September 27, 2019

Price Transparency: A Physician’s Perspective

by Richard M. Hamrick III, MD, MBA, FCCP

After a long career practicing pulmonary and critical care medicine, and then an 8-year stint as Chief Medical Officer for a Division of HCA, I recently decided to leave my position and find my next career challenge. During the transition, I navigated a scenario familiar to many Americans: a stretch without visible evidence of healthcare insurance while COBRA was arranged to provide retroactive coverage. It was an eye-opening experience.

I’m not alone in dealing with these issues in my home state of Virginia.

This June, an article in JAMA shed light that over 20,000 patients were sued and 9,000 had wages garnished in Virginia in 2017. Four not-for-profit hospitals filed over half of the lawsuits. Mary Washington Hospital was called out in a media firestorm, and quickly announced they were suspending the filing of lawsuits.  And just a few weeks ago, a Washington Post investigation found University of Virginia Medical Center had sued 36,000 patients over a 6-year period for unpaid bills.

The above headlines and my recent “uninsured” episodes have provoked considerable thought about both the plight of the un- and under-insured.

My first encounter as an uninsured patient involved a visit to my orthopedist for ongoing issues with tennis elbow. I received an X-ray, exam, and had the elbow injected with cortisone, which provided relief. I promised to send along my insurance information when it arrived. Three weeks later, I received a “self-pay discount” bill from the practice, one of the largest and most organized in the state. The charge was $263, but had been written down to $137, a very fair approach. The insurance coverage came through a few days later, and after submission to the carrier, the “allowable” billable amount ended up at $143. Kudos to this physician group for managing self-pay situations by squaring the charge to the patient with market-based reality.

What might have happened if I had known the cost all along—and did the prescribing physician have any idea of the cost?

The second—and more sobering—experience involved a simple refill of a 90-day supply of a generic medication that I have taken for over ten years for chronic rhinosinustitis. Developed decades ago, there are now multiple generic manufacturers of the drug, which should, in theory, lower the price. I was floored when, during a routine refill pickup, the pharmacist told me a three-month supply would be $1,299 without insurance. The drug is highly effective and allows me to avoid repeated sinus surgeries required before. The insurance plan has no co-pay requirement for generic 90-day scripts, leaving me unaware of the cost. Later reimbursed by the insurance company, I am now acutely aware that the $5,200 annual cost accounts for a sizeable chunk of my insurance premium.

This episode has triggered considerable thought. I enjoy employer-based insurance rates and access to a drug which provides substantial benefit without a co-pay or deductible. However, a 20 percent co-pay for a drug costing $5,200 annually would be a serious expense for most Americans.

A multitude of questions remain: why does a drug that has been around for decades and has many generic manufacturers cost so much? What is the true cost to manufacture the drug and what happens after that? What might have happened if I had known the cost all along—and did the prescribing physician have any idea of the cost? I’ll wager the answer is no, which is a problem.

In my case, I’ve benefitted enormously from this medication. But my doctor should have had the true cost available to him at the point of prescription. This way, we would both know the cost I’d bear as a patient (ideally with real-time exposure to what my co-pay would be, and where I was in my “deductible year”), as well as the expense borne by my insurance plan (in this case my self-insured employer plan utilizing a third-party administrator). I’m confident that a $5,200 annual cost this would have led to serious discussions on both my physician’s and my part about trials of once-a-day doisng, versus the current twice daily.

The ongoing national debate about rising drug costs, and in particular rising consumer exposure, has cast a critical light on the role of pharmacy benefit managers (PBMs) and the interplay between the manufacturers, PBMs, and health plans. For this particular generic drug, there are likely several thousand dollars of profit beyond the cost of manufacturing floating around. Where does that money go? Is it with the manufacturer, the PBM, the insurance company? Does any of it make it way back to the employer paying for it all?

Practically speaking, our system needs to get to a place where actual expenditures are visible to stakeholders at each step in the process. Few, if any, other major purchases in life besides healthcare have near-complete obfuscation of cost to all involved: the patient, the vast majority of providers, and, to some degree, the insurers.

Time and time again when doctors were exposed to cost data on almost anything—drug costs, joint implant costs, lab costs—they generally gravitated to the “value” option

When I was a practicing practicing physician, I often felt I was shielded from cost information. But as a CMO, time and time again when doctors were exposed to cost data on almost anything—drug costs, joint implant costs, lab costs—they generally gravitated to the “value” option maintaining quality while factoring in cost. As a consequence, unnecessary clinical variation was driven out, and costs were lowered. Outcomes were equivalent or better. I was never surprised as these outcomes can be viewed as both common-sense care and an important component of professionalism.

It is time to take a step that seems obvious to many outside our industry: to ensure cost data is available in the EHR and reviewed at the point of prescription so everyone can understand what things cost. It may become a moral imperative. While some argue cost should never be part of a clinical discussion, my experience has taught that accurate data and data-driven understanding will lower costs in a rational way.

  • Clinicians need to see what things cost as they order them. They are professional and will make the correct judgement.
  • Providers need to understand the financial ramifications of their selection for the patient. There is no reason why they should not see co-pays, and where in the deductible cycle a patient might be.
  • Patients need to also understand what things cost, and what their out-of-pocket expected expense might be.

These are all “knowable” events and the technology can be built to provide it. While there will be objections from many fronts, I believe the majority of patients and providers would embrace this.

I’d enjoy hearing from others about how we can get better data in front of doctors and hospital teams to improve clinical outcomes, financial performance and cost transparency—and I’d be interested in working with physician groups and healthcare systems to create solutions and processes that make this kind of work possible. Feel free to send an email my way via contact@gisthealthcare.com, and I’ll be back in touch.

Richard M. Hamrick III, MD, MBA, FCCP

Richard M. Hamrick III, MD, MBA, FCCP served as the Division Chief Medical Officer for HCA’s Capital Division, comprised of 18 hospitals and associated operational components across Virginia, Indiana, New Hampshire and Kentucky from 2011 through mid 2019. He is a former president of the Richmond Academy of Medicine and the Medical Society of Virginia. He has served the Commonwealth of Virginia on several workgroups appointed by the Governor and Secretary of Health and Human Resources.

Board-certified in internal medicine, pulmonary disease and critical care medicine, he practiced in Richmond, VA for over 20 years. A graduate of Randolph-Macon College and the Medical College of Virginia/Virginia Commonwealth University, he completed his internal medicine residency at West Virginia University and a pulmonary disease fellowship at Georgetown University, and an MBA from Virginia Commonwealth University. He has written frequently in both the scientific and lay press, and has extensive research experience as a principal site investigator in clinical trials.

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