Last spring, Jenni Nolan got a breast biopsy at IU Health Hospital North in Carmel, Indiana.
Her physician gave her a mammogram and injected her breast with lidocaine, an anesthetic. Then, the doctor removed a tissue sample and stuck a tiny implantable tissue marker at the injection site to ensure future biopsies would draw from a different spot. The whole process took 25 minutes.
The mammogram added $469 to Nolan’s bill. The tiny marker? $1,014.
The final charge was $10,687.55.
After her insurance company, Cigna, determined what it would cover, Nolan still had to pay about $2,700 out of pocket.
Surprise bills like this one are common, but nearly impossible to prevent. A federal rule that went into effect at the beginning of this year intends to provide patients with the cost of medical services before they receive them.
Hospitals and insurance companies lobbied against price transparency for decades, with health insurers claiming it would “undermine competitive negotiations.” Four hospital organizations — including the American Hospital Association, of which IU Health is a member — jointly sued the government to prevent the 2021 ruling. They lost, but many still haven’t provided price transparency data.
The Indiana Daily Student analyzed IU Health Bloomington Hospital’s price data and found it charges private insurance companies an average of nearly twice as much as “self-pay” patients for the same procedures. Self-pay patients are either uninsured or choose not to use their insurance to pay for a procedure.
The purpose of the price transparency rule is to help patients understand the cost of their care before receiving it. But because of resistance from hospitals, a lack of federal government enforcement, difficult to decipher datasets and the unreliability of the published prices, Americans remain in the dark about the cost of their health care — including patients at IU Health Bloomington.
Can anyone navigate the cost of care?
Even with the newly required data, patients have little to no information about how hospitals determine the cost of their health care or how much of what they pay ends up as profit. The data IU Health released estimates how much procedures cost, but the actual bill each patient receives could vary drastically.
Nolan is a Board Certified Patient Advocate who owns a small business that helps people deal with confusing or unaffordable medical bills. She spends her days negotiating with insurers and hospitals to resolve billing errors, to appeal when insurance companies won’t pay for agreed-upon procedures and to dispute high charges for her clients.
Based on her working knowledge of health care costs, Nolan expected her breast biopsy would be expensive — maybe somewhere around $3,000. The actual bill, more than three times that, was a shock.
After her procedure, Nolan investigated IU Health’s standard charge listing and its price estimator tool, which gave her different numbers — $4,118 and $5,499, respectively.
In a statement to the IDS, IU Health said its price estimator tool provides “meaningful estimates” to 90,000 patients a year. But neither the estimator tool nor the standard charge listing would have helped Nolan — they both underestimated her final bill by about half.
“People who deal with this stuff every day don't understand it because it's such a hot mess,” Nolan said. “You may think that you've done the research, but you don't have the whole picture.”
She decided to confront IU Health about her own high fees by writing a letter to the billing department.
Within a couple of weeks, IU Health agreed to write off about $2,100 from Nolan’s bill, leaving her to pay $600 out of pocket for the procedure, the amount she’d requested.
“But the problem is most of the world doesn't know that they can do that,” Nolan said. “They don't even know where to begin.”
Nolan works with clients across the country who need help dealing with similar billing issues, including many who received care at IU Health hospitals. She estimated about three-fourths of her clients have medical bills that are higher due to clerical errors. The rest are trying to combat correct but unaffordable bills.
Nolan helps them apply for financial assistance that hospitals offer. If they don’t qualify, she negotiates the balance with the billing department.
The fact that Nolan’s job exists at all points to the increasingly complex, bureaucratic nature of hospital billing. Patient advocacy has existed in some form in the U.S. since the early 20th century, but one-on-one advocates have become more popular in the past two decades.
Nolan said she wishes the system could be remade from scratch, removing the bureaucratic procedures that drive up bills.
“How awesome would it be to go back and be like, ‘OK, how much does a Band-Aid really cost — does it really cost $5? I don't think so.’”
Hospitals, insurance companies and patients
How health care price negotiations leave patients in the dark
A graphic shows the relationship between hospitals, insurers and patients. Hospitals and insurers negotiate prices. Hospitals know what everyone will pay during these negotiations, while insurers don't know what other companies are paying for medical procedures. Patients pay insurers premiums to receive help covering medical bills. Hospitals provide care to patients while patients pay for that care. It's difficult for patients to predict the cost of care in this system.
Why are prices so high?
The health care system is the only economic market in the United States in which consumers don’t know the cost of a service before they agree to pay for it, Seth Freedman, IU O'Neill School of Public and Environmental Affairs associate professor, said.
Not only is the price hidden, but patients often don’t have a choice in whether they need to get a procedure. If someone is having a heart attack, they likely aren’t going to consider the cost of an ambulance before they call 911.
There have been multiple attempts to offer more price transparency in insurance networks in the past decade or so, Freedman said. Some insurers have developed price tools that allow patients to compare costs for certain procedures at in-network hospitals.
In 2019, a Trump-era executive order required hospitals to publish a single “charge” for each procedure, but these numbers did not reflect the actual cost, which varies widely for different patients. Freedman said the 2021 rule is the first major public-facing step toward hospital price transparency.
Insurance companies and hospitals rarely conduct line-by-line negotiations for each individual price, Freedman said. Instead, companies negotiate many procedures at once, often based on Medicare costs, without knowing what their competitors are negotiating with the same hospital system.
For example, an insurance company might agree to pay 150% of what hospitals charge the federal government for multiple procedures rather than negotiating prices for individual ones.
For insurance companies, the federal transparency rule may mean more bargaining power when they negotiate with hospital networks — even if not every hospital network is complying.
“Anthem might say, ‘Look, you're charging Cigna $1,000 less. I want to pay $1,000 less also,’” Freedman said.
But Marty Wood, Insurance Institute of Indiana president, said he was skeptical the rule would significantly affect prices or negotiations, since so many other factors affect the yearly process of working out contracts.
Experts disagree about whether price transparency will cause prices to go up or down. Typically, they expect transparency will force prices down, but that isn’t always the case.
“Under certain market conditions, transparency like this actually makes prices go up,” Freedman said. “They can see what other hospitals are pricing and use that as sharing information with each other to force prices up.”
What does this mean for patients?
Individual patients tend to be either unaware this information is available or unable to sift through it on their own to shop around, Freedman said, which is another reason the standard charge listings may not make much of a difference in prices or negotiations.
For some procedures at IU Health Bloomington, insurance prices are up to 61 times greater than self-pay prices, according to the IDS’s data analysis.
Freedman said it would be inaccurate to think of self-pay prices as the “true” price of a procedure because they are based on hospitals’ expectations about how much people can pay. This is meant to avoid fees associated with hiring collections agencies to chase down patients who haven’t paid.
The biggest proportional difference in the dataset was the cost of surgically removing up to 15 skin tags with IUHPS Narrow Network insurance. A self-pay patient would pay $128.76 for the procedure. But with that insurance, the hospital would charge a total bill of $7,857.91 — 61 times more expensive.
Insurance companies don’t always have an incentive to negotiate lower costs. More spending on health care means more money for insurance companies. According to federal law, insurance company profits can’t exceed a percentage of the amount they spend on care. Even though insured patients aren’t paying the full rates, their costs still go up when their insurers negotiate higher prices.
Freedman said higher bills for insurance companies lead to higher patient costs, which could mean more out of pocket costs, higher premiums, a higher deductible or higher copay rates.
“Something has to give,” he said.
Given the available data, it’s impossible to know how much each procedure actually costs due to wide variation between individual situations. But comparing self pay and insured prices paints a picture of the massive disparities between what IU Health Bloomington charges patients on different insurance plans or with no insurance at all.
Every year, IU Health provides about $250 million of care it does not receive payment for, Ryan Kitchell, then-IU Health Executive Vice President and Chief Administrative Officer, told the IndyStar in 2018. Uncompensated care includes charity care or and patients who do not and cannot pay. At the time, Kitchell said this forces the hospital to boost costs for commercial insurers, which raises the copays and premiums insured patients pay.
Hospital profit margins are rising around the country, but the problem of high costs for insurers is particularly bad in Indiana, according to a peer-reviewed 2019 study. It found Indiana hospitals overcharge insurers and make huge profit margins compared to hospital networks in other states, resulting in higher costs for patients.
Researchers estimated IU Health had a profit margin of 11.9% in 2016. Most non-profit hospitals in the nation operate at a 2 to 3% profit margin, according to the study. Hospital executives disputed the study’s findings and reported much lower profit margins.
People often do not have a say in choosing their insurance provider, especially if they are insured through their employers — who also pay more when insurance companies negotiate high prices. Therefore, this data may not be useful for choosing insurance companies but instead for decisions like determining where and when to get a procedure.
All of the data released in compliance with the price transparency law is for all health insurance companies that have negotiated with IU Health. A hospital that is in network for an insurance company has negotiated a price specific to that hospital system.
“From the customer’s perspective, it means that they can go to any hospital within their network and it will be covered,” Freedman said.
Patients who go out of network may not be covered at all and usually have to pay much higher out of pocket costs than they would in network.
The price data from IU Health comes with several caveats. It remains unclear to what extent the prices listed on these disclosures reflect the actual amount individual patients are being charged because individual cases of the same procedure can vary widely. The data also does not include the cost of a procedure before profit, which is why the IDS is making relative comparisons between insurance companies and self-pay rates.
For more serious or expensive procedures, the uninsured patient would be paying dramatically more out of pocket than an insured patient. An uninsured patient would also have less access to preventative care and regular check-ups.
But the dramatic difference between the negotiated prices with insurance companies and the prices for uninsured patients drives up the cost of care for everyone, from insurers to employers to patients.
Where do we go from here?
While the price transparency data is a step toward consumer choice in the health care system, Freedman said the 2021 rule will likely have more of an impact on negotiations between hospitals and insurance companies than on actual patients.
“From the customer's perspective, I think there's still a ways to go to educate and empower people to use these kinds of data in their decision making,” Freedman said.
But the maximum fee the federal government is levying for noncompliance is $109,500 per year, or $300 a day. Because of the high cost of assembling and publishing price transparency data and the possibility it could lead to lower profits, the fees are likely less expensive than the cost of compliance.
The federal government has not enforced these fees, instead opting to send out warning letters. It is unclear if and when enforcement of fines will begin.
The price data doesn’t help patients reliably predict the cost of their care. It doesn’t erase often cripplingly high medical bills that many Americans face. And it doesn’t give people the ability to prevent those types of bills in the future.
But it does reveal previously unknown disparities among what IU Health Bloomington charges patients who have different insurance plans and no insurance at all. Freedman said this might lead to prices changing in the future as insurance companies now have the tools to negotiate competitively.
“I don't know if, on average, they'll end up going up or down because of this, but it definitely seems likely that they'll converge,” Freedman said.
In the meantime, Nolan recommends patients advocate for themselves if they’re hit with high bills. Even just sending a letter could help reduce medical costs.
“Just pushing back when you see a ridiculous price, we do have some control here,” Nolan said. “We’ve got to stop just going along with it.”
Correction: A previous version of this story misidentified the school within IU where Seth Freedman works.
Have a story to tell?
If you or someone you know has been affected by a surprise billing at IU Health, please email us at firstname.lastname@example.org.
To report this story, the Indiana Daily Student analyzed the standard charge listing for IU Health Bloomington. We used that data to create columns indicating the raw difference between self-pay costs and each insurance company’s negotiated costs, and another indicating how many times greater than self-pay each cost is.
For the specific examples listed, we used the following CPT codes, which are billing codes hospitals use to indicate procedures:
- CPR: 92950
- Appendectomy: 44970
- Epi Pen injection: 96372
- Urine pregnancy test: 81025
- Insulin: 83525
- MRI (head): 70544
- Intra-Arterial Chemo: 96425
- IV: 96360
- Vaginal delivery: 59409
- Anesthesia (moderate sedation): 99151