“It’s about as ugly as it can get” says a risk manager. “We don’t send people there anymore, their pricing is outrageous!”
M.D. Anderson – Houston, a Texas state hospital, has done a terrific job over the years branding itself as the only place to go to get cured. Anyone diagnosed with cancer is scared, desperate to live and wants to go there at all costs as long as someone else pays for it.
Their thought process reasons that all other cancer care centers are second rate and pity on those poor bastards seeking treatment there.
M.D. Anderson (MDA) has been blacklisted by more than one payer but Ivory Tower officials don’t care. People want to live and the money continues to roll in. No poverty here.
Most self-funded plan sponsors, caving to internal political pressure, have entered into single case agreements. Rather than making a business decision they make a political decision.
So what do these pre-printed agreements look like? Ask the in-take clerk and she will pull one out of her stack and hand it to you. No need to negotiate upfront. That’s been done for you.
MDA’s standard Single Case Agreement is 15% off billed charges. Their billed charges are whatever they want them to be and not always consistent with their published charges that are impossible to read by clueless consumers.
A 50% discount off double the price is good for the seller but not so good for the buyer. If they only knew would they buy it? Or would they shop around? No need, it’s not their money, it’s someone else’s money.
A recent MDA single case agreement claim we reviewed showed a billed charge for a certain, very common, procedure of $9,000 (rounded off). MDA’s machine-readable file published on their website lists the same procedure differently at $5,000. 15% off $9,000 = $7,650. Medicare allowable is less than $1,500. This means the plan sponsor’s plan members collectively paid +500% of Medicare by way of plan contributions.
Several years ago we ran a repricing exercise on 100% of all facility claims for a +4,000 life case over a 16 month period to determine what their PPO contracted rates allowed compared to Medicare rates. The highest cost facility was M.D. Anderson – Houston averaging 538% of Medicare.
What’s interesting is M.D. Anderson – San Antonio is much more competitive. Their single case agreements are not charge based. Rather, they are Medicare based averaging, depending on the service, anywhere from 170% to 220% of Medicare.
Public perception is “you get what you pay for” i.e., lower price means lower quality. “Those poor bastards who go to San Antonio won’t survive as long as those going to Houston” screams the lady in red during an Open Enrollment meeting. “Why are you making us go there? Don’t you care about us!”
In the case of the claim we reviewed last week the plan sponsor ended up paying over $19,000 for charges they would have paid less than $4,000 at any other facility for the same services.
Self-funded plans allowing access to M.D. Anderson – Houston are sitting on a ticking time bomb. A San Antonio employer found out the hard way. A highly valued employee demanded access to M.D. Anderson – Houston. The employer made a political decision and agreed. When the bill came in at +$500,000 we were asked to negotiate it down to a more reasonable level. “Impossible” we said, “You signed a single case agreement. You must pay it!”
Rather than going to M.D. Anderson – San Antonio where the member lived, he choose to travel to Houston to, he must have thought, improve his chances of living.
This is not news for those of us in the business. But consumers have no idea and don’t care. Someone else is paying and they just want to live. Most plan sponsors go along to get along not wanting to alienate valued employees.
MDA is the poster child for the power of branding. In health care, branding is everything. Logos too. Try selling a health plan without one. The perception of high quality outweighs the pain of high cost.
Meanwhile millions of Americans are relegated to second rate cancer care centers. Or are they?
It’s hard to reason with emotional plan members who are scared and want the best health care they think they can get.
