Grow­ing scru­tiny

Vari­ance in hos­pi­tal charges raises ques­tions

Modern Healthcare - - THE WEEK IN HEALTHCARE - Rich Daly and Rachel Lan­den

Last week’s pub­lic un­veil­ing of CMS’ charges and re­im­burse­ments data for about 3,000 hos­pi­tals across the coun­try painted an un­flat­ter­ing por­trait of the dra­matic and some­times mys­ti­fy­ing variation be­tween hos­pi­tals treat­ing sim­i­lar pa­tients in sim­i­lar mar­kets.

While much of the variation was eas­ily ex­plained by hos­pi­tal of­fi­cials, some of it was not.

The mas­sive data dump, sprawled across 160,000 lines in a sin­gle Ex­cel spread­sheet, con­tained the aver­age charges sub­mit­ted by hos­pi­tals for the 100 most preva­lent di­ag­nos­tic re­lated groups. Those charges—based on hos­pi­tals’ charge­mas­ter fee-for-ser­vice rates—in al­most all cases far ex­ceeded the aver­age pay­ments for the same ad­mis­sions. They re­vealed wide dis­par­i­ties in charged rates, rang­ing in some cases to 20 to 40 times their peers in other cities or some­times across town.

The ac­tual CMS pay­ments, which re­flected the in­pa­tient prospec­tive pay­ment sys­tem’s DRG rate ad­justed for case sever­ity, teach­ing, dis­pro­por­tion­ate share and other fac­tors, re­flected a smaller yet still wide dis­par­ity. Keck Hos­pi­tal of USC in Los An­ge­les, for in­stance, sub­mit­ted bills to Medi­care at an aver­age undis­counted price of $123,885 for ma­jor joint surgery. The CMS re­im­bursed the hos­pi­tal only $19,369 on aver­age for the op­er­a­tion.

Across town at Foothill Pres­by­te­rian Hos­pi­tal, Medi­care paid an aver­age of $15,804 for the pro­ce­dure af­ter re­ceiv­ing an undis­counted charge of $59,416. In other words, though the ba­sic charge at Keck was more than twice as high as at Foothill, its ac­tual re­im­burse­ment was only 23% more. “Keck Hos­pi­tal ac­cepts pa­tients that other hos­pi­tals do not, in­clud­ing pa­tients who need re­vi­sion surgery,” Keck of­fi­cials said in a writ­ten state­ment. “Th­ese cases take longer to com­plete and may in­volve lengthy hos­pi­tal stays.”

The stark dif­fer­ences in charges put hospi- tal of­fi­cials on the de­fen­sive, and most con­tacted by Mod­ern Health­care re­fused to dis­cuss the fre­quently wide dif­fer­ences in both what Medi­care pays and what hos­pi­tals in the same mar­kets charge. Carol Far­ron, com­mu­nity de­vel­op­ment di­rec­tor at Lodi (Calif.) Me­mo­rial Hos­pi­tal, called it “a con­vo­luted sys­tem with no log­i­cal so­lu­tion.”

“It’s such a com­pli­cated is­sue, and I think the prob­lem is there’s a dif­fer­ence be­tween charges and costs, and that’s driven by the fed-

“Th­ese rates can vary mas­sively in ways that can­not be eas­ily ex­plained.” —Kath­leen Se­be­lius, HHS sec­re­tary

eral govern­ment,” Far­ron said.

For their part, fed­eral of­fi­cials took aim at the yawn­ing gap be­tween their DRG pay­ment rates and the charges sub­mit­ted by the na­tion’s hos­pi­tals. “Th­ese rates can vary mas­sively in ways that can­not be eas­ily ex­plained,” HHS Sec­re­tary Kath­leen Se­be­lius said in a call with re­porters.

Over­all, the 100 DRGs re­flected $66.7 bil­lion in pay­ments for 7 mil­lion dis­charges or 60% of Medi­care’s IPPS dis­charges in fis­cal 2011.

Hos­pi­tal of­fi­cials were quick to point out that the vast ma­jor­ity of pa­tients never see or pay the undis­counted rates. Pri­vate in­sur­ers ne­go­ti­ate steep dis­counts based on their abil­ity to drive pa­tient vol­ume to hos­pi­tals. The newly re­vealed data showed Medi­care pay­ing rates that were usu­ally a third or less of the charged rates. And Med­i­caid pays the low­est rates of all.

But that doesn’t mean the charge-mas­ter rates have no im­pact. Peo­ple with­out in­sur­ance used to be charged the undis­counted rates, al­though that prac­tice was ended by the Pa­tient Pro­tec­tion and Af­ford­able Care Act. They now must be charged an aver­age of the hos­pi­tal’s three low­est rates. In­sur­ers whose pa­tients re­quire out-of-net­work care in an­other city can some­times be charged the undis­counted rate as can for­eign­ers com­ing to the U.S. for treat­ment.

And none of that ex­plains the vast dif­fer­ences in the top rates, which are unique to each hos­pi­tal. Their spe­cific costs are added to the charge for each pro­ce­dure, ac­cord­ing to hos­pi­tal ad­vo­cates and for­mer hos­pi­tal of­fi­cials. For in­stance, some hos­pi­tals not only add in their teach­ing, un­com­pen­sated care and cap­i­tal costs to each pro­ce­dure, they off­set losses from some pro­ce­dures with higher profit mar­gins on oth­ers.

At Cen­tinela Hos­pi­tal Med­i­cal Cen­ter in In­gle­wood, Calif., where the undis­counted price for a ma­jor joint re­place­ment was $220,881, spokesman Steven Brand said the high charge was due to the hos­pi­tal’s treat­ment of a “higher risk, more se­nior pop­u­la­tion.” Such ex­pla­na­tions have met with skep­ti­cism from fed­eral health­care of­fi­cials, who said it de­fied logic to sug­gest such huge charges could be due to any hos­pi­tal cost or the qual­ity of care pro­vided.

“To date, we have not heard any log­i­cal rea­son why there is a 20 times and 40 times variation in charge­mas­ter prices” com­pared to Medi­care pay­ments, Jonathan Blum, di­rec­tor of Medi­care for the CMS, said in a call with re­porters.

The Obama ad­min­is­tra­tion in­ex­pli­ca­bly didn’t re­lease the ac­tual cost data that hos­pi­tals sub­mit in their an­nual cost re­ports, which show items such as the cost of la­bor, ma­te­ri­als and sup­pli­ers and cap­i­tal in­vest­ment. Those costs are the ba­sis for its an­nual up­dates to the DRG pay­ments.

The cost data are crit­i­cal, hos­pi­tal ex­perts said, be­cause the dif­fer­ence be­tween charges and costs is key to un­der­stand­ing whether hos­pi­tals are in­flat­ing their prices with­out rea­son. A CMS spokesman did not re­spond to ques­tions about whether the agency plans to re­lease a sim­i­lar com­pi­la­tion of hos­pi­tal costs for the same pro­ce­dures.

For years, hos­pi­tals have ar­gued that the ac­tual DRG pay­ments are well be­low their ac­tual cost of pro­vid­ing ser­vice. The Medi­care Pay­ment Ad­vi­sory Com­mis­sion

pegged the over­all short­fall be­tween Medi­care’s pay­ments and hos­pi­tals’ costs in 2011 at 5.8%. Hos­pi­tals were pro­jected to lose about 6% per Medi­care pa­tient through 2013. Those losses, com­bined with the even greater fi­nan­cial losses as­so­ci­ated with Med­i­caid pa­tients, add to over­all pro­ce­dure costs, hos­pi­tal ad­vo­cates said.

Still, pub­li­ca­tion of the charges is cer­tain to draw close scru­tiny from in­sur­ers and com­pet­ing hos­pi­tals. Some ex­perts said it could lead to a com­pres­sion of charged rates since com­pet­i­tive pres­sures may en­cour­age the lower-priced hos­pi­tals to raise rates while em­bar­rass­ing the higher-priced hos­pi­tals into low­er­ing rates.

The newly pub­lished data echo pre­vi­ous re­search on prices charged to pri­vate in­sur­ers be­tween re­gions and within the same mar­ket. For in­stance, a 2010 study by the Cen­ter for Study­ing Health Sys­tem Change found aver­age in­pa­tient hos­pi­tal rates charged to four pri­vate in­sur­ers in eight mar­kets “var­ied widely” be­tween hos­pi­tals. The dif­fer­ences in hos­pi­tal charges also ex­ceeded Medi­care rates by up to 500%. The charge­mas­ter-based prices re­leased last week sim­i­larly ex­ceeded Medi­care rates but by even wider mar­gins— up to 4,000%.

MedPAC “has found that hos­pi­tals with sub­stan­tial ne­go­ti­at­ing lever­age can al­low unit costs to rise be­cause they can ob­tain higher pri­vate in­sur­ance rates to off­set neg­a­tive Medi­care mar­gins that re­sult from their high costs,” the au­thors noted.

Health pol­icy ex­perts ac­knowl­edged that most pa­tients never face charges near those listed in the CMS data­base be­cause in­sur­ers and Medi­care ei­ther ne­go­ti­ate or set much lower rates with providers. Among pa­tients who could be im­pacted are the unin­sured, pa­tients with high-de­ductible poli­cies and peo­ple seek­ing care out of net­work.

Hos­pi­tal ad­vo­cates down­played the im­pact of charge­mas­ter-based prices on those groups by high­light­ing le­gal pro­tec­tions. Those in­cluded the health­care re­form law re­quire­ment that hos­pi­tals im­ple­ment a writ­ten fi­nan­cial as­sis­tance pol­icy and that not-for-profit hos­pi­tals limit charges for qual­i­fy­ing pa­tients to amounts billed to in­sured pa­tients.

“So there re­ally aren’t very many peo­ple who get billed full charges and even fewer of those even pay,” Caro­line Stein­berg, vice pres­i­dent for health trends anal­y­sis at the Amer­i­can Hos­pi­tal As­so­ci­a­tion, said in an in­ter­view.

The im­pact of undis­counted prices on peo­ple with high-de­ductible poli­cies has con­cerned of­fi­cials at safety net hos­pi­tals, said Beth Feldpush, se­nior vice pres­i­dent for pol­icy and ad­vo­cacy at the National As­so­ci­a­tion of Pub­lic Hos­pi­tals and Health Sys­tems. Many such fa­cil­i­ties have mod­i­fied their char­ity-care pro­grams to cover all of the pa­tient’s costs short of the de­ductible to re­duce in­stances of pa­tients re­ceiv­ing large bills they can­not pay.

Some ex­perts see a va­ri­ety of ways the data re­lease could im­pact hos­pi­tals.

Even as hos­pi­tal ad­vo­cates have dis­missed the pre-dis­count charges as merely an ar­ti­fact of an era be­fore Medi­care set fees by statute, some hos­pi­tals pored over the data to see what their ri­vals were charg­ing for ser­vices, ac­cord­ing to health­care con­sul­tants. More­over, some still be­gin their price ne­go­ti­a­tions with in­sur­ers on those charges, while oth­ers use a per­cent­age of Medi­care fees.

“They may think they could gain some ad­van­tage,” Dan Nick­el­son, a for­mer lob­by­ist for the Cleve­land Clinic, said in an in­ter­view. That fa­cil­ity ne­go­ti­ated in­sur­ance rates based on Medi­care pay­ments, he said.

Fed­eral of­fi­cials said the pub­lic re­lease of the hos­pi­tal charges may help drive down prices ne­go­ti­ated with pri­vate in­sur­ers—and the re­lated con­sumer costs—es­pe­cially among those hos­pi­tals that ne­go­ti­ate based on their charge­mas­ter prices.

“We un­der­stand that some pri­vate in­sur­ers base their pay­ments based upon the charges, so to the ex­tent that th­ese prac­tices can be high­lighted that will hope­fully lower pre­mi­ums for those who have pri­vate in­sur­ance,” Blum of the CMS said.

Pub­li­ca­tion of the dis­parate pric­ing data could spur a leg­isla­tive push for more price trans­parency in health­care. One such bill, the Health Care Price Trans­parency Pro­mo­tion Act, spon­sored by Rep. Michael Burgess (RTexas), would re­quire states to col­lect and re­lease the pa­tient share of costs charged by hos­pi­tals and other providers.

An­other pos­si­ble out­come of the CMS re­lease of the hos­pi­tal charge in­for­ma­tion is that it could spur a push for uni­form pric­ing, ac­cord­ing to some pol­icy ex­perts. But Peter Ubel, pro­fes­sor of busi­ness and medicine at Duke Univer­sity, said in an in­ter­view, that he doubted the Obama ad­min­is­tra­tion would take on any such push as it con­tin­ues to fo­cus on the com­plex roll­out of the health­care over­haul. “Given the likely push­back, that’s some­thing I don’t see hap­pen­ing un­til the next ad­min­is­tra­tion,” Ubel said.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.