One of the cool things about running Max Out of Pocket is I get to look at both the macro and micro aspects of healthcare. I also run into random characters from across the internet occasionally who actually have to deal with the system as a patient. Some of them have been battling scary things like cancer, and have even put it into remission. These internet encounters often spark questions about how much something costs. If you have not figured it out yet, Max’s curiosity is easily triggered.
You can’t put a price on remission. It’s priceless. But in healthcare, for me, it’s almost easier to understand the granular level micro examples than the macroeconomic issues. Especially, when those examples impact people we know. With just one lab test, I am going to demonstrate how complicated healthcare reimbursement has become.
We have reviewed some “simple lab tests” like lipid panels and basic metabolic panels in the past. We even looked at my own elevated lipid panel and how I got it for free. But we have never looked at molecular genetic laboratory testing.
Apparently, it’s time to take things to the next level. Max is probably out of his league here.
PCR – Polymerase Chain Reaction
Molecular genetic testing is almost as complicated as the pricing for the service itself. Almost. The test we are going to talk about today is pretty amazing. CPT code 81206 represents this particular test. It can check for the presence of the mutant cancer gene at very low levels. My understanding is it involves chromosome 22 and chromosome 9. Evidently, the results are expressed as a percentage of bad cells to good cells. We are talking some pretty scientific stuff here.
It is basically looking for a mutation of the BCR/ABL1 gene often found in patients diagnosed with chronic myelogenous leukemia (CML). Apparently, this fusion gene can predispose an individual to certain cancers. Feel free to skip the next paragraph if you can’t handle a few technical terms. It’s a mouth full.
CPT Code 81206
There are a couple of different versions of this test, but I was interested in the CPT code represented by 81206. The “consumer-friendly” description of this is a translocation analysis (BCR/ABL1) major breakpoint. The not-so consumer-friendly description uses CPT code 81206 for the identification of major breakpoint, occurring at p210 in a 5.8 kb major breakpoint cluster region (M-bcr) around exon b3. My understanding is the BCR gene has three different regions referred to as “major”, “minor”, and “other points”. Therefore, there are two other versions of this test for the other regions and those are represented by code 81207 (minor breakpoint) and 81208 (other breakpoint). At times, all three might be needed.
My understanding is a patient getting treated for CML might need to have this test several times per year to help monitor the tyrosine kinase inhibitor treatment/therapy for CML.
Again, complicated stuff and I am not an expert. I am very happy there are people out there much smarter than Max who have figured all this out. If we have an oncologist reading this, feel free to break this down into layman’s terms for people like me.
But how much should it cost? Ah, here is where Max fits in.
A Few Quick Notes On Healthcare Pricing
The truth is, as a so-called expert, I have no idea how much this test should cost.
In theory, the retail pricing for this test would be set by the “competitive” commercial insurance market. Max happens to know that is far from the case. But except for government payers, there is technically nothing mandating a price cap for this service for commercial carriers or uninsured patients. I would generally like to see the pricing for any service set as a function of cost to provide the service with a reasonable markup that supports a profit margin. Unfortunately, it can be hard to pin the cost down on some of these more complicated tests depending on the setting and overhead that runs through a laboratory.
Posting Charges Online
A few years back, it became a requirement for hospitals to post their charges online. Max is kind of a ‘market guy’. So I naively started thinking market pressure might help us with (but not fix) some of the inflated pricing around the country. But then again, other than Max, who is really pricing out this type of test? If I had cancer, I would likely take the path of least resistance to get this test as quickly as possible. Price would be the last thing on my mind. I might take a quick look at my annual max out-of-pocket, but that’s about it.
Another problem is most hospitals (particularly the larger systems) didn’t embrace this charge posting requirement; they ran from it. They included the bare bones minimum and it was often buried deep in the website. The big problem is most of them did not include the CPT code on their listing which is one of the easier ways to communicate complex medical terminology. To be fair, there were some copyright concerns around the industry on whether or not they could publish CPT codes online. That’s a whole other blog post I will never write.
In other words, it is not as easy as pulling up CPT code 81206 on the hospital’s website and writing down the price. I’m a so-called expert on this stuff, and even I can’t always pick them out. We can make some educated guesses based on the description, but without the CPT code, we can’t be 100% sure there is a one-for-one match. I should also mention, each CPT code can map to more than one charge line and even have a different price.
A Few Examples
Here are the two options from Beaumont Hospital System’s chargemaster in Michigan for this particular service. I highlighted the two that probably meet the definition of this test. Again, a small assumption on this since they don’t share the CPT code.
This pricing seems quite reasonable from my experience, as further noted below. We can save $12-$15 on this test if you are willing to drive across town.
Unfortunately, when I type 81206 into their pricing website, I don’t get any hits.
Side note: Beaumont is an excellent health system and has treated many members of my family when I lived in Michigan. If you need a mastermind to join your finance team, please reach out. I have nothing but good things to say about your organization.
Here are a couple of options from Stanford Health Care. Evidently, their charge may differ depending on if it is a “qualitative” test vs. “quantitative” test even though the CPT code can be used universally. Again, I will leave the clinical difference to the oncologists.
To be clear, I am not necessarily calling Stanford out here. They have a world-renowned oncology program that some people probably are willing to travel to. They may be spreading their cost differently than Beaumont or practicing cost-shifting. I just think it is interesting to note the price difference and it makes them an easy target. If the price is truly a function a cost here and we are practicing “itemized healthcare”, I would question the difference.
Lastly, some hospitals like Johnson Memorial Hospital go above and beyond. They provide a description and the CPT code and it makes everything much easier to understand. In this case, we know we are on the same page. This is actually closer to where I would expect to see the price for this service in my anecdotal but valid experience.
Speaking to my experience, I have personally seen 81206 charged anywhere from about $150 to $700 depending on the hospital. The 50th percentile price would come in around $500 and about $780 for the 75th percentile. So, in my relatively short career, even I have seen some pretty wild swings for this particular lab test. I would consider anything over $1,000 on the upper end of the pricing spectrum for this CPT code. Online, I found several priced more than $1,000 when I was surveying random hospitals from across the country.
I also happen to know my own personal insurance company has negotiated this test down to a maximum charge of about $1,200 at a few of my local hospitals. My price can’t be greater than the hospital charge, though. In other words, if the price was $1,861, me or my insurance would only pay about $1,200. But if the price was $297 (like Beaumont), I would only pay that. Thankfully, I know how to work my way through the call centers and price transparency websites. My insurance company will likely always be nameless for the blog.*
Then there is always the “reference” lab route. That almost always comes in cheaper than the hospital setting. Reference lab pricing would likely come in between $375 and $600 for most of these places. Again, this is slightly anecdotal and based on my own experience, but a good starting point.
As we learned during our review of the lipid panel, Medicare sets the pricing for facilities that accept them as a payer and meet the conditions of participation. Medicare has a nice easy to read fee schedule that we can easily drill down into here.
Here is a look that the Q2 2020 Medicare lab fee schedule. We can pretty easily see that Medicare pays $163.96 for this particular form of molecular genetic testing.
Unlike most hospitals, they share the CPT codes.
I’ve mentioned this before here on the blog. What I find interesting about these prices is as of 1/1/2018, most of them are derived from the weighted median private insurance payer rates. In other words, Medicare is peeking in at what everyone else is paying and making their price the average of that. Medicare started sampling these private insurance prices in 2017. They used this sample to determine their pricing effective 1/1/2018. There are a few other moving parts to it but that’s the gist of it. Back in 2017, this same test had a national payment limit of $224.91, so evidently this new method of pricing reduced reimbursement for this lab.
This is all following the ‘Protecting Access To Medicare Act of 2014’ that was signed into law back in April 2014. So my question is, if the weighted median private insurance payer rate is only $163.96, why are both the retail price (for some hospitals) and contracted price (like mine) often so far above this? My guess is the reference labs must be weighing down the average.
Here at Max Out of Pocket, I have dubbed the gap between Medicare reimbursement and commercial reimbursement as the “problem gap”. It is a gap that needs to be addressed.
The gap between what my insurance and Medicare are each willing to pay for this service is over $1,000. I am on a high deductible plan, so that would initially all come out of my pocket until I hit my $6,600 max out-of-pocket. That’s on top of the $20,000 in premiums me and my employer dump into the system every year, a number the dwarfs my annual budget. Additionally, the Medicare fee schedule doesn’t impose out-of-pocket costs to the Medicare beneficiary for services paid off this fee schedule, even if they haven’t met the Medicare Part B Deductible.
To be clear, my insurance could allow/pay about 7.3 times what the Medicare beneficiary would pay for this service at my local hospital.
Max is on the industry’s side here. I’m not out to get anyone. I don’t blame individual insurance companies or hospitals for where we are today. The blame game is just too complicated and I still don’t believe there is necessarily intent here. But in the end, my ultimate stakeholder is the patient, and we owe it to them to simplify this mess.
I refuse to put a price on cancer remission. It’s priceless. Unfortunately, the system currently is set up with various price points on the way to remission.
Max can get pretty micro when talking about healthcare economics and how pricing is currently set up. But going through this process for the other 1,655 lab tests currently listed on the 2020 Medicare Clinical Diagnostic Laboratory Fee Schedule would take some time. In fact, I have hit three or four of them and I am exhausted.
Frankly, I work in the industry and I really don’t have a basis for pricing this molecular genetic test outside of the data the Medicare program has developed. In fact, more and more commercial pricing contracts are using a multiplier of Medicare rates as the “starting point” for negotiating reimbursement.
With more price transparency pressure coming from Medicare in 2021, I think some hospitals are probably moving into setting their itemized price as a function of cost and competition. Price strategy committees are popping up. But we are years out from having meaningful transparency on that process. In the meantime, some commercially insured cancer patients are caught in the middle cross-subsidizing the system with their overpriced high deductible health plans.
By looking at just one lab test, it is pretty evident that untangling the government pricing from the commercial market is going to take some work. Try looking at the whole system. Unfortunately, it has also become an easy target for media outlets like Bill Of The Month, that likely don’t fully understand the bigger picture.
Personally, I don’t think “itemized healthcare” is going to be the model of the future. I like the idea of packaging some of this stuff up and paying a “fixed fee” to manage a problem for several months/years. Throw in a strong bonus incentive for positive clinical outcomes. That’s what we all want to pay for anyway. I have absolutely no idea how that would work for chronic myelogenous leukemia. I am sure it would be difficult to price out an 8+ year treatment plan, but I am sure there are smart clinicians and actuaries out there who could figure something out.
*I don’t blame my insurance or any other specific insurance company for the current system. It is more systemic than that. I also don’t want one of the big insurance companies coming after me, my blog, or my family.
I am not a medical professional, and this is not medical advice or pricing advice.