New data on hospital charges and Medicare reimbursements released by the federal government illustrate the challenges facing hospitals as they seek to accommodate what one executive described as an “antiquated” system.
The figures detail the 100 procedures that were most frequently performed on Medicare recipients from Oct. 1, 2010, to Sept. 20, 2011, by more than 3,000 hospitals, and include the amounts individual hospitals charged on average for specific procedures and the average amounts they were reimbursed by Medicare.
Centers for Medicare and Medicaid Services (CMS), a federal agency that falls under the U.S. Department of Health and Human Services, released the massive data set May 10 as part of efforts at achieving greater transparency around the U.S. health care system.
The CMS data reveal a great degree of variance ”” both nationally and in Fairfield County ”” in what different hospitals charge for the same procedures. Of greater significance, hospital representatives say, is that the data show there is an equally visible gulf between the costs hospitals incur and what they are reimbursed by Medicare for any given procedure or treatment.
“Health care is a very emotionally charged issue,” said Gary G. Piantedosi, founder and principal of CBP, a Stamford consulting and benefit management firm.
A store might mark up their products by 1,000 percent, but people can choose not to shop there. When someone goes to the hospital, they rarely have a choice in the matter.
“If you hear that the hospital is making a 500 percent markup, that can certainly be upsetting,” Piantedosi said. But, he reasoned, “Whether it”™s a nonprofit or a for-profit hospital, they need to make money in order to keep their doors open. If they can”™t self-sustain, they”™re going to go out of business.”
The Business Journal analysis focused on charge and reimbursement data for some of the most common procedures performed on Medicare recipients by Fairfield County”™s six major teaching hospitals: Bridgeport Hospital, Danbury Hospital, Greenwich Hospital Association, Norwalk Hospital Association, St. Vincent”™s Medical Center in Bridgeport and Stamford Hospital.
The most frequently performed procedure among Connecticut hospitals for the period in question was a major joint replacement or reattachment of a lower extremity.
The average amount charged by each hospital for each such procedure ranged from a low of $34,458 at St. Vincent”™s to a high of $72,393 at Greenwich Hospital. The average amount each hospital was reimbursed by Medicare for each procedure ranged from a low of $15,402 at Greenwich Hospital to a high of $19,375 at Bridgeport Hospital.
For treating another common occurrence ”” kidney and urinary tract infections ”” the average hospital charges ranged from a low of $14,474 per patient discharge at Danbury Hospital to a high of $24,087 at Stamford Hospital.
As with joint replacements, the Medicare reimbursement for kidney treatments averaged out to be a fraction of the charge. Stamford Hospital”™s average Medicare reimbursement was $6,129, while Danbury Hospital”™s average reimbursement was $6,076.
Hospitals: look to payments, not charges
How each hospital deals with the balance not covered by Medicare or a private insurance policy varies. In nearly all circumstances, though, hospital representatives said the patient will pay just a fraction of the total charge.
“Patients don”™t pay the charges,” said Kevin Gage, senior vice president and CFO of Stamford Hospital. “We”™re required by law ”” and this law may be antiquated ”” but we”™re required to bill all patients the same amount, which is what the charges represent.”
Every hospital has what is called a charge master, said CBP”™s Piantedosi, describing it as a hospital”™s “menu of what costs are associated with what services.”
Piantedosi said determining the charges for each procedure is an extremely complex process and must account for things like delays in the repayment of claims by individuals or insurers, services that hospitals are required to provide under state and federal law, and a requirement that a hospital must treat anyone who walks into their emergency department regardless of that person”™s ability to pay.
Additionally, while hospitals will generally negotiate reimbursement rates with private insurers on a contractual basis, Medicare and Medicaid reimbursement levels are set by the government and are not negotiable.
“They have to do what all businesses do, which is to say, ”˜How much does it cost for us to provide all these products, these services … and what do we usually get paid for these services?”™” Piantedosi said.
From the charge master, Gage said Stamford Hospital adjusts a patient”™s bill either based on what his or her commercial policy covers, what Medicare or Medicaid covers, or in the case of uninsured patients, what they are able to pay ”” which sometimes amounts to nothing.
Gage said that for the hospital, it comes down to the question of “What are you being paid?” and not “What are you charging?”
“The net of it is, when we”™re looking at the different procedures … the disparity is more in terms of what you get paid,” Gage said.
Vin Petrini, senior vice president of public affairs for the Yale-New Haven Health System (which includes Bridgeport Hospital and Greenwich Hospital), said, “There”™s a lot of unreimbursed care and under-reimbursed care that hospitals have to share. And financial assistance policies vary from hospital to hospital as well.
“Those instances where people are actually charged what the charges are are exceptionally rare,” Petrini said.
A spokeswoman for Norwalk Hospital said a hospital”™s published charges “are generally not relevant and no longer significantly impact the reimbursement that hospitals receive.”
“Because published charges are not relevant and there is no current standard industry practice for the establishment and maintenance of them, there can be a wide variation in charges among acute care hospitals,” said Maura Romaine, the hospital”™s spokeswoman, in an email.
Messages seeking comment were left for representatives of Danbury Hospital and St. Vincent”™s.
Costs shift to private insurers
Petrini, of Yale-New Haven, said hospitals are placed in a bind by government reimbursements that don”™t cover the full costs of procedures.
“Hospitals need to maintain minimum margins just to reinvest in our infrastructure and our missions,” he said.
The result, Petrini said, is that private insurance companies bear a disproportionate share of all health care costs.
“I think in large measure there”™s a cost shift that occurs, (and) not only with uninsured patients or those who receive free care,” Petrini said. “Medicaid, for example, pays hospitals in our state around 65 cents on the dollar. … When we get that low of a percentage in terms of reimbursements, those costs are shifted to commercial payers.”
Gage, of Stamford Hospital, said businesses have taken notice.
“In order for hospitals to be profitable, they make up (the reimbursement gap) on the commercial payers,” Gage said. “And you”™re seeing some pushback on that where some corporations and employers are saying, ”˜We can”™t continue to subsidize the government.”™”
