Hos­pi­tals say out­pa­tient list prices ir­rel­e­vant

In­sur­ers, con­sumer groups could lever­age lat­est CMS data for bet­ter deals

Modern Healthcare - - THE WEEK IN HEALTHCARE - Beth Kutscher

The lat­est re­lease of CMS charges and pay­ments—this time for hos­pi­tal out­pa­tient ser­vices—drew re­newed scorn last week from hos­pi­tal of­fi­cials, who con­tinue to ques­tion the rel­e­vance of list prices that the vast ma­jor­ity of pa­tients never see and pay­ers never pay. But like much of the in­for­ma­tion be­ing re­leased through the Obama ad­min­is­tra­tion’s health­care trans­parency ini­tia­tive, the wide dis­par­i­ties in out­pa­tient charges likely will be used by in­sur­ers and con­sumer groups to seek a bet­ter deal on what they pay.

Why, they might ask, does Medi­care re­ceive an aver­age bill for Level 1 ul­tra­sound ser­vices of $3,037 from Cap­i­tal Health Med­i­cal Cen­ter-Hopewell in Pen­ning­ton, N.J., while nearby Hun­ter­don Med­i­cal Cen­ter in Flem­ing­ton charges only $482? In cen­tral New Jersey, hos­pi­tals re­ceived an aver­age of about $66 in 2011 for per­form­ing the ser­vice on Medi­care pa­tients.

Hos­pi­tals “are go­ing to get a lot more pres­sure,” said Alyssa Martin, a vice pres­i­dent at Wil­liam Gal­lagher As­so­ciates, which pro­vides in­sur­ance bro­ker­age, risk man­age­ment and em­ployee ben­e­fits ser­vices. Of course, the height­ened trans­parency will also chal­lenge pay­ers to in­crease their own trans­parency on pay­ments to hos­pi­tals and co­pay­ments charged to ben­e­fi­cia­ries, which could re­sult in their los­ing ne­go­ti­at­ing power.

A Mod­ern Health­care anal­y­sis of the data found not only wide variation be­tween what dif­fer­ent hos­pi­tals charge for the same pro­ce­dure, but also vastly dif­fer­ent markups de­pend­ing on the ser­vice. For in­stance, ul­tra­sounds and pul­monary test­ing tended to have some of the high­est ra­tios of charges to Medi­care pay­ments, while hos­pi­tal clinic vis­its tended to have the low­est.

Paul Gins­burg, pres­i­dent of the Cen­ter for Study­ing Health Sys­tem Change, sug­gested that the dif­fer­ence might re­flect the de­gree to which hos­pi­tals are com­pet­ing with other physi­cians in the com­mu­nity.

The out­pa­tient re­lease comes one month af­ter Medi­care pub­lished sim­i­lar in­for­ma­tion about in­pa­tient charges and pay­ments. A Mod­ern Health­care anal­y­sis found that while hos­pi­tals charged an aver­age of 380% more for im­pa­tient ser­vices than what Medi­care re­im­bursed, out­pa­tient ser­vices had an aver­age list price that was 520% more than what Medi­care paid.

For in­stance, at the high-end, 213-bed Delaware County Me­mo­rial Hos­pi­tal, in Drexel Hill, Pa., sub­mit­ted an aver­age charge of $6,729 for a Level 3 pul­monary treat­ment in

2011—or more than 65 times the $103 that Medi­care even­tu­ally paid. But in Buf­falo, N.Y., 352-bed Mercy Hos­pi­tal, part of Catholic Health Sys­tem, charged $125 and was re­im­bursed $94, for a ra­tio of just 1.3-to-1.

A spokesman at Spring­field, Pa.-based Crozer-Key­stone Health Sys­tem, which owns Delaware County Me­mo­rial, did not re­spond to a re­quest for comment by dead­line. Dennis Doo­ley, vice pres­i­dent of plan­ning and de­vel­op­ment at Cap­i­tal Health, noted that its high ul­tra­sound prices may re­flect the high bur­den of char­ity care, es­pe­cially at ur­ban hos­pi­tals. “The fact of the mat­ter is that safety net hos­pi­tals are bear­ing an enor­mous amount of un­paid care,” he said. “That’s sort of the un­re­solved is­sue here.”

HHS Sec­re­tary Kath­leen Se­be­lius un­veiled the 2011 data on June 3 as part of Health Dat­a­palooza IV, an an­nual con­fer­ence on data trans­parency. The pric­ing in­for­ma­tion for 30 hos­pi­tal out­pa­tient pro­ce­dures was re­leased along­side county-level data on Medi­care ex­pen­di­tures and rates of elec­tronic health records’ adop­tion by brands.

As the CMS re­leases even more data about what hos­pi­tals charge for var­i­ous pro­ce­dures— and this lat­est bomb­shell was par­tic­u­larly sen­si­tive since out­pa­tient ser­vices are an in­creas­ingly im­por­tant piece of hos­pi­tal rev­enue—hos­pi­tals are con­tin­u­ing to ques­tion what pur­pose the data serve and how they might be used.

Doo­ley of Cap­i­tal Health noted that de­spite billing higher charges for some ser­vices, its hos­pi­tals col­lect a lower aver­age pay­ment than their neigh­bors. “Our per­cent­age of col­lec­tion rel­a­tive to charges is less than oth­ers in our re­gion,” he said. He added that only 4.5% of con­sumers are af­fected by the list prices, and even then, the sys­tem will work with those who don’t have the means to pay.

“The charges are an ar­ti­fact of a bro­ken sys­tem,” he said, not­ing that they were de­vel­oped as a method for en­ter­ing into ne­go­ti­a­tions with third-party pay­ers and will be­come even less rel­e­vant un­der health­care re­form’s new pay­ment mod­els. “How does this im­prove the con­ver­sa­tion about health­care costs in this coun­try? ... I’m not aware of any­one who pays 100% of charges.”

Still, the dif­fer­ences in the way in­pa­tient and out­pa­tient ser­vices are paid for could trig­ger a broader dis­cus­sion than the pre­vi­ous re­lease on in­pa­tient charges. For in­stance, while Medi­care uses di­ag­no­sis-re­lated groups to pay for in­pa­tient care, out­pa­tient care is paid per pro­ce­dure. “It’s more ac­ces­si­ble to con­sumers, to the me­dia,” Gins­burg said.

Crit­ics of the data re­lease say the fig­ures aren’t mean­ing­ful, at least as pre­sented, be­cause they’re only the jumping-off point for ne­go­ti­a­tion. And, as pay­ers and providers duke it out over which is more re­spon­si­ble for ris­ing health­care costs, hos­pi­tals want in­sur- ance com­pa­nies to sim­i­larly pub­li­cize cost­shar­ing in­for­ma­tion that more ac­cu­rately re­flects what pa­tients owe.

Chip Kahn, pres­i­dent and CEO of the Fed­er­a­tion of Amer­i­can Hos­pi­tals, which rep­re­sents for-profit sys­tems, said in a state­ment that the lat­est data re­lease “again misses the mark in pro­vid­ing price trans­parency to help con­sumers.” Con­sumers need in­for­ma­tion that helps them make bet­ter de­ci­sions, “which in most cases will be what it costs them out of pocket for their care,” he said.

There are some pa­tients who do get charged ex­actly what the hos­pi­tals charge— many of the unin­sured, for in­stance. Yet Gins­burg noted that much ad­vo­cacy work has been done around pre­vent­ing unin­sured pa­tients from be­ing hit with the high­est prices.

A re­port last month from Moody’s In­vestors Ser­vice sim­i­larly found that data doesn’t al­low con­sumers to do true com­par­i­son shop­ping— al­though price trans­parency could one day be a mar­ket­ing strat­egy for some hos­pi­tals. The greater risk, ac­cord­ing to the re­port, is that per­sis­tent pric­ing dis­par­i­ties will in­vite greater scru­tiny and reg­u­la­tion, which could re­quire even more dis­clo­sures from hos­pi­tals and force them to ra­tio­nal­ize the prices they charge.

Of course, that doesn’t ap­ply when in­sur­ers have no ne­go­ti­at­ing power, which they dis­cover when they pay for out-of-net­work in­pa­tient ser­vices. Some pri­vate eq­uity-owned hos­pi­tal groups are em­ploy­ing a strat­egy of sev­er­ing con­tracts with pay­ers—leav­ing health plans on the hook for the charged price when one of their ben­e­fi­cia­ries ends up in the now out-of-net­work emer­gency room.

The is­sue trig­gered a law­suit by Cal­i­for­nia’s Prime Health­care Ser­vices against Kaiser Per­ma­nente, which is fight­ing pay­ment on $25 mil­lion in claims for emer­gency ser­vices pro­vided at out-of-net­work Prime fa­cil­i­ties, ac­cord­ing to court doc­u­ments.

“This (strat­egy) is some­what on the fringe of th­ese hos­pi­tals,” Gins­burg noted.

Nev­er­the­less, the same is­sues can arise on the out­pa­tient side when pa­tients elect to go to an out-of-net­work provider and then are stuck with the bal­ance of a bill af­ter a health plan pays what it sees as “usual and cus­tom­ary” charges.

Greater aware­ness of dis­crep­an­cies in charges and pay­ments for out­pa­tient ser­vices could also be use­ful to peo­ple in­volved in set­ting up health in­sur­ance ex­changes or shared-sav­ings pro­grams, such as ac­count­able care or­ga­ni­za­tions. “Th­ese are tools for those who are tak­ing re­spon­si­bil­ity for de­fined pop­u­la­tions, be­cause they can now see what the costs are,” said Fred Entin, a cor­po­rate com­pli­ance and reg­u­la­tory spe­cial­ist at Polsinelli’s health­care law prac­tice. “There’s clearly an op­por­tu­nity now to be more tar­geted and more pre­cise.”

Casey Sch­warz, client ser­vices coun­sel at the Medi­care Rights Cen­ter, which pro­vides ad­vo­cacy ser­vices for Medi­care ben­e­fi­cia­ries, noted that the data could help con­trol costs on a pop­u­la­tion­wide ba­sis. “I think it’s good that it’s out there for peo­ple who have the abil­ity to trans­late it into more use­ful in­for­ma­tion.”

“It’s prob­a­bly too early to re­ally know what the im­pact is,” Entin said, “but the fact that this in­for­ma­tion is out there is prob­a­bly go­ing to drive more changes in how pro­ce­dures are priced, how they’re paid for and how de­ci­sions are made.”

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