When I began my medical career more than two decades ago, people were already very concerned about the skyrocketing cost of healthcare. However, as much as everyone knew medical costs were high, no one in my profession seemed to know why. None of my colleagues could answer even simple questions about what, specifically, was costing so much. This seemed to be a real problem: how could we begin to control these costs, if even the people in the field didn’t know what they were?
Why didn’t we know? To start with, unlike any other business in America, almost all of the financial transactions in healthcare are hidden from the providers as well as the patients. We order tests, procedures and medications to manage our patients, but very few doctors, or other healthcare providers, have any idea how much any of those things cost. Patients only rarely pay directly for these services and payment for any service varies substantially from different payers. Hospitals have separate billing departments that are far removed from anyone ordering or performing tests or procedures. No one directly involved with patient care has any notion of the charge or reimbursement for their service. Even most private doctor’s offices contract billing companies, who just send them a check each month from the total amount collected, leaving them no notion of the actual charge or reimbursement for an individual service they provided.