Calculating IVF Costs and FeesAugust 11, 2010Carole 8 Comments »
Finding out how much it costs to provide a health care service should be fairly straightforward. You business accounting majors and economists feel free to chime in here. If you have a service to sell and you are pricing that service, don’t you typically need to know what it costs you to provide the service (fixed costs, variable costs, overhead etc etc)??– and then you add some profit and presto, there is your price.
In health care, I wonder if anyone actually does that. In one of my previous lives working for a large hospital system, I was asked to determine a price for our basic IVF service. Me, the biologist. Haa!! I dutifully added up the expense of every supply we used in a single IVF case and calculated what part of other expenses (like payroll) should be attributed to each case based on hours spent in the lab or on-call for the lab. I added the cost of other lab expenses such as keeping the lights on, rent, housekeeping, staff training etc. Then because I am a biologist and not an accountant, I didn’t trust my cost per case analysis using my “build-a-case” approach so I recalculated the whole thing by looking at annual costs attributable to IVF and dividing by the number of annual cases. Each method had it’s own flaws and uncertainties so I did it both ways to double my fun and hopefully, triangulate the truth. I was relieved to find that either way I did it, our lab costs for providing an IVF case was about $2500.
Now, remember, the lab costs are only about a third of your IVF bill. There are physician fees, blood lab fees, ultrasound fees, maybe outpatient surgery center fees and of course the cost of medications which can easily also account for the final third of your IVF bill.
So I reported my “lab costs to provide” price to the finance department and was told, “Now, go ahead and triple that price“. What??? What kind of new math was this? It turns out that the across the board triple increase was routine at the time because hospitals could expect that insurance companies would send them a check for roughly a third of whatever they charged. Okay, I said, that may work for most hospital services for insured patients but most of our patients are self-pay, this doesn’t seem fair. I did manage to successfully argue for a less-inflated price because insurance coverage didn’t come into play.
There seems to be little correlation between what health care actually costs and what providers will bill, what insurance companies will pay providers and what patients will end up paying for it. Sometimes, I wish we could just clear the deck and start over and ask the basic question about what does it cost to provide a service? I wonder if insurance companies are so used to providers submitting inflated fees, that they just assume every provider is overcharging and think that every procedure can be delivered for much less.
My adventure in insurance hell. I argued with a rather large insurance company (let’s call it Company X) for the better part of a year to convince them that the $776 dollars they were paying the lab to provide IVF services to their members wasn’t covering our lab costs (which I knew were about $2500) and so we were losing money on every patient who had insurance coverage from this company.
A little background might help here. Insurance companies and in-network providers (like IVF labs) agree on what the insurance company will pay the provider when one of its members receives a covered service (like IVF). The provider can’t charge more -no matter how inadequate the reimbursements are–if they agreed to that reduced price for insurance members. The fees the insurance company agreed to pay to the service provider (the lab) for services (IVF) to its insured members (the patients) are listed on a ”fee schedule”.
In my, admittedly, limited experience with our own IVF fee schedule, the fees assigned to various procedures looked completely random. For instance, for performing IVF culture for three days, we received around $500 from the insurance company. For extended culture to day 5, we were paid an additional three dollars and fifteen cents. I am spelling it out so you don’t think it’s a typo- like I did- when I first saw the fee schedule. What crazy person would think that $3.15 cents could buy ANY health care? I can’t even buy a Starbucks latte for that!! Then I considered it some more, and wondered if this was just an indirect way to influence what health care services are provided? After all, if we simply stopped culture on day 3, the expenses would stop, and we would almost break even on the first three days. Day 5 transfer might be better for our patient but if we lost money on the case, how long can we keep providing extended culture?
Interestingly, to perform intracytoplasmic sperm injection (ICSI) we were also paid $3.15. Did some one at Company X want to discourage ICSI or was someone using a magic answer ball that always came up $3.15? To put this in perspective, even if the techs worked for free and there was no overhead, training or other costs associated with the procedure, one glass ICSI injection pipette cost the lab $20 dollars, putting the lab in the red financially before we even do the procedure. And, oh, did I mention we need an egg holding pipette too, which is another $20? So what crazy Alice in Wonderland world did we step into where ICSI can be done for $3.15?
Being naive, I thought the insurance company would be interested in pregnancy outcomes. I prepared an analysis of our publicly reported CDC pregnancy rates compared to all the other clinics in our state and then also compared our pregnancy rates to the outcomes of providers in another state-Texas- who were also in-network with Company X but were receiving more generous reimbursements. (I chose to look at Company X in Texas because they posted their fee schedule on-line–other wise, you never find out what other clinics are being paid.) I pointed out to my friendly contact at Company X that our CDC-reported pregnancy outcomes were superior to all the other labs in our region and superior to all but two of the fertility clinics in Texas. So shouldn’t we get paid at least as much as the worst clinic in Texas? Umm, No. That argument had absolutely no traction.
Finally, I don’t know if I just wore Company X down or they had a change of heart but they doubled out payments to around $1500 per case. Remember, that’s still only slightly over half of what it costs to provide IVF, but at least we weren’t hemorrhaging money as badly on these cases. Because the lab still made money overall, no one in the administration cared too much about being paid closer to cost for IVF provided to Company X’s members. The administration understood and accepted that being in-network meant losing money on IVF lab fees but being in-network also attracted patients who were using other better reimbursed services.
I still think that fees should be based on costs (plus some profit) and all patients should expect to pay the same for healthcare. Self-pay patients should not have to more in fees to make up for the below-cost payments received from Company X for their insured patients. I strongly support fertility insurance coverage for everyone but the current health insurance status quo does not appear to be based on what health care actually costs to provide. The current system is inherently unfair because self-pay patients are subsidizing the health care of insured patients in situations where providers accept ridiculously low cost insurance fee schedules just to stay in-network.
Fees paid to providers should be based on actual costs to provide care. There should be greater transparency within the industry (both on the insurance and the health care provider side) on what health care costs actually are and how reimbursements are calculated. Until these costs are analyzed and validated, health care costs won’t make sense and can’t be reigned in.
A related fairness concept is that fees shouldn’t be inflated by providers to anticipate ridiculously low insurance reimbursements to providers.
Quality of outcome and reimbursements to providers should be correlated. IVF costs to patients could be reduced (directly and indirectly) if substandard providers were forced out of the insurance system. If only the best providers were accepted in network, volumes would increase at the best centers, which would provide volume-based cost savings which could be passed on to the consumer. Ironically, in our region, the provider with the worst (and I mean substantially worse pregnancy rates!) also charged thousands of dollars more per IVF case than everyone else. High prices don’t always correlate with high quality either.
© 2010, Carole. All rights reserved.