The Story of What Healthcare Charges And What It Costs

I had the privilege of joining the Healthcare Price Transparency Tweet Chat last night. (#hcpt more on simpler here) During the conversation a few topics came up about patients understanding pricing better, the cost of healthcare, and being able to access the information.
This made me think, I am not sure how many healthcare organizations actually understand what their internal cost is to produce a specific episode of care for patients, let alone most healthcare professionals knowing and understanding billing, coding, charges, and reimbursement.
So, I decided that I was going to try and shed a bit of light on this and see if I can help to explain what is the cost to produce an episode of care versus what is the charge of that care to patients.
I know as other healthcare “insiders” read this post, they will begin to argue one point or another, so I am going to be as transparent as possible and share my methodology.
We are going to specifically take a look at the treatment of lung cancer patients, undergoing radiation therapy. I will use CMS data, as well as the most likely scenarios for a treatment for lung cancer. Then I will do my best to think through the cost equation that it will take to produce that same episode of radiation therapy.
We will assume that this is a new patient to radiation oncology, has been referred appropriately, and that workup has been completed. I will use the CPT codes for an outpatient department of hospital. I will also use NCCN for dose fractionation schemes for therapy.
Charges for radiation therapy:
1. New patient consult, level complex (99205): $164.67
2. Simulation: CT Scan for Therapy Guide (77014) $124.54; Set Radiation Therapy Field (77290) $531.94; Radiation Therapy Planning (77263) $158.89; Radiation Treatment Devices (77334) $150.04
3. Treatment Planning {will assume 8 beams}: IMRT Radiation Therapy Plan (77301) $1990.35; Radiation therapy Dose Plan (77300*8) $66.69*8= $533.52; MLC Treatment Devices (77338*8) $$501.16*8= $4009.28
4. Physics: Radiation Therapy Physics Consult (77370) $118.06
5. IMRT Treatments (70Gy in 2Gy fractions): Radiation Treatment Delivery IMRT (77418*35) $405.55*35= $14,194.25
6. Weekly Charges over 6 weeks: Continuing medical physics (77336*5) $43.89*5= $219.45; Weekly Port Films (77417*6) $14.29*6= $85.74; Radiation Treatment Management (77427*5) $178.28*5= $891.40
Total Charges = ~$23,172.13 (give or take a $1000)
Now we will begin to look into the cost it takes to produce that treatment. 
Staff: Radiation oncologist, nurse, medical physicist, dosimetrist, 2.5 radiation therapists, receptionist, nurse navigator, and medical coder/biller.
MD, around 5 hours including 1 hour consult, 15 minute weekly visits, time for treatment planning, simulation, contouring, reviewing plan, new start: $1205
Nurse, around 3 hours for initial consult, weekly visits, end of treatment: $96
Medical Physicist, around a total of 3 hours between IMRT QA checks, calculations, and weekly chart reviews: $288
Dosimetrist may spend on average of 5 hours working on a treatment plan: $240
Radiation Therapists, figure 2.5 therapists to treat on a daily basis, 2 for simulation, and average of 15 minute time slots: $840
Navigator may spend a total of an hour with a radiation therapy patient: $32
Receptionist may spend a total of an hour with a patient during course of treatment: $16
Billing/coder: may spend up to a total of 2 hours on patient: $44
Cancer registrar may spend an additional 1 hour abstracting: $30
Total staffing cost: ~$2791.00
Figure in the amount of capital investments such as Vault: $1M, Radiation Therapy Linac, EMR, and Treatment Planning computers: $5M, Clinic $1M, CT Simulator $500,000, and additional equipment, QA, consumables, and reusable device aids: $1.55M
Total for above: $8.55M
Now, I know this is simple math, but in order to figure out the cost related to the Lung Cancer Patient being treated, I wanted to take into consideration the above costs and figure it into the overall cost to produce the care of the patient.
So $8.55M/(8years(or 4,204,800 minutes) = $2.03/minute
So figure the patient spends a total of around 500 minutes in the department over the course of their entire treatment, the cost of the facility, equipment, and additional resources is an additional: 500 minutes * $2.03/minute = $1015.00
So the total cost to produce the IMRT treatment for the Lung Cancer patient comes to a total: $3806.00
In summary it appears to be the following scenario: A patient would be charged an average of about $23,172.13 for their treatment.
The cost it takes the facility to produce that treatment between staffing, equipment, and the cost of the facility is around $3806.00
If we want to be better consumers and to be able to have more control over the story of how we use care and what we are willing to pay for that care, we need to not only understand what we are charged, but we need to better understand that price it takes the care team to produce that care for us.
I hope this small story of lung cancer charges in radiation oncology will begin to help you think a bit differently.
What will your healthcare price transparency story be?

#PtExp #PX #cancer #hcldr #hccosts #hcsm #stories #storytelling #lcsm #bcsm #LCAM2013 #hcpt #radonc #XRT
  • seandparnell
    Posted at 17:56h, 20 November

    GAAH! No, you can’t simply divide the total cost of fixed capital by the number of minutes in 8 years. This machinery isn’t built to operate around the clock (how many people do you know that want their cancer treatment at 3am?), and it takes time to prep the facilities for each new patient.
    I’m pretty much the last person on the planet that will defend hospital pricing (outrages of the ‘chargemaster’ are pretty much a staple of my own blog, The Self-Pay Patient), but what you’ve done here doesn’t begin to fairly consider what it actually costs to provide cancer treatment in a hospital setting.

    • cancergeek
      Posted at 19:46h, 20 November

      You’re absolutely right. Facilities do not operate 24 hours a day, there is additional costs of training, service contracts, depreciation, recruitment, and many other multiple factors. However, I have also built 5 comprehensive caner centers and I know that I can spend $8-9M for radiation oncology alone and make the investment back in under 3 years. (in right markets)
      I prefaced the post by saying it isn’t perfect, but I think you are missing the larger focus….patients want transparency, they want to know how much things cost.
      But it can’t just be about what the price or cost for a procedure is, we both know the issues with charge code masters. We need to get to the root of the problem, which is what is the “cost/price” it takes to produce the service we are paying to receive. Most hospitals do not understand this level of detail, so if we want to push on charge masters, they need to understand the cost it takes to produce the service(s).
      That was the purpose and point. Maybe we can collaborate and develop a more complete healthcare cost calculator that will be even more directionally correct and closer to ideal? Let me know, I’d love to work on it with you if you like.
      It is out there for you and others to build off of, I gave you the codes, the price structures, the scenario…you are more than welcome to perfect it.
      Thank you

  • seandparnell
    Posted at 20:04h, 20 November

    Sorry if my reply sounded a little harsh – the cost methodology you used just kind of sent me spinning. ;->
    Absolutely agreed that transparency is a necessity, my focus tends to be on real prices (it’s that whole econ degree thing), as a general rule I’m less interested in costs from the provider side other than to agree with you that most hospitals have no real clue, which is a pretty big barrier to getting real prices.
    Love to find a way to collaborate, will contact you offline.

    • cancergeek
      Posted at 20:08h, 20 November

      No not harsh at all. I agree w you. Please do contact me. You’d definitely be able to help the story and make drastic improvements. Hopefully I could add some value for you too.
      Look forward to it. Thanks for reading and connecting.

  • jeanne
    Posted at 21:41h, 21 November

    This is great. Thank you for this, and for your tweetchat contribs. Look forward to more wisdom from you!

  • jeanne
    Posted at 21:42h, 21 November

    Sorry, adding web site to my comment above.

  • Casey Quinlan (@MightyCasey)
    Posted at 16:00h, 23 November

    This is TERRIFIC stuff! Thank you SO much for posting it, and for giving a shout-out to the #hcpt tweetchat, too. You’ve made great contributions to our chat, and with this …. HUGE gift.

    • cancergeek
      Posted at 16:10h, 23 November

      I’m alway happy to help. Glad I can do a small bit to help out. Always willing to push the envelope & connect things in new ways. You inspire me & I’m blessed to be included in your following.

  • Denise
    Posted at 17:13h, 26 November

    I am sorry, I do follow your logic, but somehow I missed the cost of the light bulbs and the cost of the electricity to keep the place lit, and the salary of the janitor who cleaned the place and the cost of his supplies, and the toilet paper and paper towels in the bathroom, and the cost of the brochures and ad dollars to let people know of the place. And the salary of the man who waters the plants. And and and.
    I agree there is overcharging, but simple math (while ignoring overhead) does not clarify the picture IMHO

    • cancergeek
      Posted at 18:07h, 26 November

      You are absolutely correct. There are a lot of additional overhead and variables. It can be from the things you said to a lot of other additional variables.
      The point is that everyone needs to realize that there is a difference between cost to produce a service and the price that you as a consumer pay for it. (if you include marketing, than you are already assuming you are in a consumer driven market)
      If you would like to develop the other piece on what the complete overhead would potentially look like from a cost perspective and add it to the post, I would welcome the collaboration. I think it would be wonderful to have you take that on and add additional clarity to the post.
      Being one who has developed and operated cancer centers in previous lives, I can attest that the additional cost is contributive, but it is not prohibitive.
      Let me know if you want to work on the overhead and we can get it uploaded.
      Thank you

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