Shocking News: Hospital Billing Varies Wildly

Ok, maybe you’re actually not shocked.  However, according to a New York Times article: “Data being released for the first time by the government…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.”

In case you didn’t know, “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.”

However, “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.”  In other words, they are picking up “the slack” of what Medicare and insurers have negotiated due to their buying power, without resemblance to what the treatment actually costs.

“An official at the American Hospital Association, a trade group, said there was a cat-and-mouse game between hospitals and insurers that affects what hospitals charge.  As insurers demand bigger discounts from a hospital, a facility may raise its charges to protect its bottom line, that official, Caroline Steinberg, said. ‘The hospital raises its rate to cover the discount,’ said Ms. Steinberg, who is the group’s vice president for trends analysis.”

“Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, the nation’s largest association of health insurers, said some member companies were reporting sharp price increases of 20 to 30 percent for some services. Some insurers are seeking similar price increases from policy holders.  ‘There’s very little transparency out there about what doctors and hospitals are charging for services,’ Mr. Zirkelbach said. ‘Much of the public policy focus has been on health insurance premiums and has largely ignored what hospitals and doctors are charging.’”

“Ms. Steinberg said that the Affordable Care Act required that hospital charges be limited for patients who qualify.  ‘That’s driving all of the rates for uninsured patients towards the same amount that Medicare pays,’ she said.”

“In addition, bills submitted by profit-making hospitals to Medicare are typically higher than those submitted by nonprofit centers, the analysis found.  Government hospitals typically billed Medicare less than either nonprofit or profit-making hospitals, the data shows.”

“‘Medicare payments represent about 91 cents of every dollar that a hospital spends on treatment,’ Ms. Steinberg said.”

“Mr. Anderson, the hospital finance expert, said that private insurers negotiated rates with hospitals that were typically about 30 percent above what Medicare pays. He understands that hospitals will often charge above the Medicare rate, but he said the huge premiums at some hospitals make no sense.  ‘If you’re charging 10 percent more or 20 percent more than what it costs to deliver the service, that’s an acceptable profit margin,’ Mr. Anderson said. ‘Charging 400 percent more than what it costs has no rational basis in it at all.’”

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