with Physicians Practice in Atlanta, claims doctors save only $5 to $7 if they don't have to deal with filing an insurance claim. If a claim is rejected, add on another $15 to $18 for a total cost of total of $20 to $25 per claim.

"That doesn't make a big enough difference for the patient, so in general doctors will take 30% off the charge," Woodcock said.

But this doesn't mean your fee minus 30% will cover rent, salaries and other costs of doing business.

Michael Jaczko, DO, a family physician in Carlton, Ore., who under SimpleCare has moved to a cash-only practice, suggests that physicians look at their payroll and staff benefits when they create a fee structure.

"I haven't broken it down just for insurance administration costs, but there is a big difference when you think about the amount of time spent for each claim," Dr. Jaczko said.

"I look at it more as salary for employees, my salary, existing loans, supplies. Instead of saying insurance claims cost $30 an hour, I say it costs us so much a month to run this practice, and then I break it down to an hourly or quarterly hour rate," Dr. Jaczko said.

Don't forget antitrust issues

The easiest way to set fees may seem to be asking your colleagues what they charge, but that could get you into trouble. Under antitrust laws, physicians may not agree among themselves to bill specific fees, and the mere act of mentioning fees is a gray area.

According to attorneys in the antitrust field, technically it is the act of making an agreement on price that is against the law. That might not fly, however, if you had to try to explain in court how you may have been talking about fees with other physicians, but you were not making any agreements. Attorneys advise doctors to avoid any hint of impropriety, and that means not talking about fees openly.

That said, physician practice consultants say that setting fees is a matter of finding out what others charge in your area, looking at Medicare rates and reviewing commercial insurers' fee schedules to be sure you charge enough to get maximum allowable reimbursement rates.

To get data on what other doctors charge, besides the questionable practice of finding out by word-of-mouth, there are plenty of consultants willing to sell data on national averages and some will break these down by ZIP code.

Determining what to charge also brings up the issue of price points. There's information on consumers' price sensitivity in most retail markets, but there's little experience with this in medicine.

Sandy Lutz, health care research director for PricewaterhouseCoopers Consulting, said physicians generally don't have a sense of what fees the market will bear. "Will people change doctors for a $5-a-visit difference or a $25 difference? We haven't been in that kind of market before, and doctors don't know how to price themselves in that environment," Lutz said. "Right now, they set a price in a vacuum."

Consumers are more likely to shop by price when looking for a new doctor, so new patient visits may be a good place to practice competitive pricing while other fees could be tied more closely to meeting office and salary costs.

"The real trick is to keep fees reasonable," Dr. Jaczko said. "I think that anything under $50 [for an office visit] is reasonable for patients, but everybody is different. I've yet to have anyone complain about the prices I charge."

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 ADDITIONAL INFORMATION: 

Patients are asking for discounts

"In the last 12 months, have you ever talked to any of the following to see if you could pay a lower price than they had billed you, or wanted to bill you?"

Pharmacist:: 17%
Doctor: 13%
Dentist: 12%
Hospital: 10%

Source: Harris Interactive Health Care News; based on a nationwide survey of 2,118 adults, who were surveyed online Jan. 24-30, 2002. Data were weighted to be representative of all U.S. adults.

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