Our Dumb Medical Billing System

Everybody knows at least one line from Shakespeare’s Henry VI: “The first thing we do, let’s kill all the lawyers.”

But really, that line is hundreds of years old. Anybody writing today wouldn’t put lawyers first on the list. Not while there are still people alive in medical billing departments.

My God, this is a stupid business.

My wife had surgery a few months ago, and I’m in the process of cleaning up the last of the bills. As near as I can tell, there are seven different entities sending us bills:

• My wife’s regular doctor who took the initial complaint and helped us decide what to do about it.
• The surgeon who went in and fixed the problem.
• The anesthesiologist who knocked my wife out and brought her back.
• The hospital where the procedure was performed.
• The completely different hospital that did the lab tests.
• The radiologists who analyzed images of the problem.
• The pathologist who evaluated tissues that had been removed.

We got some of these bills relatively quickly, but others took weeks to get here, and I have no way of knowing if there are any more bills still to come. (When I had very minor surgery last summer, the surgeon’s bill took months to arrive, and it arrived in the form of a collection notice for non-payment.)

By comparison, around the same time, my car had an unfortunate encounter with some suicidal geese. It took about four days to repair the car, but unlike with my wife’s surgery, the entire bill was available immediately, and more importantly, the entire bill was payable to the bodyshop. I didn’t have to pay the paint supplier or the Toyota parts supplier or the specialty shop that reclaimed the coolant from the air conditioner and refilled it. Even the insurance company had already promised to pay their share. It was a single, consolidated bill.

That’s pretty much how everybody else handles billing. If you hire a photographer for your wedding, you don’t have to pay his assistant or the lab that makes the prints. If you add a room to your house, you pay the general contractor, and he pays all his suppliers and subcontractors. Consolidating the bill is a very common service.

So, the first question is: Why can’t medical billing be this simple? Why couldn’t I pay for my wife’s surgery with a single payment? It wouldn’t necessarily have to be a single payment to the surgeon or the general practitioner. In fact, given the unpredictability of medical costs, it would probably have to be an intermediary with reasonably deep pockets. The hospital or the insurance company are both obvious candidates.

Or, given that there’s money involved, perhaps it should be a new niche for the banks. It all went on my American Express card, so maybe they’d like more of the action. After all, if they can offer Travel Services, why not a new Medical Services division?

It seems like everybody from the doctors to the hospitals to the patients — heck, maybe even the insurance companies — would benefit from making this process more efficient. And they ought to be willing to pay someone to do it. So why isn’t it happening?

I don’t know. If I had to guess, I’d say that this is the sort of customer-be-damned inefficency that is at the heart of any monopoly. Since there’s no obvious monopoly player, I’m guessing that it’s actually a cartel of medical service providers, probably enforced by the government. This is not entirely just libertarian suspicion of government: The hospital cartel is right out in the open in many states, enforced by Certificate Of Need requirements before any hospital can open or expand. The ban on interstate sale of health insurance also serves to cartelize the insurance companies of each state, protecting them against competition in a national market.

Now we come to the second and more important question: What else in healthcare is this inefficient? I can recognize the inefficiency of the billing process because it is a relatively simple non-medical matter. I don’t have to know a lot about medicine or hospital management or actuarial science to see the problem.

So if the small part I can see and understand is so absurdly inefficient, what else is screwed up just as badly, except that I don’t know enough to spot it? Operating room scheduling? Radiology equipment maintenance? Laboratory workflow? Ten other things that I don’t even know exist? If the problem with billing is systemic (as I suspect) there’s nothing to stop it from affecting every part of healthcare.