Episode Details

I have been on a mission to figure out why some health systems, particularly in the oncology space but not limited to the oncology space, could manage to mark up the price of infused specialty pharmacy drugs up to 6x. Some employers and patients are paying six times the cost of a specialty pharmacy drug in markup for some already incredibly expensive specialty pharmacy drug at some oncology centers. Read more about this in a study by Roy Xiao, MD, and colleagues.

Let's not forget now or ever that financial toxicity is clinical toxicity. This 6x is exactly how financial toxicity is operationalized. Many patients are charged a coinsurance percentage based on their cost of care, after all; and like 20% of 6x is a huge number, it is a huge bankrupting bill for some patients—maybe many patients. That, plus their premiums go up because, of course, their employers are picking up the remaining 80% of that 600% markup.

Families are already, on average, paying I think it's $22,000 in premium; and the trend line on that premium growth continues to go up steeply in the 2022-23 projections that I have seen.

Bottom line: This 6x is not a victimless modus operandi is my point.

But what I wanted to know is how they do it, these health systems. Charging 6x the cost of a super expensive specialty pharmacy drug in markup would seem to require some skill, right? And any time I see a Pandora's box, I have a terrible habit of trying to get in there.

Autumn Yongchu and Erik Davis to the rescue. Today's show digs into how some health systems and hospitals stack the odds that no one will notice their 6x markups and just pay the bills. Here's the short version of the playbook, but you'll need to listen to the show for a more robust explanation.

First off, keep in mind that while Medicare Part B tells hospitals to charge ASP (average sales price) + 6% (ish) when they buy and bill Medicare patients, there is no such guidance for commercial patients. Commercial insurers negotiate a fee off chargemaster rates, and as we all know, those chargemaster prices are, in general, based on absolutely nothing and are, in general, sky-high. So that's the first thing.

The second thing gets into coding. Let me give you the general idea here, but we talk about this in some depth in the conversation to come.

As you likely know, hospitals get paid by sending bills with codes on them—procedure codes, for example. We the hospital did this procedure, and our charge for this procedure is $4000—so, here you go. Code followed by dollar amount is shown on somebody's bill or explanation of benefits document.

These procedure codes are standardized across the industry for the most part. It's not like every health system and/or payer is making up their own. This standardized set of procedure codes is called the Healthcare Common Procedure Coding System, affectionally known as HCPCS. So, if someone starts talking about a HCPCS code, all it means is that the code comes out of that standard set of codes.

Now, J-codes are one kind of code in this common procedure coding system. They are procedure codes that start with a "J." These J-codes are for procedures involving (usually) specialty pharmacy drugs. A J-code identifies the specialty pharmacy drug that was used in the procedure.

So, you'd think it'd be pretty easy to audit a hospital bill, right? You look at the J-code on the bill; you find the ASP, the average sales price, or whatever of the drug; and then you get out your trusty calculator and you do the math on what the markup is.

And okay, maybe this works sometimes … but the problem is that so very, very often, the hospital doesn't put the actual drug's J-code on the bill. There's this miscellaneous J-code that doesn't specify the drug used, whic