Several weeks back, I came across a novel use of crowdsourcing in the normally staid and bureaucratic realm of health care in the United States. A platform called MedicalBillExchange.com uses crowdsourcing "to provide meaningful medical cost comparison tools to the 200 million commercial health insurance enrollees in the U.S."

I asked founder Nicholas Newsad to explain a little bit more about how it all works:

MedicalBillExchange.com has created a public database through which all U.S. patients with commercial health insurance can make money selling the pricing information found in their medical bills and explanations of benefits (EOBs) to other price shopping healthcare consumers online. Its competitors, Castlight Health and Change Healthcare, provide similar price comparison tools to the employees of self-insured companies which can mine their own employees’ medical claims data.

MedicalBillExchange.com uses historical medical claims data that is “crowdsourced” from the public to help commercially insured patients identify low-cost and high-cost medical providers in their communities. Like its competitors, it aggregates the “contracted allowable amounts” from historical medical claims to enable patients to compare specific health insurance rates for hospitals, doctors, surgery centers and imaging centers.

Currently Cigna is the only major health insurer that gives enrollees the ability to compare their out-of-pocket costs for different medical providers. Cigna’s enrollees represent less than five percent of all Americans with commercial health insurance.

While MedicalBillExchange.com is dwarfed by the financial support that its competitors have procured, it still has the potential to outgrow them by effectively leveraging the mass public’s participation through crowdsourcing. MedicalBillExchange.com utilizes a direct consumer-to-consumer (C2C) business model like Craigslist or eBay that creates financial incentives for patients to upload their information into the exchange. Castlight Health and Change Healthcare are both dependent on lengthy sales and implementation processes with self-insured corporations.

All companies in the pricing transparency space will have to compete with free, state-sponsored All Payer Claims Databases which have already matriculated in Maine, Massachusetts and New Hampshire. Over a dozen states have ongoing initiatives to develop similar public databases, but only a few have successfully implemented them.

Newsad is also the author of The Medical Bill Survival Guide: Easy, Effective Strategies for People Experiencing Financial Hardship and is currently a senior associate for a national healthcare valuation firm. He's administered an ambulatory surgery center and been the senior analyst of a national surgery center chain. I had plenty of questions for him about MedicalBillExchange.com but found Newsad's own list of frequently asked questions about the platform to be far more comprehensive. He's given us permission to re-post them here:

1) How does the exchange work?

The exchange enables patients who have had surgery, imaging or physician services to sell the pricing information found in their medical bills and explanation of benefits (EOB) to other price shopping medical consumers.

2) How exactly can patients turn their medical bills and EOBs into income?

The exchange uses a database to aggregate the contracted “allowable amounts” found in medical bills and EOBs. This figure represents the contracted rate between a particular health insurance company and a particular medical provider for a specific service. Price shopping medical consumers with high deductibles and coinsurance can save hundreds or even thousands of dollars by identifying which providers in their health insurance network have the lowest contracted rates. The exchange enables price shopping patients to buy pricing information from patients who upload it.

3) Why would someone with health insurance need to price shop medical services?

More Americans have to pay a larger portion of their medical bills now than ever before. According to AHIP, high deductible health plan (HDHP) enrollment has grown 1,000% in the last 7 years while the dollar threshold for what qualifies as a HDHP has increased 20% during the same period. We believe this growth rate will accelerate with the advent of individual insurance exchanges in 2014.

4) Why can’t health consumers get pricing info to compare from their health insurer or providers?

Most health insurance companies and providers have kept their negotiated prices confidential for competitive reasons. Also, providers generally don’t quote prices to price shopping patients unless they are already scheduled for service. This is because it takes them some time to perform the “benefit verification” process and some providers just don’t want patients to select their medical providers on price. Cigna is currently the only major health insurer that gives enrollees access to provider pricing.

5) How is MedicalBillExchange.com different from other consumer health websites?

New Hampshire and Maine now have pretty decent “all payer” databases, but 200 million commercially insured Americans still have no way to compare provider costs. None of the other consumer health websites do what MedicalBillExchange.com does.

MedicalBillExchange.com: Patients sell their medical bill/EOB pricing info to price shopping medical consumers.

HealthGrades.com, Vitals.com, uCompareHealthcare.com: Patients view quality ratings for providers.

PriceDoc.com: Uninsured patients solicit cash quotes for dental, cosmetic and preventative care.

HealthCareBlueBook.com: Estimates reasonable medical prices for uninsured patients.

NewChoiceHealth.com: Estimates overall average treatment costs for facilities. No insurance detail.

CakeHealth.com, Simplee.com: Give patients organization tools and online bill pay.

6) Is patient information private?

Yes. We even give patients the ability to permanently “black out” or “redact” their identifying information from their uploaded medical bills and EOBs.

7) How does the exchange make money?

We charge a 15% service fee on all transactions. Most of this goes to cover the PayPal fees.

8) Where can patients get EOBs?

All the major health insurance companies give you instant access to your EOBs online. All you need to get them is your health insurance card, your birth date and possibly your social security number.

9) Why haven’t any other companies already offered this service?

Actually Castlight Health and Change Healthcare offer this service to self-insured employers as a subscription service for their employees. MedicalBillExchange.com is different, because our database is open to all 200 million commercially insured Americans for use.

10) Why did you start MedicalBillExchange.com?

It is not fair for employers and insurance companies to shift costs to patients in the form of high deductibles without giving them access to providers’ pricing. Newsad has seen prices for the same exact treatment vary up to 400% under the same health insurance plan between facilities on the same street. Patient can’t make good financial decisions if healthcare pricing is a black box.