The cost of care
Sunday, February 27, 2005
By BLEYS W. ROSE
THE PRESS DEMOCRAT
A single tablet of ibuprofen at Sutter costs $12.50, but only $6.30 at Memorial Hospital.
Chest X-rays at Memorial cost $522, more than at Kaiser, where they are $345.
A mother's stay in the maternity room at Kaiser costs $3,335 for a normal delivery, nearly three times what Sutter charges at $1,226.
This Byzantine and unpredictable world of pricing medical services delivered by Sonoma County's three largest hospitals has been revealed under a new state law mandating that all facilities release what they charge patients who do not have health insurance.
"These prices are a starting point for consumers to understand health care costs," said Bob Shirrell, a consultant who brokers health insurance for schools and government employees. "Right now, patients don't have any concept of what the charges are and how hospitals figure to make their money."
Consumers are unlikely to know what a procedure actually costs because most people's medical bills are paid by private insurance or government programs.
But with employers shifting more insurance costs to workers and premiums rising an estimated 40 percent over the past several years, more and more people are feeling the impact of rapidly rising medical costs that are expected to outpace inflation and wage growth for at least the next decade.
Now, for the first time, health care consumers can get a glimpse of the price tag for hospital stays, the drugs dispensed and new technologies in use.
"Of course, you don't start comparing prices in an emergency, but we believe the list does lend more transparency to health care costs and that is a step in the right direction," said Kathleen McKenna, Kaiser Permanente spokeswoman.
A review of 14 medical services out of about 40,000 - from prescription drugs to emergency room use - shows that Memorial Hospital's prices were highest in eight instances. Kaiser and Sutter had highest prices in three categories each, but in general, Sutter's were often the lowest.
For example, a CT scan of the abdomen, not including doctors' fees, costs uninsured patients $3,454 at Memorial, $2,195 at Kaiser and only $1,875 at Sutter. But then, a day in the intensive care unit costs $6,120 at Kaiser, $4,649 at Memorial and $3,102 at Sutter.
St. Joseph Health System operates Memorial, the largest hospital in Sonoma County, and vies with Kaiser Permanente as the largest private employer, each with about 2,500 workers. Kaiser has 152,735 members, covering half of county residents with health insurance and a third of the population.
Sutter Medical Center is the formerly public Community Hospital and is operated under contract with the county by Sutter Health of Sacramento. While Sutter and Memorial take patients from doctors in private practice medicine, Kaiser is an integrated health plan and medical service that primarily, but not always, treats Kaiser members.
The price list, Shirrell said, "makes Memorial look like the high-priced spread. But then Memorial does have the ER, the trauma center, the heart surgery and the organ transplants and somehow they have to pay for it."
Donald Miller, Memorial's chief financial officer, said Memorial's prices are higher because they were set using comparison with other Bay Area hospitals that host Level 2 trauma centers, such as in Davis, Walnut Creek and San Francisco.
Miller said the Ernst & Young firm assisted the hospital in making comparisons and establishing consistent ratios of actual costs to billed charges. The hospital, he said, has to pile on just about every cost imaginable, from the cost of labor to the price of doing state-mandated seismic retrofit work.
"They include the level of services offered, whether the hospital has major capital equipment or project needs and the hospital's burden of care for the uninsured," Miller said.
And since neither Medi-Cal nor Medicare reimburses for actual costs, the difference must be made up through patients who can pay.
"All patients are charged the same price," Miller said. "What differs is the level of discount. Most patients benefit from the discounts the health plans have negotiated with the hospital."
For that reason, experts said the price lists provide an interesting if incomplete picture.
That's because people with health insurance end up paying from a quarter to half less, because their health plans contract with hospitals for negotiated rates. These prices are deemed secret under federal trade law.
"Unfortunately, it doesn't tell the consumer what the real cost is and it often doesn't have any relationship to reality," said Shirrell. "Hospitals will always accept less. I've seen them take $4,300 on a $10,000 bill and go away happy they got something."
Hospitals agree. Potentially, every one of the 60,000 uninsured residents of Sonoma County could be billed amounts on the so-called "charge master" list, but in reality very few would wind up paying them.
The California Hospital Association estimates that, on average, facilities in the state collect only 4 percent of the total billed to uninsured patients.
At Memorial, officials say fewer than 5 percent of their patients typically pay full charges.
"The charge master prices are essentially irrelevant even for most of the uninsured," said Jan Emerson, the California Hospital Association's vice president for external affairs. "We write it off, we get them on Medi-Cal, we get them charity care or we work it out so they pay a discount."
Services in hospitals often cost more than the same ones delivered in outpatient facilities, even when they are part of the same health system. That is because the hospitals - with their higher-price labor, modern technology and mandates for seismic retrofit - have higher operating costs than outpatient clinics.
For example, a splint on a child's arm is priced at $570 at Memorial, but only $180 at St. Joseph Health System's Urgent Care Center on Fulton Road or in Rohnert Park. A complete metabolic panel in the hospital is $517, but only $40.90 at a contract lab, and a complete blood count is $221.90 in the hospital, but only $29.90 at an outreach lab.
A routine emergency room visit at Memorial - such as a walk-in for a sprain - would be billed at $519, while it would be only $183 if you went to St. Joseph's Fulton Road or Rohnert Park Urgent Care Center.
Likewise at Sutter, a two-view chest X-ray is $260 in the hospital, but only $161 in its outpatient clinic. A complete blood count is $87 in the hospital, but only $22 for outpatients.
Avery Schlesenberg, Sutter's chief financial officer, said the Sacramento-based health system bases prices on mathematical formulas that figure in costs of supplies and staffing in addition to the relative price of medical services in a particular geographic area. Generally, health plans pay about half the charge master prices, he said.
"The government reimbursements are statutory, the health plans are contractually negotiated and both have nothing to do with the cost of services," Schlesenberg said.
Kaiser Permanente sets two different rates for Northern and Southern California, said McKenna. Since Kaiser is a self-contained health plan and medical service delivery system primarily for its members, its charge master prices apply to patients insured with other health plans as well as to uninsured patients, she said.
When it treats a nonmember with health insurance elsewhere, Kaiser negotiates with that insurer using charge master prices as a starting point, she said.
The price list, which is available in different forms at all hospitals, has attracted the attention of consumer advocacy groups and unions with membership working at hospitals.
The law that created the list, sponsored by Rep. Dario Frommer, D-Glendale, was intended to educate consumers about hospital billing practices in the hopes that price shopping would bring costs down.
Although the law went into effect in July, hospital officials say very few patients or special interest groups have asked their business offices to see their charge master lists.
Next July, another provision takes effect that requires hospitals to file with the state a list of the top 25 most common charges. The lists, collected by the Office of Statewide Health Planning Development, will be available online.
The law makes an attempt to return medical pricing to a position about 40 years ago, when hospital costs and prices charged for services were generally in step. In the 1960s, the federal Medicare system began setting rates on how much it would pay for treating seniors and the disabled.
In the 1980s, the government began using these rates as a budget control mechanism, which forced hospitals and doctors to look elsewhere for revenue relief.
Finally, in the 1990s, the rise of health maintenance organizations and managed care contracts that reimbursed medical service providers by averaging costs over a large group, pushed the relationship between costs and prices further out of whack. The end result is that the same procedure can have multiple costs depending on whether an insurer, government agency or individual is paying.
Health Access, an Oakland-based group that advocates universal health care, said hospital pricing lists will ultimately drive debate in the direction of reforming the entire health system.
"I think when we look at these charge masters and see fairly wide variation in prices between hospitals right next to each other . . . it will help guide our ability to provide remedies to try to deal with hospital costs," said Anthony Wright, Health Access executive director
www1.pressdemocrat.com |
