As President Biden’s term comes to a close, a record 24 million Americans are now enrolled in Affordable Care Act (ACA) health insurance, which is more than double the number of Americans enrolled when he first took office four years ago. While insurance expansion has been critical to improving access to healthcare, the very structure of our healthcare system has not been significantly changed since its inception, leaving many to wonder if we’re truly fixing the system or just expanding its flaws.
There aren’t many industries where poor quality leads to more revenue, but healthcare is one of them. When my friend developed abdominal pain and went to our nearby ER, he was diagnosed with appendicitis and admitted that same night for surgery. Typically, appendicitis cases require immediate surgery to prevent complications like spreading infection or perforated intestines. However, that night and the next day, the surgical team had multiple trauma cases that took priority in the operating room, so his appendectomy was delayed for 30 hours after his admission. Luckily, his condition did not deteriorate and his surgery went well in the end.
Yet, the delay did have real financial consequences that highlight the absurd and deeply flawed nature of our healthcare system, which largely still operates on a fee-for-service model. Because of the delay, instead of undergoing immediate surgery and being discharged quickly, my friend was charged for every additional day of his hospital stay. Not even counting the surgery or diagnostic tests or medicines or any other fees, each day was billed at $4,586 for the hospital bed alone, and so rather than just a one-day hospital stay, he was charged for three days at over $13,000. In other words, the poor care he received directly resulted in a higher bill—and therefore, more revenue for the hospital.
If this were any other industry, he would have been offered a discount or compensation for the poor service he received. In healthcare, however, this delay not only jeopardized my friend’s health but also came at a steep financial and emotional cost. There are ways over the past few decades we’ve tried to combat this, with methods such as “bundling payments” so that an episode of care is paid for with a fixed payment. But the healthcare delivery and payment system still largely functions as fee-for-service. Since his hospitalization, the No Surprises Act has also been passed, which requires that patients be billed in-network rates for emergency services. While this legislation addresses some billing issues, it has brought its own share of unexpected complications, including potential abuse by insurers, increased arbitration costs, and downstream consequences for underpaid healthcare providers. What remains unchanged, though, is the grim reality that in healthcare, poorer care still often translates to higher revenue.
It is highly unlikely that physicians are intentionally providing poor care to increase revenue. Rather, the U.S. healthcare system is structured in ways that often can allow for, and sometimes even encourage, questionable billing practices. One example is “upcoding,” where medical charts are coded to reflect a sicker patient or a higher level of service than what actually occurred, resulting in greater reimbursement for the hospital or medical group. It is estimated that in 2019, compared to 2011, upcoding practices were linked to $14.6 billion in additional hospital payments, with the largest share, $5.8 billion – coming from private health plans. The rise of electronic health record (EHR) systems has only amplified this issue by making it much easier to enter automatic phrases or quick-click options that exaggerate patient severity. The growing use of Artificial Intelligence (AI) has added to these concerns, with 94% of medical professionals themselves expressing doubts about the accuracy and nuance of AI-generated codes. In many cases, this process isn’t driven by physicians at all; hospitals often outsource coding to third-party companies, some of which are compensated based on a percentage of the charges they generate. In fact, as a physician myself, even though I’ve asked, I’ve never seen the charges my patients receive or how my charts are coded, as these processes operate entirely independently from the care I provide.
Without a doubt, health insurance is critical to providing Americans access to healthcare. But let’s also make sure that the way we pay for care is designed so that every dollar we spend actually contributes to better health, not bigger bills.
