Personal injury attorneys will often rely on Medical Cost Projections (MCP) when seeking to establish future medical damages in their cases. The MCP provides a roadmap of the future injury-related care and an estimate of the cost of such services. This article provides a comprehensive overview of healthcare billing and the methodology used by allocators in pricing future medical services.
Overview of Healthcare Billing
The U.S. healthcare system is often criticized for its complex and opaque billing practices. One of the most significant flaws in the U.S. healthcare billing system is the lack of transparency in pricing. Unlike other industries where consumers can easily compare prices, healthcare providers often do not disclose the costs of services upfront. The cost of identical medical services can vary widely between providers and even within the same facility, depending on factors such as location, the provider’s negotiation with insurers, and the patient’s insurance plan. Billing is often fragmented and comes from multiple providers for a single episode of care, including hospitals, physicians, labs, and other ancillary services.
The use of CPT codes for billing introduces complexity and potential for error. CPT codes are standardized numeric codes maintained by the American Medical Association (AMA) used to describe medical, surgical, and diagnostic services. These codes are essential for:
- Communicating uniform information about medical services and procedures between healthcare providers, insurers, and patients.
- Facilitating accurate billing and efficient claims processing.
- Ensuring compliance with healthcare regulations.
Upcoding occurs when healthcare providers submit claims using CPT codes that represent more extensive or higher-cost services than those provided. This practice can result in increased reimbursement from insurers, leading to higher costs for payers and patients. Examples of upcoding include the following: billing for a comprehensive office visit when only a brief consultation was conducted, coding for a more complex surgical procedure than was performed and submitting codes for services not medically necessary or not provided.
Pricing in the medical field involves various factors with the fundamental components being the cost of services and the need to generate a profit. Direct costs consist of medical supplies, equipment, and labor, while indirect costs include facility maintenance, administrative expenses, and insurance. Medical providers also consider the prevailing market rates for similar services in their geographic area. In regions with higher competition, prices may be lower to attract patients. Conversely, in areas with fewer medical facilities, providers may have more pricing power.
The payer mix, or the proportion of revenue coming from private insurance, government programs (such as Medicare and Medicaid), and self-paying patients, also significantly influences pricing decisions. Medicare and Medicaid typically reimburse at lower rates than private insurers. To compensate for these lower reimbursements, providers may increase prices for services billed to private insurance or self-paying patients. The agreed-upon rates between insurance companies and providers are often influenced by the provider’s reputation, specialty, and bargaining power. Larger healthcare systems or providers with unique specialties may command higher rates.
Patient demographics and socioeconomic factors also play a role in pricing decisions. Providers may adjust prices based on the demographic makeup of their patient population. In affluent areas, higher charges might be feasible, while in lower-income communities, providers might offer discounts or sliding scale fees to accommodate patients’ financial capabilities.
Medical Pricing Databases
Allocators that prepare MCPs use medical pricing databases such as, but not limited to, Medata, FAIR Health and Healthcare Bluebook in estimating the cost of the future injury-related medical services. These databases collect, analyze, and disseminate data on healthcare costs across various providers, regions, and types of services. They aggregate pricing information from insurance claims, Medicare data, and other sources to provide comprehensive cost estimates for a wide range of medical services.
Medata is a leading medical pricing database known for its extensive and detailed cost information. It provides real-time data on medical procedures, treatments, and services from common procedures to specialized care, and offers pricing information segmented by geographic region, type of provider, and payer type. FAIR Health is another prominent medical pricing database which compiles data from millions of healthcare claims nationwide, offering a comprehensive overview of costs. Healthcare Bluebook provides transparent pricing data for healthcare services, helping users understand fair market prices. This tool is particularly useful for comparing costs across different providers and ensuring that estimates reflect realistic market conditions.
MCPs may be customized to reflect a specific percentage of the usual and customary rates over an individual’s life expectancy. The medical pricing databases also provide Medicare fee schedule pricing as well as workers’ compensation state specific medical fee schedule rates. There are other databases for the pricing of drugs.
Conclusion
Medical Cost Projections play an important role in quantifying future medical treatment costs. By leveraging the MCP, lawyers can enhance their case preparation and negotiation strategies, ultimately securing better results for their clients. Contact Synergy to learn more about how our MCP report can simplify the negotiation of future medical care for your case.
Written by: Rasa Fumagalli, JD, MSCC, CMSP-F
