If you think you’re having a heart attack, there isn’t time to research the most affordable hospital for cardiac care. You want to get to the nearest facility as soon as possible.
There is more time, however, to plan for a non-emergency procedure, and if you do the research, you might be surprised to learn that the hospital may charge anywhere from $26,171 to nearly $90,000 for knee replacement surgery, depending on where in Kentucky you choose to have it done.
In May 2013, for the first time ever, the federal government released a list of the charges that hospitals across the country bill for the 100 most common procedures. The Centers for Medicare and Medicaid Services (CMS) released the information to “show the significant variation across the country and within communities in what hospitals charge for common inpatient services.” Releasing the information, CMS said, would help “make our healthcare system more affordable and accountable.”
The data included hospital-specific charges by the more than 3,000 U.S. hospitals that receive Medicare Inpatient Prospective Payment System (IPPS) payments for the top 100 most frequently billed discharges, paid under Medicare for fiscal year 2011. (Hospitals determine what they will charge for items and services provided to patients, and these charges are the amount on the hospital bills.)
Huge range of charges for same procedures
Each hospital has its own charge structure, according to Steve Miller, vice president for finance at the Kentucky Hospital Association. Every patient suffering from heart failure, for example, must be charged the same amount within that hospital.
On average, Kentucky hospitals collect about 50 cents on every dollar charged, he said.
Medicare, Medicaid and private insurance companies negotiate with medical facilities and end up paying a percentage of the billed amount.
“Depending on the contracts (hospitals) have with different insurers and different groups, some may pay 85 to 90 percent of that charge; others may be paying 35 percent of that charge. That’s all negotiated with the hospital,” Miller said.
In most every category, the CMS data showed a wide range of charges for procedures performed in Kentucky hospitals.
The cost of surviving heart failure with no major complications, for example, ranged from $5,816 at Saint Joseph Mount Sterling to $36,308 at Paul B. Hall Regional Medical Center in Paintsville. Rounding out the top five highest billers for heart failure procedures were: University of Louisville ($21,241); Three Rivers Medical Center ($19,582); Parkway Regional Medical ($19,413); and Frankfort Regional Medical Center ($19,143).
Bills for renal failure with complications at Kentucky hospitals ranged from $8,666 to $45,493. Bourbon County Hospital had the lowest average charge; the highest was again Paul B. Hall Regional Medical Center.
The bills for treating hypertension without major complications ranged from $5,956 at Clinton County Hospital in Albany to $25,427 at UofL, where more charity care is provided than all other Louisville hospitals combined, according to Ruth Brinkley, CEO of KentuckyOne Health.
Need a pacemaker? Kentucky hospitals charged anywhere from $21,815 to $80,856 for that procedure.
Why so varied? Why so high?
Medicare patients make up 50 to 55 percent of a Kentucky hospital’s volume, and Medicaid patients represent 15 to 18 percent of volume, according to KHA.
Medicare pays 93 to 95 percent of the cost of delivering care to a patient, Miller said.
“Not 93 percent of the charge, but 93 to 95 percent of the actual cost of caring for that patient,” he said.
Medicaid pays about 85 percent of the cost of care.
“As a result of that, you’ve got some 70 percent of your patient load – and that doesn’t include bad debts and charity – that on average are paying less than 90 percent of the cost of delivering that care,” Miller said. “Somewhere along the line, as bad as it may sound, somebody’s got to be paying more than their (actual) cost to make up for the cost that is not being covered with the other patients. Consequently, somewhere through the hospital’s charge structure, they have to make sure they have the charges in place to cover that and maintain a positive bottom line.”
This informal healthcare cost-shifting arrangement is sometimes referred to as the “sick tax.”
To illustrate that point, the heart procedure for which Paul B. Hall Regional Medical Center billed $36,000 brought in an average Medicare payment of $3,898 in 2011. Medicare payments for renal failure procedures, for which hospital charges ranged from $8,666 to $45,493, produced an average reimbursement of $6,174.
The addition of more than 300,000 Kentuckians to Medicaid as part of the Affordable Care Act will compound the problem, at least in the short term, Miller said.
“That puts about 30 percent of the state’s population on Medicaid, which will pay an average of 85 percent of the costs of caring for them,” he said. “In our projection, we saw that the increased payment coming from those individuals who will now have insurance does not offset the payment reductions that we’ve incurred to help finance that expansion of insurance.”
Combine that with reimbursement issues, reductions in payments on the federal level and insurance companies that know they have been paying “more than just their cost and are tired of doing that,” according to Miller, and you have “a challenging opportunity,” he said.
“It makes for a perfect storm when you’ve got those who have been paying more-than-cost don’t want to anymore, and you’ve got more people coming on board that will be covered by policies that pay less-than-cost,” he said.
What’s the solution? Good question, said Mike Rust, KHA president.
Hospitals continue to look for ways to be more efficient, provide better outcomes for patients, improve quality-of-life care and develop population-health-management strategies, he said.
In the long term, more access to healthcare will improve overall health, thereby driving down costs, but it will take a while to get there, Miller said.
Assessing the real costs to consumers
As expected, the release of hospital charges by CMS got a lot of attention. TIME magazine printed the longest story in its history, “Bitter Pill: Why Medical Bills are Killing Us.”
“We now spend 20 percent of our GDP – an estimated $2.8 trillion for 2013 – on healthcare. It’s time to cut through the policy debate and follow the money,” TIME wrote. (Read the story here: http://ti.me/11WkvkP)
The data certainly piqued the public’s interest, but for 99 percent of consumers, the information was “immaterial,” said Mike Lorch, regional vice president for provider services at Anthem Blue Cross Blue Shield of Kentucky, which serves 1.2 million of Kentucky’s 4.38 million residents.
“The whole thing is kind of interesting,” Lorch said. “The public did get interested when the data came out, but it didn’t really have anything to do with them. Ninety-nine percent of people aren’t paying those billed charges.”
“It doesn’t matter what the hospitals charges are,” he said. “It matters what your actual cost is, based on what your health plan has negotiated with each of the hospitals.”
There are multiple ways to determine the actual cost of care, but not everyone has access to the information.
Anthem has developed several tools, including an online application that shows the “estimated real cost of care.” Before having surgery or a procedure, Anthem members can find out and compare the facility cost and professional costs (doctors fees, etc.) at various hospitals or outpatient facilities, Lorch said. Because individual care can vary, the rates are plus or minus 10 percent.
At the beginning of 2013, Anthem instituted an “interactive process” to help its members find the best prices for medical procedures. For example, when a member’s doctor orders an MRI, during the insurance company’s pre-certification process, “we will look at the choice of provider to see if there are more cost-efficient providers in the area with the same quality, of course,” Lorch explained. “If there is, we will attempt to contact you and give you that information.”
Louisville-based Humana, one of the country’s largest health insurance companies, also provides cost comparison tools to its 10.2 million members. One of the most robust is MyChoice Tools on the MyHumana member portal, where members can compare physicians, hospitals and outpatient facilities.
“If an individual is searching for a physician, he/she may look at the estimated costs of an office visit, related pharmacy and drugs and lab tests,” said Rich Johnson, Humana’s director of provider analytics and transparency. For outpatient procedures and hospitalization, members may review a range of costs for the procedure and a rating of facilities based on cost and quality.”
The range of costs is all-inclusive, meaning if a patient is receiving surgery the procedure assessment includes payments to the anesthesiologist, radiologist and surgeon as well as recovery costs, Johnson said.
Other companies also are getting into the act. Lexington-based IF Technologies developed a subscription-based medical cost-comparison software tool for preferred-provider networks and employers. Health eReports allows patients to log into an online database that provides historical data on the prices charged by area physicians for medical procedures, as well as patient satisfaction ratings in categories such as professionalism, cleanliness and other parameters.
Websites such as the Healthcare Blue Book and Medicare.gov also offer ways to compare providers and facilities, and KHA provides data about procedures performed in Kentucky facilities, including the number of discharges, the median charges, length of stay and median age of the patient. (Access KHA’s online database at info.kyha.com/Pricing/MSDRG/main.htm.)
Getting consumers to use cost-comparison tools
While the information is available in many formats – some hospitals now publish their master charge list on their websites, Miller said – the real trick is getting consumers to actually use it.
Although Anthem has provided tools to its members for several years, “we get very little usage of it,” Lorch said.
“I still don’t think that it is in people’s natural DNA to shop for medical services, and you’ve got to keep the availability of that information at the top of everyone’s mind for the one time maybe in your lifetime you’re going to need to shop for that,” he said. “It is pretty hard to get that done.”
Patients who are required to pay a significant amount of the costs of the procedure, however, are more likely to shop around.
“Patients with high deductibles are going to have a bigger stake in the actual cost of care. They’re more interested in comparing costs,” Lorch said.
Over time, Anthem expects its cost-comparison tools to become more popular, especially as the landscape of healthcare continues to change.
KHA also predicts more involvement on the patient level.
“John Q. Public is being encouraged and in some cases forced to get more informed,” Miller said.
Lorie Hailey is associate editor of The Lane Report. Follow her on Twitter at twitter.com/loriehailey.