Why Did We Decide to Become a Cash Pay Laboratory?

Why Is Tomorrow’s Health a Cash-Only Laboratory?

The short answer to the above question is that we (Tomorrow’s Health) wanted to provide a service to our customers that is not only reasonably priced, but is completely (100%) transparent. The decision to not bill through insurance has led to huge savings of time and money for us – savings which we pass on to our customers.

Some Background

On January 1, 2022, the federal government updated some of their regulations due to some of the enormous problems we have in our healthcare system right now. In particular, this blog highlights the reasons surrounding changes made to CFR part 149 – a section titled, “Surprise Billing and Transparency Requirements”. As the title implies, our healthcare system has a real problem with surprise medical bills and lack of transparency. 

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The Problem with Billing Healthcare through Insurance

Almost all customers can relate to this – witnessing a complete lack of transparency of what a medical visit/procedure will cost to then receiving surprise medical bills weeks to months after the fact. An article in the Los Angeles Times in 2016 gives a common example of what patients experience, particularly in the hospital setting. Five (5) common laboratory tests were ordered for this particular patient. The hospital billed the patient’s insurance $408, for which the patient was responsible for $269.42. After receiving this bill, the patient called the hospital to find out the cash price for those five tests was only about $75. The patient ended up paying almost four times (4X) the actual cost of the tests by billing through their insurance!

How is this affecting the average patient? According to an article published by CNBC2, the number one reason people file for bankruptcy is difficulty paying medical bills. A whopping 66.5% (2 of every 3) of all bankruptcies are tied to medical bills. And of those who cite medical bills as a reason for bankruptcy, almost 75% (3 of every 4) have some form of medical insurance! This data points directly to the problem with our rising healthcare costs – our current medical insurance model!

So why does it cost so much more to bill through insurance? Some studies have estimated that 15-31% of healthcare costs are administrative in nature, with 13-16% of this going directly to billing and insurance-related costs. Those numbers are probably underestimates! Comparing ourselves to other developed countries around the world, the United States pays more in healthcare costs (16.8% of gross domestic product (GDP)) than any other country, yet scores significantly lower in almost all healthcare metrics than any other country – ranking last in administrative efficiency!

The lack of transparency in medical billing practices, and the idea that “your insurance will cover the costs” is leading to skyrocketing bills from medical practitioners that are only partially covered by insurance and end up being paid primarily by the patient.

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What is The Solution – or at least A Solution? 

Many people are already going in this direction – only getting “catastrophic” healthcare insurance and paying out of pocket for low-cost healthcare items. This actually would function more like automobile insurance: the consumer is responsible to pay for oil changes, new brakes, windshield wipers; the insurance is responsible to pay for major repairs due to accidents or other problems. 

This is saving people a LOT of money. Consider the below comparison:

Typical private insurance. The average person pays $400/month in healthcare insurance premiums – that adds up to $5,000/year. In a typical year, let’s assume that a person sees the doctor 3 times (1 well checkup and 2 urgent care visits). Including the visits with the doctor ($250/visit), a few lab tests ($250) and a radiology exam (e.g., x-ray, MRI) ($500), the amount billed to insurance would be around $1,500. Since you haven’t met your deductible, you will pay around 80% of that cost: $1,200. So, for the year you’ve spent $6,200.

Catastrophic insurance plus cash pay. The average person pays $150/month in catastrophic healthcare insurance premiums – that adds up to $1,800. Assuming the same typical year as above and cheaper up-front cash prices for healthcare: $100/visit, $100/lab tests, $200/radiology exam, total costs for healthcare would be around $600. So, for the year, you’ve spent $2,400 – a savings of $3,800! This is a good down payment on a car, something you’ve saved in just one year!

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Why Tomorrow’s Health? 

When we first started offering blood work laboratory testing, we were accepting all forms of insurance. However, this meant we needed to charge the patient (through their insurance) much more money per test (2 to 3 times the up-front cost) so that we could recoup what we needed to operate our business. After some months of this, we didn’t feel like this was an honest way to do business, so we decided on April 1, 2022 to switch completely to up-front cash payments for our blood work laboratory tests (note: we still bill through insurance for COVID-19 PCR testing, per the CARES Act).

We know this model doesn’t work for everyone. But since then, we’ve had several patients tell us how much they appreciate this. Some of them had been surprised in past by bills that come months after and with costs much higher than they expected. Paying up front was transparent AND saved them money. And some have appreciated their ability to order their own laboratory test (without a doctor’s order), letting them be more involved with their own health and giving them peace of mind.

The bottom line: Tomorrow’s Health wants to provide superior customer service (including cost savings) that leads to the greater health of members of our great community!