Huge differences in hospital charges, CMS finds: UPDATE 2 | Arkansas Blog

Friday, May 10, 2013

Huge differences in hospital charges, CMS finds: UPDATE 2

Posted By on Fri, May 10, 2013 at 10:37 AM

St. Bernards: A bargain
  • St. Bernards: A bargain

How is it possible that a major and small bowel procedure at National Park Medical Center in Hot Springs costs on average $333,470, according to the Centers for Medicare and Medicaid Services, but only $19,740 at St. Bernards Medical Center in Jonesboro?

Or that infectious and parasitic diseases with OR procedures are billed at $257,369 at National Park and $44,446 at St. Bernards?

Why is one of the most common procedures in Arkansas, a cardiac procedure to insert a drug-eluting stent, cost $108,524 at Northwest Hospitals Inc. in Springdale but only $35,803 at St. Bernards? Or that major joint replacement or reattachment of a leg, another common procedure, is $75,655 at St. Mary’s Regional Medical Center in Jonesboro Russellville, but $10,597 at the Physician’s Specialty Hospital in Fayetteville?

Sometimes, hospitals in the same cities charge different rates for the same procedure: Treatment of a stroke, either ischemic or hemorrraghic, without major complications is $17,707 at the Arkansas Heart Hospital, $16,732 at Baptist Health Medical Center in Little Rock, $16,432 at St. Vincent Infirmary Medical Center and $10,733 at the University of Arkansas for Medical Sciences.

The federal CMS data was released for this first time Wednesday, thanks to an Obama administration directive for a more accountable health care system. The huge database shows how 3,337 American hospitals in 306 cities charge for the 100 most common inpatient procedures billed to Medicare. It includes 163,065 charges.

The Huffington Post, writing about the database yesterday, noted that people without insurance pay the most for their healthcare.

People without health insurance pay vastly higher costs for care when less expensive options are often available nearby. Virtually everyone who seeks health care winds up paying inflated prices in one form or another as these stark disparities in price sow inefficiencies throughout the market.

The database includes charges on the 100 procedures in 39 Arkansas hospitals, if I counted right. The disparity between National Park Hospital in Hot Springs and St. Bernards in Jonesboro is striking. Both are non-profit institutions; National Park is run by Capella Health care and St Bernards by the Benedictine Sisters. Financial vice president Harry Hutchison at St. Bernards, who has seen the database, said it was a "very interesting question" why his hospital charges so much less than National Park and other hospitals, but attributed it to lean management and the hospital's goal of being a "good value" to its patients. We've got a call in to National Park as well.

UPDATE: Mandy Golleher of National Park responded this morning to a question on disparity with this email:

UPDATE 2: Golleher sent a second e-mail, which is posted after the first.

In response to the article regarding the release of hospital charge data by CMS:

The charges for common hospital services published by the Centers for Medicare & Medicaid services do not reflect the prices generally paid by individuals, insurance companies, Medicare or Medicaid. They actually have little bearing on what hospitals are paid for services. National Park Medical Center’s out-of-pocket payments for patients with private health coverage are determined by covered benefits and negotiated payment rates negotiated between hospitals and health plans. Out-of-pocket payments for Medicare beneficiaries are set annually by law and Medicaid copayments are part of Arkansas’ Medicaid plan and set by the state.

We have generous discount payment policies for uninsured or underinsured patients which limit how much they will be billed. Although Medicare requires hospitals to submit charges when submitting claims, the charges have virtually no direct relation to the payment that a hospital receives, which is fixed by law. This is true for both the amount that the Medicare program pays and the beneficiary cost-share. It also true for the Medicaid program.

Medicare and Medicaid often pay less than the cost of providing care. As a result, Medicare rates are a poor benchmark for determining charges or pricing in health care. Hospital costs vary because the types of patients they treat and the communities they serve vary. Health care pricing is complex, involving multiple payers — both private and government — that all set and negotiate rates. Without the appropriate context, publishing lists of hospital charges does little to educate consumers about the price of a service.

In fact, when you look at the Total Payment that CMS lists for National Park under the major and small bowel procedure, that figure is only $35,754, which is less than the reimbursement that UAMS receives for the same procedure: $57,326.

The 2nd email:

In doing some additional research on the CMS data, I would like to expand on the statement sent earlier today.

It’s hard to look at hospital charges in black and white. Hospitals are only one part of a larger healthcare system for which a more rational financial system needs to be created. CMS publishing this data makes concrete something that everyone who has had an experience with the healthcare system already knows intuitively — hospital bills often do not appear to make common sense. We, too, would like to see a system in which charges billed for individual items bear a closer relationship to individual costs.

When it comes to the cost of healthcare, typically the patient is most interested in what they themselves will be paying. The problem with the new CMS public data is that it does not answer that question.

Unfortunately, looking at charge data in isolation does not take into account a full picture of the complex reimbursement environment that we, along with all hospitals, must deal with. It is important to understand that hospitals only collect a small percentage of our charges, or “list prices.” We are required to give Medicare one level of discount from list price, Medicaid another and private insurers negotiate for still others. Strange as it may seem, if we did not start with the list prices we have, we would not end up with enough revenue to keep the doors open. Additionally, much of what is not collected is the result of providing charity care or care that is otherwise uncompensated. For most hospitals, this is millions of dollars per year.

National Park Medical Center works with each individual patient based on his or her own insurance and payment situation. While our uninsured self-pay patients receive a minimum of a 60% discount for their services, it’s not an exact science because each patient is handled on a case-by-case basis. Depending upon the services rendered and the patient’s individual needs, additional discounts may apply. Because patient satisfaction is so important to us, we have financial counselors who work with our patients to determine a payment plan that works best for them.

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