Per the linked story. We’ve all seen (and sometimes personally experienced) seemingly insane charges for small, uncomplicated medical tests and procedures. How is is possible within the realm of reason for hospitals to claim these are reasonable billing charges?
Overhead. In a hospital you have all those extra doctors and drugs and machines that go “ping”. Granted, they aren’t needed for every patient, but they were there in case somebody’s toenail clipping developed unexpected complications. And because they’e there, they have to be paid for.
True, these things have to be paid for, but adding 500 to 1000 dollars to each minor toenail procedure because that shiny new MRI is standing by for you strikes me as an exaggerated and unpersuasive argument bordering on fraud to justify overbilling.
What are the limits in making these “expensive environment” arguments? The answer seems to be “the most we can get away with”.
That’s basically correct, it is cost shifting, something that hospitals have been doing for years. When John Doe from skid row is brought in at 2:00 am with 3 life-threatening problems and expires 4 days later after consuming $100,000 worth of “doctors and drugs and machines that go ‘ping’,” what’s the hospital to do? Answer, clip some paying patients. Before medicaid, cost sharing plus charity is how poor people got their medical care. Medicaid was supposed to stop cost sharing. From what I can see it greatly reduced charity care (which was a well established part of U.S. medicine 40 years ago) but has not stopped cost shifting.
Why fraud? A hospital’s charges are (at least in California) required to be public; you can shop around and ask each hospital what they charge before you go in for a procedure. Although, if you have insurance, what a hospital charges is irrelevant, because your insurance company already has negotiated a significantly lower amount it will pay on your behalf. But what about the uninsured? The rich ones do pay the full charges. That happens about as frequently as, well, never. The poor ones negotiate a lower rate with the hospital and the hospital writes off the rest. Or the poor ones go BK and the hospital gets nothing.
In reality, what the media is unwilling to focus on (because it would require them to engage their limited mental resources on something more difficult than finding a willing plaintiffs’ lawyer to shill for his client on the evening news) is the fact that no one pays these charges. A hospital’s charges are akin to the MSRP on a car. When you go car shopping, the sticker on the car’s door tells you the MSRP. You don’t pay that; instead, you negotiate with the dealership to get a better price, or if you belong to some club (auto club, or perhaps your insurance company) someone will negotiate a fleet discount for you. You don’t pay sticker at a hospital either.
Hospitals are not these massive profit centers. Instead, they generally are just barely getting by, and some are having to shut down their more expensive departments (trauma, anyone?) just to keep their heads above water. Why? Because hospitals lose money on most of their patients, and turn a profit on only a small percentage of patients. If hospitals tried to turn a profit on each patient, insurance premiums would likely double or triple, because the hospitals would negotiate a higher reiumbursement from the insurance companies, which would, in turn, pass the higher costs on to their insureds in the nature of increased premiums. That would price more of the population out of being able to purchase insurance, so hospitals would then have more uninsured patients (the working poor, who make too much to qualify for Medicare but not enough to pay for insurance) from whom it cannot collect even an amount to cover the hospital’s costs. So, the hospital then has to charge the insurance companies more, lather, rinse, repeat.
Bottom line, don’t be sucked in by these anecdotal stories that play to your preconceived notions. Talk to someone with a notion about the historical role that charges and DRG groups and what-have-you have played in setting charges; consider how quiet all the insurance companies have been while the media is fixated on a handful of isolated instances – the insurance companies know they have it good right now – they can charge premiums through the roof and yet use the current crisis to justify not paying their contracted rates with the hospitals.
I want to be plain, here, that your question is not asking how the US health system ought to be, but just why hospital charges seem high. This is more of GD than GQ, either way.
Umm… let me give you a reality check that won’t bounce. Many people tend to assume that everyone (somehow) has good coverage with minor co pays. There is a vast population of non-wealthy middle class professional people who are independent contractors, or are not otherwise affiliated with groups or organizations that have affordable health insurance plans. I belong to this cohort.
In those cases the plans offered are typically high deductible “catastrophic” plans that don’t kick in until a 2000 - 5000 deductible has been paid ($ 3000 per person in my case and I am in good health). If I go to the hospital my plan via the Golden Rule Insurance Co., gives me a card that discounts procedures slightly (and I do mean slightly), but in the cases I have gone to the hospital for procedures this discount is minor, and I am responsible for large majority of the full load of the cost.
If I went to have a funky toenail checked out, and I got a bill for 1300 discounted down to 1000 I would go batshit. Granted, I could have thoroughly investigated the likely cost of this, but I can imagine that most people figuring that a minor procedure like this will be a few hundred at most, might not bother to check and see if the hospital intends to bill them some insane amount.
But why is a person going to a hospital for a toenail problem?
Hospitals are for emergencies and surgery.
It’s always going to cost more to have a “regular” procedure done at a hospital.
Probably a lot more. Even if you have decent medical insurance, the co-pays for a hospital “visit” are usually more than double that of a doctor’s office visit.
Probably because urban hospitals generally do have an array of clinics to do non-emergent care for those who want to be seen but aren’t actual emergencies. That’s a pretty common scenario in many urban areas I’ve worked in. Hell, they even advertise them on TV around here.
Concerned patient: Gee, I wonder if this spot on my foot is serious! I wish I had a doctor nearby!
Magic TV voice: Well, come on down to St. Elsewhere’s urgi-med clinic! Convenient hours on weekdays and evenings, and we accept some major insurance plans! Maybe even yours! Don’t wait! You might die!
As to the OP: Hospital costs is seriously effed up! Don’t get me started. But know that hospital systems are very good at figuring out how to get maximum bux wherever they can to offset payment failures from elsewhere. And they’re getting really, really good at squeezing the docs for monetary concessions to allow said docs to continue to have hospital privileges.
Not anymore. I recently had some lumbar X-rays taken for a bout with sciatica and the doctor sent me to the hospital because they have the latest X-ray machines (cost was quite reasonable). In many cases primary physicians, esp outside of major metro areas, are referring people to the hospitals for tests and such because they have better diagnostic hardware. The results of the tests are then returned to the doctor for diagnosis and treatment.
Hrrmm…QtM answered faster and better.
What I find interesting is that the hospital’s normal charge might be listed as $275. Medicare says their payment for this procedure is $75. The hospitals says OK.
What are these priviledges?
Being allowed to take care of your patients in their hospital, doing surgery and other procedures on them.
Thanks. I’d try to cash that check but I don’t know if it’s worth the paper it’s written on. In retrospect, I apologize for posting in this thread, as I haven’t been able to find public sources I can cite you to for the bigger picture, and this has devolved into anecdotal evidence, which everyone’s seen already in the media. I think that the bigger picture is important, but it’s getting lost in the noise, and unfortunately without citations to the relevant studies, I’m not helping. My apologies. The only point I tried to make is that this is an issue that is much more complicated than the media is conveying with its stock story of Patient Q, who had widget surgery done and was charged an obscene amount! This isn’t an issue that ought to be fought anecdotally and, as I said, I can’t find public sources for much of what I’ve said, so I’ll bow out. Except I can’t resist one last thing . . .
David Simmons, that’s because Medicare controls a significant number of patients, and if a hospital loses its Medicare patients (i.e., Medicare says it will no longer permit its patients to go there), the hospital is in a serious bind. Medicare therefore has significant bargaining power and can set low, low rates for its patients, and what the hospital loses in billed rates, it makes up in volume. (There’s one other issue, which is that Medicare also compensates hospitals once a year for depreciation on its equipment; that amount is not reflected in the billed rate for a procedure as it would be with other insurance companies, but it does get paid to the hospitals. That means that Medicare’s rates may look lower than another insurance company’s, but part of that is due to the different way that Medicare compensates hospitals.)
I don’t work at the hospital, but at a separate radiology clinic, in the billing office. (Our prices are actually quite a bit lower than the hospital’s.)
I can’t give you statistics on how many people have high deductibles on their insurance, or whether they have “good insurance” by any standards, or how many people have no insurance at all. Still, a quick count of the charges I’m reviewing today shows 147 people visited the county hospital radiology center. Roughly one third of those patients had Medicare; another third had private insurance. Only a small fraction (8 of 147 patients) asked for charity and/or had no insurance at all.
That’s by no means a complete picture, since the most expensive interventional radiology (angiography and angioplasty, biopsies, PET scans to screen for cancer, etc) are most often Medicare patients, while charity care usually involves someone under 25 who is looking at a relatively minor complaint (as opposed to welfare, which one often qualifies for by being pregnant).
I doubt that that 5% of charity care cases are by themselves causing hospital prices to be inflated grotesquely. A more likely explanation is that Medicare is such a large slice of patient coverages, but pays less compared to commercial insurance.
If you factor in welfare (21 cases) and military (4 cases) then over 55% of the patients have government-sponsored insurance or charity care. I’ll wager most of the high-cost demographics (sick elderly patients + young pregnant patients) have been entrusted to the government agencies which pay the least well.
They’re the government. The bottom line is that hospitals can’t say no. Ditto welfare and military insurance. The alternative is to refuse treatment to those patients entirely … on those rare occasions the law allows hospitals to turn away patients. (In this state, my ER RN friend tells me any patient who comes to the ER must be seen, and treated enough to stabilize. That means the ER will set a broken arm or stitch up a GSW but they’re not obligated to perform follow-up care on that patient or do expensive elective surgeries. (You can’t walk into the ER and demand breast implants, for instance, since that’s not… well, I was going to say emergent.)
**Fish, **how many of your bills are going out to people with no insurance or insurance with extrememly high deductibles who never made an appointment because they assumed they couldn’t afford treatment, couldn’t meet their deductibles, and didn’t know about charity care? (And is a high deductible insurance carrier eligable for charity care, or only the truly uninsured?) That’s where a huge portion of the problem is - people who ignore thier relatively minor complaints because of money, and who end up needing expensive test and procedures later on for big things that can’t be ignored or lived with any longer - which, in some cases at least, would have been cheap and easy to deal with early on.
…sez the gal who hasn’t seen a dentist or a doctor outside of pregnancy in 15 years, but has ($5000 deductible) private insurance.
…and who’s mom lost all of her womanly innards to endometriosis because it was too expensive to see a doc-in-the-box for a D&C, so she waited until something ruptured and her 9-year old daughter (me) had to call an ambulance to take her to the hospital for major emergency abdominal surgery.
This is a question impossible to answer, and I already said I cannot give any evaluation on whether somebody has a high deductible or “good insurance” by any definition. All I can see is the insurance carrier. I can not see their coverage plan, cost of co-pay, deductible, schedule of payments, etc.
The question is also fairly meaningless in isolation, because it is equally valid to ask, “How many people had expensive procedures (which their insurance would have paid 100%) that could have been prevented if they’d seen a doctor 15 years ago… but they just didn’t want to go at the time?”
It is equally valid to ask, “How many people had expensive procedures today even though they have been doing their regular yearly exams?”
I cannot answer those questions, nor will I attempt to try. The issue of rising health care costs vis-a-vis patients who cannot or do not visit regularly can be covered in a Great Debate topic, if you like. I’m sorry you have personally had problems with health care in the past regarding your mother, but just because I work in a billing office doesn’t mean I deserve to be shouted at. 
I do not do charity care or assign or evaluate patients for their worthiness of same, so I dunno their criteria. The hospital has a staff for that. I do see patient reports with Medicare or private insurance as a primary, with charity care as their secondary insurance (meaning the hospital bills insurance for what it can and writes off the balance).
As was said above, if the difficult expensive procedures have a slim profit margin and the easy cheap diagnostic ones have a larger profit margin to compensate, yes, this would be part of the problem. (It’s along the same lines that a restaurant is unlikely to give you free steak & lobster but it’ll give you free coffee and french fries all night). If all procedures were billed out on the same profit margin, then it wouldn’t matter (billing-wise) whether the patients put off the expensive stuff or not. It’s complicated by the near-certainty that the older one gets, the more likely one is to have Medicare, and the more frequently one needs the expensive stuff, and the more likely one is to die and not have to fully pay his bill, so it’s inextricably linked to rates of mortality and insurance compensation.
I don’t know what the profit margins look like on these procedures so I can’t be of any use there.
Of course it is. That’s why I asked it.
The whole thing is just so complicated that there is no GQ answer to the OP, other than, “because they can.” There are data points which are next to impossible to collect (those I mentioned), data points that insurance companies would rather we not collect (like the depth of their discounts) and data points that the hospitals would rather we not collect (like all that baby formula, bandages, Tylenol and other meds and supplies that insurance companies and patients pay for but is given to the hospital for free by the manufacturers).
[rant] our hospital put a charge on the bill for “take home medications” at $76. What did they give me to take home? One 50 pill bottle of extra strength Tylenol, one 50 pill bottle of OTC Midol, and one 50 pill package of Gax-X. $76. Now, my insurance company didn’t pay it, and I wasn’t on the hook, thanks to their agreements with the hospital. But if I was uninsured, I would have been paying $76 for 3 bottles of stuff I could have gotten at Walgreens for $15. And you know what the hospital paid for all of that? Zero. They’re given to them for free so that J&J can say “Tylenol is the number one pain reliever used by hospitals” in their ads. [/rant]
Like any industry which walks this bizarre tightrope between free market and managed industry (airlines and utilities being two others), there are no easy answers when it comes to cost or pricing.
Well… I guess that’s that, although it is a bit disappointing to have a large portion of the US health care compensation system built on a series of interlocking, self sustaining lies.
The OP expects the normal rules of pricing and market economics to apply to hospitals, but they just don’t. You have to understand that you can walk into your nearest emergency room with a bleeding cut, announce that you have no intention whatsoever of paying your hospital bill, nor will you identify yourself so that the hospital can send you a bill or sue, and the ER still has to treat you at its own expense. There’s no other business that is required by law to give free goods and services to whoever needs them. (Hospitals aren’t really a business, precisely because of this. So it’s pointless to expect them to operate like one.)