The $50,000 Laceration Repair

Genähte Wunde am Rücken, vier Stiche. (sewed w...

Hopefully $50k buys a better repair than this.

The American Board of Plastic Surgery’s February 2011 newsletter discusses ethical practice, noting that a surgeon reportedly billed $50,000 for a 1 cm laceration, which was paid as an out-of-network charge.  This vignette presents several avenues for discussion.  It seems clear that such a charge is flagrantly excessive.  Consider a surgeon who repaired six similar injuries each day.  Given a five-day week and 4 weeks of vacation per year, total payment would be $72,000,000.  Wound healing physiology being what it is, even a $72 million surgeon has to leave a scar!

But the newsletter does not explore the issues behind the problems illustrated by this example.  Notably, that there is no price transparency in healthcare services, and that leads to market failures that do not serve patients, doctors or insurance companies.  The concept that “in healthcare, nobody pays sticker price” is hardly untrue.  There is no problem with insurers or patients paying sticker price, as long as that price reflects reasonably accurate value for services provided.  It seems odd that the insurer had no safeguard or review procedure for extreme claim amounts.  Health insurance policies could contain out-of-network benefit limits that would limit extreme claim amounts.  Would the surgeon realistically expect a patient to pay $50,000 for a 1 cm laceration?

In defense of the surgeon, there are abuses on the other side as well.  Out-of-network doctors covering emergency patients often are not paid, or see payments disbursed to the patients directly, then are forced to try to collect from them.  Reimbursement of the patient for out-of-network services works well for elective care, but is not feasible for emergency situations.  My guess is that the surgeon was trying to “make back” many past losses.

Insurers have bitten back on out-of-network overcharging, as noted here.  I don’t agree with the charges noted in the article (over $56,000 for a 25 minute consultation?) because they are clearly disjointed from value provided.  These instances are too often portrayed as vast overcharging and price-gouging, but they really should serve as a primer to discuss the return of value-based pricing to the system.  This is best done by allowing market forces to act far more than they can at present.


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