Truth in Pricing?

January 1, 2006

You've always wanted access to their fees, but now that at least one payer is posting allowables online, we're finding it hard to cheer about it.


One of the most common complaints physicians have about insurance companies is the lack of infor-mation they're willing to supply concerning fee schedules.

Most practices have no real idea what reimbursement to expect from managed-care companies; they spend hours creating an assumed fee schedule based on obscure formulas in their contracts.

Just a few days ago, a physician wrote me with this question: "We struggle to get fee schedule information from our payers prior to signing the agreement and during our enrollment. Does it seem that unusual of a request to ask what you are going to get paid before you agree to provide services?"

Sadly, it is pretty unusual. The insurers want to keep price information as hush-hush as possible, for obvious reasons: the more you know, the better position you're in to demand higher rates. That's why we work hard to develop our annual Fee Schedule Survey.

It's also why Aetna's decision late last year to post allowables to its member Web site created such buzz.

Aetna beneficiaries can log in, search for a physician (at least in Cincinnati, where the program is being tested), and see the prices Aetna has agreed to pay the physician for their most common office visits, diagnostic services, and minor procedures.

The idea is to encourage consumers to make "responsible" use of healthcare resources. Those with high deductibles can shop to find the lowest prices. "There is a lot of interest among consumers in getting more information to help them make decisions," explains Elizabeth Sell, a spokeswoman for Aetna's consumer-directed healthcare program. The theory is that healthcare costs will go down when patients become more aware of the cost of the services they use.

That's all lovely in an abstract economic model, but it seems sort of silly in the real world of physicians.

I accessed Aetna's site myself to check out the fee schedules of six internal medicine physicians in Cincinnati.

Guess what?

The allowables for every one were exactly the same.

"That is a market where there is not a lot of variation among physicians," acknowledges Sell.

So what's the point of posting identical fee schedules? To be fair, reimbursement for procedures provided by specialists did vary. For example, of the gastroenterologist descriptions I accessed, there was a 40 percent variation between the highest and lowest fees for "scope of esophagus and stomach for diagnosis." My question then: What in the world is Aetna going to do when the gastroenterologist making 40 percent less than his colleagues gets wind of the difference? You better believe he'll be asking for more cash; how will that keep prices low?

After years of sanctimonious talk of price-fixing whenever the topic of being open about fee schedules comes up, I am astounded that Aetna would so blatantly just post prices.

I see that Aetna is trying to make healthcare into more of a free market economy with this move, but this gesture can't make much of dent in the highly regulated healthcare environment. This version of pricing transparency simply makes physician services a commodity. It's not as if there is a way to decide if paying a higher price gets you better treatment. There is no way to tell if a gastroenterologist getting paid less is a rube or a quack.


Only recently have payers been required to disclose their fee schedules to physicians who contract with them - and then they often do it in some inscrutable way. This is one of the more absurd aspects of practice management, and bless Aetna if it wants to make fee schedules easier to come by. But the irony is hard to miss. Aetna is targeting consumers, not physicians.

I don't have any complaint with Aetna or other payers who may similarly publish their allowables. What makes me scratch my head are the assumptions behind it. How can free market competition work in a system where the costs for most care from most providers is exactly the same, when prices are obscured from the suppliers, and when the consumer, as an Aetna customer, has most of his costs covered anyway?

This article originally appeared in the January 2006 issue of Physicians Practice.