Somewhere along the line when starting my practice, insurance contracts came across my desk. Anxious to get credentialed, I would review the fee schedule knowing I had little choice but to accept the terms, sign and hurry it off to the mailbox. Several times over the years, I would attempt to get a raise by negotiating an increase on rates with commercial insurances. My effort was always futile, despite inflation and employees who expected raises beyond cost-of-living increases. The majority of my patients were on Medicare, so a portion of my income essentially made me a part-time government employee.

When I recently joined a large group practice, I was sure that now free-market conditions would take on reimbursement. No such luck. But how could supply and demand, a basic economic principle, not impact pricing in health care?

ECONOMIC PRINCIPLES DON’T APPLY HERE

My experience demonstrates that insurance companies can determine physician reimbursement through market leverage and the ability to create knowledge asymmetry. Four or five major U.S. health insurance companies have a tremendous advantage negotiating with tens of thousands of cottage-industry health providers or groups that are left in the dark regarding pricing. The physician side of the equation, however, faces the charge of “collusion” if practices agree to fix prices in negotiations. This also would apply to doctors sharing information on reimbursement from insurance companies with each other.

Recently, I inadvertently got a peek behind the curtain of provider pricing. A patient I had referred to a subspecialist returned to me, bringing 2 years of his medical bills and complaining that the rates for the same exams and tests that I used to perform were 30% higher for this doctor — and he had a 20% co-insurance to pay. I was upset too and wished I had not learned this information. While this specialist was associated with a university, he saw this patient in a nearby community office like mine. The difference in contract pricing meant that this doctor only had to work 3.5 days per week to my 5 days to earn the same amount as me.

A LOOK AT TRANSPARENCY

As health-care costs increase and their percentage of GDP rises, physicians know reimbursement for exams, procedures and testing are not driving this out-of-control escalation. Let’s consider the impact of health care-increasing free market conditions. Pricing and value of goods are a big part of an economy. In standard economics, market participants all have perfect information, therefore price transparency is complete. Because physicians do not have price transparency when negotiating reimbursement for patient care with insurance companies, a necessary free market condition is compromised. A low level of price transparency can depress competition, thus increasing prices.

Now, imagine removing the curtain keeping provider-care pricing in the dark, allowing the market to operate freely and correct itself. Having price transparency for office visits, testing and procedures would increase market competition and ultimately drive down or stall healthcare costs. This would happen in two ways.

First, providers could better negotiate with insurance companies, allowing an opportunity for market conditions to balance supply and demand. This new marketplace fosters competition and levels economic variables to likely impact overall cost of health care. Second, patients would have access to pricing before utilizing health care, which would typically influence their decisions as to where to obtain care and would encourage them to question the need for extra testing or procedures.

HOPEFUL SIGNS AHEAD

There is some momentum to correct health-care market pricing. The American College of Physicians have taken a position, calling for insurers to make available to subscribers the rates that they have negotiated with physicians and hospitals. According to the group’s 2010 policy paper on health-care transparency, research shows that “transparency can help patients and their families make informed choices when selecting a health plan, hospital, clinical practice or choosing among alternative treatments … Transparency can also improve quality, safety and efficiency throughout the healthcare system due to competition and/or the availability of clinical benchmarks.”

In 2019, the Trump administration released a plan that would require hospitals and insurers to disclose their secretly negotiated rates for the first time. This information would level the playing field for many providers. Also, as providers consolidate under private equity, the supply of care will impact the demand for pricing. Another trend toward transparency: Academic institutions, often with better rates to cover uncompensated care and teaching, have opened many clinics in suburban and rural areas. These shifts in market supply may impact contract reimbursement pricing over time.

Unfortunately, until changes to policies and regulations alter the status quo, many physicians feel powerless in the fight for increased price transparency. A start, however, is recognizing why price transparency is important in a health-care system. Next, one could get involved in organizations that are lobbying for this change or even initiate a grassroots effort with letter writing to lawmakers. Once consumers — ie, patients — have access to pricing, they in turn will help create a free market by demanding to see certain providers for specific care. Ideal reimbursement for health care would reflect feedback from outcomes, quality and cost of care. OM

Scott LaBorwit, MD, is a principal at Select Eye Care, with locations in Towson and Elkridge, Md., and is an assistant professor, part-time faculty, at Wilmer Eye Clinic of Johns Hopkins Hospital, Baltimore. His e-mail is Sel104@me.com.

Disclosures: Dr. LaBorwit is a consultant to and speaker for Alcon.