As this New York Times article details, data being released for the first time by the government on Wednesday shows that hospitals charge Medicare wildly differing amounts — sometimes 10 to 20 times what Medicare typically reimburses — for the same procedure, raising questions about how hospitals determine prices and why they differ so widely.
The data for 3,300 hospitals, released by the federal Center for Medicare and Medicaid Services, shows wide variations not only regionally but among hospitals in the same area or city. For instance, in Saint Augustine, Fla., one hospital typically billed nearly $40,000 to remove a gallbladder using minimally invasive surgery, while one in Orange Park, Fla., charged $91,000. A hospital in Livingston, N.J., charged $70,712 on average to implant a pacemaker, while a hospital in nearby Rahway, N.J., charged $101,945.
Hospitals submitted bills to Medicare that were, on average, about three to five times what the agency typically pays to treat a condition, an analysis of the data by The New York Times indicates. And variations between what hospitals charge may be even greater.
The data covers bills submitted from virtually every hospital in the country in 2011 for the 100 most common treatments and procedures performed in hospitals. Medicare does not actually pay the amount a hospital charges but instead uses a system of standardized payments to reimburse hospitals for treating specific conditions.
Private insurers do not pay the full charge either, but negotiate payments with hospitals for specific treatments. Since many patients are covered by Medicare or have private insurance, they are not directly affected by what hospitals charge.
Experts say it is likely that the people who can afford it least — those with little or no insurance — are getting hit with extremely high hospitals bills that may bear little connection to the cost of treatment.
Geoff Masci DC says
Most of you all who know me, know that I’ve had some significant health challenges in the last 5 years. So has my semi-spouse. All of these have involved hospital and grand specialty centers. (I’m just qualifying myself since I’m not MD/DO and have no hospital rights.) I consider myself a discerning health services consumer. I too can attest from experience that service charges vary widely, among hospitals, large and small clinics, nursing homes and on medical specialty fees. The variation seems sinful-if I may use an out-of-fashion word. Within my patient files resides an ombudsman for our local nursing home and a cost appraiser for construction “punch lists” (this has relevance in view of the “our new construction requires raising prices to defer costs” rationale).This and an intimate knowledge of ancillary services(PT- was married to one), gives me some insight into the charges billed to Medicare and their wide variation. Certainly,I myself am thoroughly immune to charges of overcharging Medicare for my professional services ( have a little sense of humor here!).
Years ago, the Congressman from California, the very Honorable Fortney P. Stark (“Pete” Stark) accused us-individual doctors- of being the most egregious violators of ethics, fair charging practices and being the initiators of all fraud in Medicare-that’s how I chose to rewad it at the time- the result was “Stark I and Stark II” Medicare fraud legislation. His premise was that doctors were the significant cost aggregators in Medicare expenditures due to fraudulent billing practices. His solution-arrest the doctors. Although there were some instances of fraudulent charging and some “busting” of Medicare “mills”, when I requested the data when I served on a county Board of Health, I was shocked to discover that the fraud among doctors was a paltry .08%-as “suspected”, not proved. However no mention was made of the larger institutions and their charging practices.
PT/Nursing Homes: based on direct testimony of the above and another close relative who’s a PT(and did work for registries) In the mid 90’s, PT’s were paid a range of $35 to $60 per hour to work in clinics as employees. In Registry work they typically contracted to work for the Registry for $35/hr. The Registry charged the Nursing Home $245/hr and the Nursing Home was allowed to charge Medicare $465/hr. Medicare paid. Was this proportionately reduced, you may ask? No, replies the Ombudsman. However, the Nursing Home must(is somehow forced) do this to pay for/balance the costs of operating/service provision to offset the massive losses that either Law or Policy dictates that they provide. It’s all about keeping the doors open. It’s too bad that isolated scapegoating takes place (just as I’m doing here) by our esteemed legislators and the felonization of basic necessary business practices. You would think that there would be more “common sense” involved, I can assure you as a former legislator(local), that “common sense” never enters into the legislative or policy formulations.
In our work as reviewers of claims, note the coding used and compare the charges that appear for same/similar coded services and note the pricing. Note the variation for institutional vs. private clinic charging (You’ll probably note that there is wide variation in charges but not a consistent indictment of either ownership category). The “take-away” here is that these charges should have an average determined and that could be the “fair-market” price. Or take a cue from Pete Stark and then reduce the fee to 80% and then find 80% of that and that might be the “fair price”. Better still would be a National Fee Schedule without any waivers or qualifiers for 5 years, that established baseline fee structures regardless of size, importance or hat size. Then this conversation might have a starting point. But, I suppose that would collapse the system. It would be nice if we could design a pilot study to track say-code variation- as we went about our day as reviewers…….sigh!. It would be nice to generate data and not persist on anecdotal exchange.
The more I write, the more I’m forced to realize that our system is irreparably broken. Although I’m Right-of-center politically, quite right, actually, let me wax heretical and state that, possibly, this points out the necessity of a single payor system. Heavens! I said it.
Is written diarrhea more physically costly, than verbal ?
Food for thought.
Geoff Masci DC says
Very snarky, Geoff !
It is absolutely true that those who have no insurance are hit with the highest bills with little or no opportunity for discount. This way the hospital tries to make up for the steep cuts made by large insurers.