Paying Till It Hurts A Case Study in High Costs
Colonoscopies Explain Why U.S. Leads the World in Health Expenditures
By ELISABETH ROSENTHAL | Published: June 1, 2013
The $2.7 Trillion Medical Bill
By ELISABETH ROSENTHAL
MERRICK, N.Y. — Deirdre Yapalater’s recent colonoscopy
at a surgical center near her home here on Long Island went smoothly:
she was whisked from pre-op to an operating room where a
gastroenterologist, assisted by an anesthesiologist and a nurse,
performed the routine cancer
screening procedure in less than an hour. The test, which found nothing
worrisome, racked up what is likely her most expensive medical bill of
the year: $6,385.
That is fairly typical: in Keene, N.H., Matt Meyer’s colonoscopy was
billed at $7,563.56. Maggie Christ of Chappaqua, N.Y., received
$9,142.84 in bills for the procedure. In Durham, N.C., the charges for
Curtiss Devereux came to $19,438, which included a polyp removal. While
their insurers negotiated down the price, the final tab for each test
was more than $3,500.
“Could that be right?” said Ms. Yapalater, stunned by charges on the
statement on her dining room table. Although her insurer covered the
procedure and she paid nothing, her health care costs still bite: Her
premium payments jumped 10 percent last year, and rising co-payments and
deductibles are straining the finances of her middle-class family, with
its mission-style house in the suburbs and two S.U.V.’s parked outside.
“You keep thinking it’s free,” she said. “We call it free, but of
course it’s not.”
In many other developed countries, a basic colonoscopy costs just a few
hundred dollars and certainly well under $1,000. That chasm in price
helps explain why the United States is far and away the world leader in
medical spending, even though numerous studies have concluded that
Americans do not get better care.
Whether directly from their wallets or through insurance policies,
Americans pay more for almost every interaction with the medical system.
They are typically prescribed more expensive procedures and tests than
people in other countries, no matter if those nations operate a private
or national health system. A list of drug, scan and procedure prices
compiled by the International Federation of Health Plans, a global
network of health insurers, found that the United States came out the
most costly in all 21 categories — and often by a huge margin.
Americans pay, on average, about four times as much for a hip
replacement as patients in Switzerland or France and more than three
times as much for a Caesarean section as those in New Zealand or Britain. The average price for Nasonex, a common nasal spray for allergies, is $108 in the United States compared with $21 in Spain.
The costs of hospital stays here are about triple those in other
developed countries, even though they last no longer, according to a
recent report by the Commonwealth Fund, a foundation that studies health policy.
While the United States medical system is famous for drugs costing
hundreds of thousands of dollars and heroic care at the end of life, it
turns out that a more significant factor in the nation’s $2.7 trillion
annual health care bill may not be the use of extraordinary services,
but the high price tag of ordinary ones. “The U.S. just pays providers
of health care much more for everything,” said Tom Sackville, chief
executive of the health plans federation and a former British health
minister.
Colonoscopies offer a compelling case study. They are the most expensive
screening test that healthy Americans routinely undergo — and often
cost more than childbirth or an appendectomy
in most other developed countries. Their numbers have increased
manyfold over the last 15 years, with data from the Centers for Disease
Control and Prevention suggesting that more than 10 million people get
them each year, adding up to more than $10 billion in annual costs.
Largely an office procedure when widespread screening was first
recommended, colonoscopies have moved into surgery centers — which were
created as a step down from costly hospital care but are now often a
lucrative step up from doctors’ examining rooms — where they are billed
like a quasi operation. They are often prescribed and performed more
frequently than medical guidelines recommend.
The high price paid for colonoscopies mostly results not from top-notch
patient care, according to interviews with health care experts and
economists, but from business plans seeking to maximize revenue;
haggling between hospitals and insurers that have no relation to the
actual costs of performing the procedure; and lobbying, marketing and
turf battles among specialists that increase patient fees.
While several cheaper and less invasive tests to screen for colon cancer are recommended as equally effective by the federal government’s expert panel on preventive care
— and are commonly used in other countries — colonoscopy has become the
go-to procedure in the United States. “We’ve defaulted to by far the
most expensive option, without much if any data to support it,” said Dr.
H. Gilbert Welch, a professor of medicine at the Dartmouth Institute
for Health Policy and Clinical Practice.
In coming months, The New York Times will look at common procedures,
drugs and medical encounters to examine how the economic incentives
underlying the fragmented health care market in the United States have
driven up costs, putting deep economic strains on consumers and the
country.
Hospitals, drug companies, device makers, physicians and other providers
can benefit by charging inflated prices, favoring the most costly
treatment options and curbing competition that could give patients more,
and cheaper, choices. And almost every interaction can be an
opportunity to send multiple, often opaque bills with long lists of
charges: $100 for the ice pack applied for 10 minutes after a physical therapy session, or $30,000 for the artificial joint implanted in surgery.
The United States spends about 18 percent of its gross domestic product
on health care, nearly twice as much as most other developed countries.
The Congressional Budget Office has said that if medical costs continue
to grow unabated, “total spending on health care would eventually
account for all of the country’s economic output.” And it identified
federal spending on government health programs as a primary cause of long-term budget deficits.
While the rise in health care spending in the United States has slowed
in the past four years — to about 4 percent annually from about 8
percent — it is still expected to rise faster than the gross domestic
product. Aging baby boomers and tens of millions of patients newly
insured under the Affordable Care Act are likely to add to the burden.
With health insurance
premiums eating up ever more of her flat paycheck, Ms. Yapalater, a
customer relations specialist for a small Long Island company, recently
decided to forgo physical therapy for an injury sustained during Hurricane Sandy
because of high out-of-pocket expenses. She refused a dermatology
medication prescribed for her daughter when the pharmacist said the
co-payment was $130. “I said, ‘That’s impossible, I have insurance,’ ”
Ms. Yapalater recalled. “I called the dermatologist and asked for
something cheaper, even if it’s not as good.”
The more than $35,000 annually that Ms. Yapalater and her employer
collectively pay in premiums — her share is $15,000 — for her family’s
Oxford Freedom Plan would be more than sufficient to cover their medical
needs in most other countries. She and her husband, Jeff, 63, a sales
and marketing consultant, have three children in their 20s with good
jobs. Everyone in the family exercises, and none has had a serious
illness.
Like the Yapalaters, many other Americans have habits or traits that
arguably could put the nation at the low end of the medical cost
spectrum. Patients in the United States make fewer doctors’ visits and
have fewer hospital stays than citizens of many other developed
countries, according to the Commonwealth Fund report. People in Japan
get more CT scans. People in Germany, Switzerland and Britain have more
frequent hip replacements. The American population is younger and has
fewer smokers than those in most other developed countries. Pushing
costs in the other direction, though, is that the United States has
relatively high rates of obesity and limited access to routine care for the poor.
A major factor behind the high costs is that the United States, unique
among industrialized nations, does not generally regulate or intervene
in medical pricing, aside from setting payment rates for Medicare and Medicaid,
the government programs for older people and the poor. Many other
countries deliver health care on a private fee-for-service basis, as
does much of the American health care system, but they set rates as if
health care were a public utility or negotiate fees with providers and
insurers nationwide, for example.
“In the U.S., we like to consider health care a free market,” said Dr.
David Blumenthal, president of the Commonwealth Fund and a former
adviser to President Obama. ”But it is a very weird market, riddled with
market failures.”
Consider this:
Consumers, the patients, do not see prices until after a service is
provided, if they see them at all. And there is little quality data on
hospitals and doctors to help determine good value, aside from surveys
conducted by popular Web sites and magazines. Patients with insurance
pay a tiny fraction of the bill, providing scant disincentive for
spending.
Even doctors often do not know the costs of the tests and procedures
they prescribe. When Dr. Michael Collins, an internist in East Hartford,
Conn., called the hospital that he is affiliated with to price lab
tests and a colonoscopy, he could not get an answer. “It’s impossible
for me to think about cost,” he said. “If you go to the supermarket and
there are no prices, how can you make intelligent decisions?”
Instead, payments are often determined in countless negotiations between
a doctor, hospital or pharmacy, and an insurer, with the result often
depending on their relative negotiating power. Insurers have limited
incentive to bargain forcefully, since they can raise premiums to cover
costs.
“It all comes down to market share, and very rarely is anyone looking
out for the patient,” said Dr. Jeffrey Rice, the chief executive of Healthcare Blue Book,
which tracks commercial insurance payments. “People think it’s like
other purchases: that if you pay more you get a better car. But in
medicine, it’s not like that.”
A Market Is Born
As the cases of bottled water and energy drinks stacked in the corner of
the Yapalaters’ dining room attest, the family is cost conscious —
especially since a photography business long owned by the family
succumbed eight years ago in the shift to digital imaging. They moved
out of Manhattan. They rent out their summer home on Fire Island. They
have put off restoring the wallpaper in their dining room.
And yet, Ms. Yapalater recalled, she did not ask her doctors about the
cost of her colonoscopy because it was covered by insurance and because
“if a doctor says you need it, you don’t ask.” In many other countries,
price lists of common procedures are publicly available in every clinic
and office. Here, it can be nearly impossible to find out.
Until the last decade or so, colonoscopies were mostly performed in
doctors’ office suites and only on patients at high risk for colon
cancer, or to seek a diagnosis for intestinal bleeding. But several
highly publicized studies by gastroenterologists in 2000 and 2001 found
that a colonoscopy detected early cancers and precancerous growths in
healthy people.
They did not directly compare screening colonoscopies with far less
invasive and cheaper screening methods, including annual tests for blood
in the stool or a sigmoidoscopy, which looks at the lower colon where
most cancers occur, every five years.
“The idea wasn’t to say these growths would have been missed by the
other methods, but people extrapolated to that,” said Dr. Douglas
Robertson, of the Department of Veterans Affairs, which is beginning a
large trial to compare the tests.
Experts agree that screening for colon cancer
is crucial, and a colonoscopy is intuitively appealing because it looks
directly at the entire colon and doctors can remove potentially
precancerous lesions that might not yet be prone to bleeding. But
studies have not clearly shown that a colonoscopy prevents colon cancer
or death better than the other screening methods. Indeed, some recent
papers suggest that it does not, in part because early lesions may be
hard to see in some parts of the colon.
But in 2000, the American College of Gastroenterology anointed
colonoscopy as “the preferred strategy” for colon cancer prevention —
and America followed.
Katie Couric, who lost her husband to colorectal cancer,
had a colonoscopy on television that year, giving rise to what medical
journals called the “Katie Couric effect”: prompting patients to demand
the test. Gastroenterology groups successfully lobbied Congress to have
the procedure covered by Medicare for cancer screening every 10 years,
effectively meaning that commercial insurance plans would also have to
provide coverage.
Though Medicare negotiates for what are considered frugal prices, its
database shows that it paid an average of $531 to gastroenterologists
for a colonoscopy in 2011. But that does not include the payments for
associated facility fees and to anesthesiologists, which could double
the cost or more. “As long as it’s deemed medically necessary,” said
Jonathan Blum, the deputy administrator at the Centers for Medicare and
Medicaid Services, “we have to pay for it.”
If the American health care system were a true market, the increased
volume of colonoscopies — numbers rose 50 percent from 2003 to 2009 for
those with commercial insurance — might have brought down the costs
because of economies of scale and more competition. Instead, it became a
new business opportunity.
Profits Climb
Just as with real estate, location matters in medicine. Although many
procedures can be performed in either a doctor’s office or a separate
surgery center, prices generally skyrocket at the special centers, as do
profits. That is because insurers will pay an additional “facility fee”
to ambulatory surgery centers and hospitals that is intended to cover
their higher costs. And anesthesia,
more monitoring, a wristband and sometimes preoperative testing, along
with their extra costs, are more likely to be added on.
In Mount Kisco, N.Y., Maggie Christ had two colonoscopies two months
apart, after her doctor decided it was best to remove a growth that had
been discovered during the first procedure. They were performed by the
same doctor, with the same sedation. The first, in an outpatient surgery
department, was billed at $9,142.84 (insurance paid $5,742.67). The
second, in the doctor’s office, was billed at $5,322.76 (insurance
eventually paid $2,922.63) because there was no facility fee. “The
location was about accommodating the doctor’s schedule,” Ms. Christ
said. “Why would an insurance company approve this?”
Ms. Yapalater, a trim woman who looks far younger than her 64 years, had
two prior colonoscopies in doctor’s offices (one turned up a polyp that
required a five-year follow-up instead of the usual 10 years). But for
her routine colonoscopy this January, Ms. Yapalater was referred to Dr.
Felice Mirsky of Gastroenterology Associates, a group practice in Garden
City, N.Y., that performs the procedures at an ambulatory surgery
center called the Long Island Center for Digestive Health. The doctors
in the gastroenterology practice, which is just down the hall, are
owners of the center.
“It was very fancy, with nurses and ORs,” Ms. Yapalater said. “It felt like you were in a hospital.”
That explains the fees. “If you work as a ‘facility,’ you can charge a
lot more for the same procedure,” said Dr. Soeren Mattke, a senior
scientist at the RAND Corporation. The bills to Ms. Yapalater’s insurer
reflected these charges: $1,075 for the gastroenterologist, $2,400 for
the anesthesia — and $2,910 for the facility fee.
When popularized in the 1980s, outpatient surgical centers were hailed
as a cost-saving innovation because they cut down on expensive hospital
stays for minor operations like knee arthroscopy.
But the cost savings have been offset as procedures once done in a
doctor's office have filled up the centers, and bills have multiplied.
It is a lucrative migration. The Long Island center was set up with the
help of a company based in Pennsylvania called Physicians Endoscopy. On
its Web site, the business tells prospective physician partners that
they can look forward to “distributions averaging over $1.4 million a
year to all owners,” “typically 100 percent return on capital investment
within 18 months” and “a return on investment of 500 percent to 2,000
percent over the initial seven years.”
Dr. Leonard Stein, the senior partner in Gastroenterology Associates and
medical director of the surgery center, declined to discuss patient
fees or the center’s profits, citing privacy issues. But he said the
center contracted with insurance companies in the area to minimize
patients' out-of-pocket costs.
In 2009, the last year for which such statistics are available,
gastroenterologists performed more procedures in ambulatory surgery
centers than specialists in any other field. Once they bought into a
center, studies show, the number of procedures they performed rose 27 percent.
The specialists earn an average of $433,000 a year, among the highest
paid doctors, according to Merritt Hawkins & Associates, a medical
staffing firm.
Hospitals and doctors say that critics should not take the high “rack
rates” in bills as reflective of the cost of health care because
insurers usually pay less. But those rates are the starting point for
negotiations with Medicare and private insurers. Those without insurance
or with high-deductible plans have little weight to reduce the charges
and often face the highest bills. Nassau Anesthesia Associates — the
group practice that handled Ms. Yapalater’s sedation — has sued dozens
of patients for nonpayment, including Larry Chin, a businessman from
Hicksville, N.Y., who said in court that he was then unemployed and
uninsured. He was billed $8,675 for anesthesia during cardiac surgery.
For the same service, the anesthesia group accepted $6,970 from United
Healthcare, $5,208.01 from Blue Cross and Blue Shield, $1,605.29 from
Medicare and $797.50 from Medicaid. A judge ruled that Mr. Chin should
pay $4,252.11.
Ms. Yapalater’s insurer paid $1,568 of the $2,400 anesthesiologist’s
charge for her colonoscopy, but many medical experts question why
anesthesiologists are involved at all. Colonoscopies do not require
general anesthesia — a deep sleep that suppresses breathing and often
requires a breathing tube. Instead, they require only “moderate
sedation,” generally with a Valium-like drug or a low dose of propofol,
an intravenous medicine that takes effect quickly and wears off within
minutes. In other countries, such sedative
mixes are administered in offices and hospitals by a wide range of
doctors and nurses for countless minor procedures, including
colonoscopies.
Nonetheless, between 2003 and 2009, the use of an anesthesiologist for
colonoscopies in the United States doubled, according to a RAND Corporation study
published last year. Payments to anesthesiologists for colonoscopies
per patient quadrupled during that period, the researchers found,
estimating that ending the practice for healthy patients could save $1.1
billion a year because “studies have shown no benefit” for them, Dr.
Mattke said.
But turf battles and lobbying have helped keep anesthesiologists in the
room. When propofol won the approval of the Food and Drug Administration
in 1989 as an anesthesia drug, it carried a label advising that it
“should be administered only by those who are trained in the
administration of general anesthesia” because of concerns that too high a
dose could depress breathing and blood pressure to a point requiring resuscitation.
Since 2005, the American College of Gastroenterology has repeatedly
pressed the F.D.A. to remove or amend the restriction, arguing that
gastroenterologists and their nurses are able to safely administer the
drug in lower doses as a sedative. But the American Society of
Anesthesiologists has aggressively lobbied for keeping the advisory,
which so far the F.D.A. has done.
A Food and Drug Administration spokeswoman said that the label did not
necessarily require an anesthesiologist and that it was safe for the
others to administer propofol if they had appropriate training. But many
gastroenterologists fear lawsuits if something goes wrong. If anything,
that concern has grown since Michael Jackson died in 2010 after being
given propofol, along with at least two other sedatives, without close
monitoring.
‘Too Much for Too Little’
The Department of Veterans Affairs, which performs about a
quarter-million colonoscopies annually, does not routinely use an
anesthesiologist for screening colonoscopies. In Austria, where
colonoscopies are also used widely for cancer screening, the procedure
is performed, with sedation, in the office by a doctor and a nurse and
“is very safe that way,” said Dr. Monika Ferlitsch, a gastroenterologist
and professor at the Medical University of Vienna, who directs the
national program on quality assurance.
But she noted that gastroenterologists in Austria do have their
financial concerns. They are complaining to the government and insurers
that they cannot afford to do the 30-minute procedure, with prep time,
maintenance of equipment and anesthesia, for the current approved rate —
between $200 and $300, all included. “I think the cheapest colonoscopy
in the U.S. is about $950,” Dr. Ferlitsch said. “We’d love to get half
of that.”
Dr. Cesare Hassan, an Italian gastroenterologist who is the chairman of
the Guidelines Committee of the European Society of Gastrointestinal
Endoscopy, noted that studies in Europe had estimated that the procedure
cost about $400 to $800 to perform, including biopsies and sedation.
“The U.S. is paying way too much for too little — it leads to
opportunistic colonoscopies,” done for profit rather than health, he
said.
Some doctors in the United States are campaigning against the overuse of
the procedure, like Dr. James Goodwin, a geriatrician at the University
of Texas. He estimates that about a quarter of Medicare patients
undergo the screening test more often than recommended,
even though the risks of complications, like long recovery times and
poor tolerance of sedation, increase for older people. Routine screening
is not recommended for all people over 75.
And some large employers have begun fighting back on costs. Three years
ago, Safeway realized that it was paying between $848 and $5,984 for a
colonoscopy in California and could find no link to the quality of
service at those extremes. So the company established an all-inclusive
“reference price” it was willing to pay, which it said was set at a
level high enough to give employees access to a range of high-quality
options. Above that price, employees would have to pay the difference.
Safeway chose $1,250, one-third the amount paid for Ms. Yapalater’s
procedure — and found plenty of doctors willing to accept the price.
Still, the United States health care industry is nimble at protecting
profits. When Aetna tried in 2007 to disallow payment for
anesthesiologists delivering propofol during colonoscopies, the insurer
backed down after a barrage of attacks from anesthesiologists and
endoscopy groups. With Medicare contemplating lowering facility fees for
ambulatory surgery centers, experts worry that physician-owners will
sell the centers to hospitals, where fees remain higher.
And then there is aggressive marketing. People who do not have insurance
or who are covered by Medicaid typically get far less colon cancer
screening than they need. But those with insurance are appealing
targets.
Nineteen months after Matt Meyer, who owns a saddle-fitting company near
Keene, N.H., had his first colonoscopy, he received a certified letter
from his gastroenterologist. It began, “Our records show that you are
due for a repeat colonoscopy,” and it advised him to schedule an
appointment or “allow us to note your reason for not scheduling.”
Although his prior test had found a polyp, medical guidelines do not
recommend such frequent screening.
“I have great doctors, but the economics is daunting,” Mr. Meyer said in
an interview. “A computer-generated letter telling me to come in for a
procedure that costs more than $5,000? It was the weirdest thing.”
