Health care stewardship: Check your percentages when reviewing medical provider estimates

Everywhere we go, we’re bombarded by advertisements.

They dance on digital billboards as we drive down the road. They shout at us from the screen on the gas station pump. There may be some in your pocket right now, showing up as push notifications on your phone. In an environment like this, it’s challenging to be a discerning consumer, cut through the noise, assess what a product is worth, and determine whether the price you’re being offered is a good one.

Many businesses signal that they’re offering a good price with percentage discounts. If a product is 50% off, we assume that we must be getting a good deal. It’s a comforting mental shortcut, and our brains crave that simplicity in a world where we’re confronted with too much information.

Unfortunately, discounts can be misleading. We’ve all encountered the clothes retailer that seems to have a perpetual sale going on, with everything permanently 25% off. Marketers call this practice “anchoring.” If they can suggest to you that a particular price is expected, anything less than that seems like a good deal. If almost no one pays the sticker price, it ceases to be a meaningful number.

The real cost of care

We also get misleading price signals in the world of health care. Hospitals use a list of the services they offer and their prices, called a chargemaster. Unfortunately, chargemaster rates aren’t tied to the costs of providing care. The rates are set by hospital finance departments, whose focus is on managing revenues and supporting hospital negotiations with insurance companies. The chargemaster rate is an opening bid that the hospital uses to negotiate with payers. This means that the chargemaster rate is usually much more aggressive than the actual cost. It’s also higher than what the hospital ultimately hopes to collect. This role as a negotiating tool means that chargemaster rates can change dramatically and arbitrarily.

Since chargemaster rates are disconnected from the true cost of care, it’s difficult to assess whether a particular percentage discount off that price is a fair amount. A procedure discounted by 70 percent could still be a bad deal if the original price was inflated, and a 10 percent discount could be a fair amount if the original price was reasonable. Few professionals in the health care industry know the cost of care for a particular procedure, and cash-pay patients have even less information.

Consider one variation in costs provided by Healthcare Bluebook™ in 2023. According to market data, the fair price for an upper gastrointestinal endoscopy with biopsy in the Nashville, Tennessee, area at the time was $2,118. Vanderbilt University Medical Center priced this procedure at $10,028 but offered a 12 percent discount, bringing the cost down to $8,825. TriStar Skyline Medical Center’s chargemaster rate was $22,500, but its “larger” 25% discount left the price at $16,675. While TriStar offered a cash-pay discount percentage that is significantly larger than that offered by Vanderbilt, the starting charges were also inflated. As a result, even after that cash-pay discount was applied, TriStar offered a deal that is significantly more expensive than that offered by Vanderbilt.

Becoming a wise consumer

How can we be discerning consumers and wise stewards of our God-given financial resources when it’s so difficult to get reliable information?

First, understand that a percentage discount isn’t a reliable indicator of value.

Second, ask your provider for a good-faith estimate prior to having a major procedure done. The federal No Surprises Billing Act of 2023 requires providers to issue estimates of services upon request, and to issue the document at least three days prior to the scheduled procedure date. The law also threatens penalties if providers exceed the quoted price by more than $400. Knowing your expected cost in advance will make it easier to make a wise decision. For more on good-faith estimates, you can refer to our post on the subject.

Third, you can compare the price listed in a good-faith estimate to the market data provided by Healthcare Bluebook, which is in the Health Resources section of the Samaritan Dashboard. Good-faith estimates can regularly exceed the fair price by 400% or more. If you discover that the price you’ve been offered is a bad deal, you have time to consider seeking an alternative.

By combining an accurate quote with an objective standard, you can be confident that you’re making a wise decision as a health care consumer. It’s a straightforward way that we can care for one another and have greater peace of mind.

What you can do

• Ask for a good-faith estimate before your procedure.
• Compare pricing on the good-faith estimate to market data from Healthcare Bluebook.
• Do not look at percentage discounts as a reliable indicator of value.
• Consider seeking another option if you’re not getting a fair price.

The information provided in this article is for educational purposes and is not meant as financial advice.