Officials with the U.S. Department of Health and Human Services and the Centers for Medicare and Medicaid Services said their hope was that releasing hospital charges and what Medicare actually paid would provide transparency and show the wide variation in charges not only across the country but even among local hospitals. But hospital finance officers said the charge system really is “idiosyncratic,” often with tradeoffs to maximize some business and take a loss on other services within a hospital, so charges won’t make much sense or prove useful for consumers, who generally don’t pay those charges anyway.
The federal agencies released average charge and Medicare payment for the 100 most common inpatient procedures for 3,400 hospitals across the country. What they found was a “vast variation in charges” not only between different places, with charges for the same procedure as much as 20 times higher in some hospitals than others, but also great variation even among local hospitals, said Jonathan Blum, the deputy administrator for CMS.
“The extent of the variation doesn’t support the reasons” providers gave for the big differences, he said. While acknowledging that most don’t pay the charged rate, it does apply for many patients, said Brian Cook, the director of the Media Relations Group at CMS.
“For those who are uninsured, those who are underinsured, they may be responsible for charges that are five-six times what Medicare pays, even more than that,” he said. “While they may be negotiating with hospitals to come down from there, the starting point is also much, much, much higher than what Medicare would consider to be an appropriate charge.”
On most of the procedures for which charges were listed, Doctors was the highest among Augusta hospitals, often significantly higher. Its $342,443 average charge for treating major infections with surgery and major complications was the highest charge of any listed in Georgia. Doctors e-mailed a response Wednesday evening that did not directly address the higher charges but said that “what patients pay has more to do with the type of coverage they have than charges.” Those without coverage are eligible for the hospital’s charity care program or could receive discounts, the statement said.
That Doctors would be higher was not surprising to officials at other Augusta hospitals.
“You would see that in almost every instance of an HCA hospital,” Doctors’ parent company, said Greg Damron, the chief financial officer for GRMC.
Doctors is usually “aggressive” in how it sets its charges, said Dave Belkoski, the chief financial officer for University Hospital.
Both agree, however, that no one pays those charges.
“Charge is not relevant,” for the consumer, Belkoski said. What would be more useful would be finding out the negotiated payment an insurance company might have set with different institutions, he said.
Often times within a particular hospital, how it arrived at a particular charge might be “idiosyncratic” to that institution, Damron said. A hospital that does a lot of a particular kind of procedure might set charges for that higher, while those for others are not raised, he said.
“You’re going to try to place charges in places that are going to maximize reimbursement, particularly from the managed care payors,” Damron said. “You’re trying to create revenue streams.”
And those charges might have been raised or lowered based on negotiations to maximize volume in key areas, Belkoski said.
“You ask for more on cardiac and you take less on (obstetrics) just so you can get all of the cardiac business,” he said.
What a hospital charges really wasn’t designed to be consumer friendly, it was to respond to government and commercial insurance reimbursement demands, Damron said.
“It’s not like going to Home Depot and buying a wheelbarrow,” he said.
Officials are hoping that providing a look into the system will help “reform a complicated marketplace,” Blum said. And both Damron and Belkoski say greater demand from patients for cost comparisons, particularly in light of reforms from the Affordable Care Act, will help push more consumer-friendly price comparisons in the future.
As for Medicare payments, Georgia Regents is always higher than others in Augusta because it gets extra payments to cover the costs of teaching and training residents and extra payments for seeing a higher number of low-income people, Damron said, which pushes up its total payment numbers.