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I have been on a mission to figure out why some health systems, particularly in the oncology space but not limited to the oncology space, could manage to mark up the price of infused specialty pharmacy drugs up to 6x. Some employers and patients are paying six times the cost of a specialty pharmacy drug in markup for some already incredibly expensive specialty pharmacy drug at some oncology centers. Read more about this in a study by Roy Xiao, MD, and colleagues.

Let\u2019s not forget now or ever that financial toxicity is clinical toxicity. This 6x is exactly how financial toxicity is operationalized. Many patients are charged a coinsurance percentage based on their cost of care, after all; and like 20% of 6x is a huge number, it is a huge bankrupting bill for some patients\u2014maybe many patients. That, plus their premiums go up because, of course, their employers are picking up the remaining 80% of that 600% markup.

Families are already, on average, paying I think it\u2019s $22,000 in premium; and the trend line on that premium growth continues to go up steeply in the 2022-23 projections that I have seen.

Bottom line: This 6x is not a victimless modus operandi is my point.

But what I wanted to know is how they do it, these health systems. Charging 6x the cost of a super expensive specialty pharmacy drug in markup would seem to require some skill, right? And any time I see a Pandora\u2019s box, I have a terrible habit of trying to get in there.

Autumn Yongchu and Erik Davis to the rescue. Today\u2019s show digs into how some health systems and hospitals stack the odds that no one will notice their 6x markups and just pay the bills. Here\u2019s the short version of the playbook, but you\u2019ll need to listen to the show for a more robust explanation.

First off, keep in mind that while Medicare Part B tells hospitals to charge ASP (average sales price) + 6% (ish) when they buy and bill Medicare patients, there is no such guidance for commercial patients. Commercial insurers negotiate a fee off chargemaster rates, and as we all know, those chargemaster prices are, in general, based on absolutely nothing and are, in general, sky-high. So that\u2019s the first thing.

The second thing gets into coding. Let me give you the general idea here, but we talk about this in some depth in the conversation to come.

As you likely know, hospitals get paid by sending bills with codes on them\u2014procedure codes, for example. We the hospital did this procedure, and our charge for this procedure is $4000\u2014so, here you go. Code followed by dollar amount is shown on somebody\u2019s bill or explanation of benefits document.

These procedure codes are standardized across the industry for the most part. It\u2019s not like every health system and/or payer is making up their own. This standardized set of procedure codes is called the Healthcare Common Procedure Coding System, affectionally known as HCPCS. So, if someone starts talking about a HCPCS code, all it means is that the code comes out of that standard set of codes.

Now, J-codes are one kind of code in this common procedure coding system. They are procedure codes that start with a \u201cJ.\u201d These J-codes are for procedures involving (usually) specialty pharmacy drugs. A J-code identifies the specialty pharmacy drug that was used in the procedure.

So, you\u2019d think it\u2019d be pretty easy to audit a hospital bill, right? You look at the J-code on the bill; you find the ASP, the average sales price, or whatever of the drug; and then you get out your trusty calculator and you do the math on what the markup is.

And okay, maybe this works sometimes \u2026 but the problem is that so very, very often, the hospital doesn\u2019t put the actual drug\u2019s J-code on the bill. There\u2019s this miscellaneous J-code that doesn\u2019t specify the drug used, which is a quite common tactic, it seems. (I learned that in this episode.) Hospital just sticks \u201cMiscellaneous chemotherapy\u201d on a bill with a price after it, and nobody knows what drug was used.

Or the hospital will send a bill that just includes revenue codes. I think about revenue codes as the name of the section of the bill. It\u2019s like on a menu: There\u2019s that section, that headline, that says \u201cSeafood\u201d with a whole list of seafood dishes underneath it. In this example, the Seafood header is like the revenue code; and the J-codes are the actual dishes. Some bills come from the hospital, and all they have on them are the revenue code. There was some seafood. We\u2019re not gonna tell you what dish or how much seafood, but yeah, seafood. The only thing we know about seafood is that there was some and it was very pricy.

Here\u2019s a great example of a bill with some explanations. \xa0

The main point here is that how health systems get away, in large part, with charging a whole lot for specialty pharmacy drugs is that their bills roll up charges into these very opaque codes that include lots and lots of stuff that is not broken out.

When I interviewed Marshall Allen (EP328) and we talked about his book Never Pay the First Bill, he said step one in getting an accurate and fair bill is to ask for the line item charges\u2014and now that is totally making sense to me and also why this is so vital.

Just be aware, if you ask for these breakouts, you will likely get a huge box of hard copies. Check out this photo of a literally three-foot pile of printouts that one patient-turned-artist exhibited at an art show recently that I saw. If you don\u2019t have the stamina to sort through all of those pages and pages and pages, you could be subject to 6x or more in markups or billing errors which are all too common and all too expensive. Hospital charges are a huge chunk of any employer\u2019s healthcare spend, after all\u2014over half of it in some cases. These are not small potatoes that we\u2019re talking about. These are bills that bankrupt patients and make premiums go so high that patients cannot afford to get care. \xa0

In this healthcare podcast, as mentioned earlier, we have two guests\u2014Erik Davis and Autumn Yongchu\u2014both from USI Managed Care Consulting and both having spent decades deep in the inner workings of the healthcare industry. And the topic of today\u2019s show required that depth of knowledge, for sure.

Erik Davis, AAI, CIC, CRM, is senior vice president and principal consultant, managed care and analytics, at USI Insurance Services. He has over 30 years of experience in the insurance and risk management industry. Erik works to create an environment that supports the healthcare risk management goals of an organization while maintaining focus on compliance and financial accountability. He is instrumental in vendor negotiations, data benchmarking, population health strategies, claims analysis, recommendations in plan design, and communication strategies.

In this capacity, Erik has been involved with development of rates, payment structures, and recommendations of changes in processes, policies, and procedures. He has a broad understanding of contract analysis, evaluating risk, auditing for correct payment, and structuring of excess loss and pharmacy programs.

Erik\u2019s experience extends from overall employee benefits consulting to workers\u2019 compensation, as well as managed care organizations in Medicaid, Medicare, and commercial contractual risk arrangements.

Erik earned his bachelor\u2019s degree in economics from Oregon State University. He holds Accredited Advisor in Insurance (AAI), Certified Insurance Counselor (CIC), and Certified Risk Manager (CRM) designations.

Autumn Yongchu is a healthcare operational risk consultant at USI Insurance Services. Autumn works with multiple database platforms to examine data for trends and abnormalities. Using investigative querying, medical coding analysis, and report development, she provides resources that help identify cost control opportunities and assists organizations in strategic business decisions regarding the management of healthcare risks.

Autumn analyzes and interprets healthcare utilization data, allowing the development of initiatives regarding claim and risk management. This includes identifying fiscal and clinical strategies and providing necessary information to develop, design, and implement management initiatives. Autumn also analyzes trends, assists with insurance underwriting, and adjudicates stop-loss claims.

Autumn has an in-depth knowledge of Medicaid and Medicare billing guidelines and payment methodologies.

Prior to joining USI, Autumn was a claims auditor and trainer for a managed care organization which serviced over 100,000 commercial, Medicaid, and Medicare lives. Her responsibilities included contract analysis, claims adjudication, ensuring accurate payment, and identifying and recouping errors.

07:33 How do hospitals maximize inpatient bills?
08:05 How can hospitals upcode on specialty pharmacy products?
09:44 \u201cIt\u2019s really not uncommon to be overbilled and overcharged.\u201d\u2014Autumn
11:11 Why do marked up bill charges actually affect the price commercial payers pay?
12:49 \u201cIf your payer\u2019s not double-checking \u2026 how do you know that fraud\u2019s happening?\u201d\u2014Autumn
12:52 \u201cIf the payer doesn\u2019t have the detail to validate what that drug actually is, then are they really checking?\u201d\u2014Autumn
13:33 Why is it so hard to verify what you\u2019re actually paying for on a hospital bill?
16:28 How do hospitals maximize profit with outpatients?
17:12 \u201cReally it comes down to contracts and how [the] contracts are written.\u201d\u2014Autumn
21:54 \u201cThere are \u2026 silos within healthcare, and none of them actually talk to each other.\u201d\u2014Autumn
24:56 \u201cThere are these rules out there, but there are also big loopholes out there.\u201d\u2014Autumn
26:13 How can hospitals maximize payments for Medicare patients on drugs that have been out for a while?
29:30 \u201cWe just have a tendency to assume \u2026 that Medicare has a rate for everything, and Medicare doesn\u2019t.\u201d\u2014Autumn
30:32: EP369 with Keith Hartman, RPh. \xa0

Erik Davis and Autumn Yongchu discuss #specialtypharma billing in #healthsystems on our #healthcarepodcast. #healthcare #podcast #hospitalsystems

How do hospitals maximize inpatient bills? Erik Davis and Autumn Yongchu discuss #specialtypharma billing in #healthsystems on our #healthcarepodcast. #healthcare #podcast #hospitalsystems

How can hospitals upcode on specialty pharmacy products? Erik Davis and Autumn Yongchu discuss #specialtypharma billing in #healthsystems on our #healthcarepodcast. #healthcare #podcast #hospitalsystems

\u201cIt\u2019s really not uncommon to be overbilled and overcharged.\u201d Erik Davis and Autumn Yongchu discuss #specialtypharma billing in #healthsystems on our #healthcarepodcast. #healthcare #podcast #hospitalsystems

Why do marked up bill charges actually affect the price commercial payers pay? Erik Davis and Autumn Yongchu discuss #specialtypharma billing in #healthsystems on our #healthcarepodcast. #healthcare #podcast #hospitalsystems

\u201cIf your payer\u2019s not double-checking \u2026 how do you know that fraud\u2019s happening?\u201d Erik Davis and Autumn Yongchu discuss #specialtypharma billing in #healthsystems on our #healthcarepodcast. #healthcare #podcast #hospitalsystems

\u201cIf the payer doesn\u2019t have the detail to validate what that drug actually is, then are they really checking?\u201d Erik Davis and Autumn Yongchu discuss #specialtypharma billing in #healthsystems on our #healthcarepodcast. #healthcare #podcast #hospitalsystems

Why is it so hard to verify what you\u2019re actually paying for on a hospital bill? Erik Davis and Autumn Yongchu discuss #specialtypharma billing in #healthsystems on our #healthcarepodcast. #healthcare #podcast #hospitalsystems

How do hospitals maximize profit with outpatients? Erik Davis and Autumn Yongchu discuss #specialtypharma billing in #healthsystems on our #healthcarepodcast. #healthcare #podcast #hospitalsystems

\u201cReally it comes down to contracts and how [the] contracts are written.\u201d Erik Davis and Autumn Yongchu discuss #specialtypharma billing in #healthsystems on our #healthcarepodcast. #healthcare #podcast #hospitalsystems

\u201cThere are \u2026 silos within healthcare, and none of them actually talk to each other.\u201d Erik Davis and Autumn Yongchu discuss #specialtypharma billing in #healthsystems on our #healthcarepodcast. #healthcare #podcast #hospitalsystems

\u201cThere are these rules out there, but there are also big loopholes out there.\u201d Erik Davis and Autumn Yongchu discuss #specialtypharma billing in #healthsystems on our #healthcarepodcast. #healthcare #podcast #hospitalsystems

How can hospitals maximize payments for Medicare patients on drugs that have been out for a while? Erik Davis and Autumn Yongchu discuss #specialtypharma billing in #healthsystems on our #healthcarepodcast. #healthcare #podcast #hospitalsystems

\u201cWe just have a tendency to assume \u2026 that Medicare has a rate for everything, and Medicare doesn\u2019t.\u201d Erik Davis and Autumn Yongchu discuss #specialtypharma billing in #healthsystems on our #healthcarepodcast. #healthcare #podcast #hospitalsystems

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Recent past interviews:

Click a guest\u2019s name for their latest RHV episode!

Keith Hartman, Dr Aaron Mitchell (Encore! EP282), Stacey Richter (INBW34), Ashleigh Gunter, Doug Hetherington, Dr Kevin Schulman, Scott Haas, David Muhlestein, David Scheinker, Ali Ucar, Dr Carly Eckert, Jeb Dunkelberger (EP360), Dan O\u2019Neill, Dr Wayne Jenkins, Liliana Petrova, Ge Bai, Nikhil Krishnan, Shawn Rhodes, Pramod John (EP353), Pramod John (EP352), Dr Eric Bricker, Katy Talento, Stacey Richter (INBW33), Stacey Richter (INBW32), Dr Steve Schutzer (Encore! EP294), Lisa Trumble, Jeb Dunkelberger, Dr Ian Tong

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