I have finally squared away my various hospital bills from last August's appendectomy, so what follows is a discussion of the hospital charges versus what everyone involved finally got paid. Excitement! Suspense! Thrills! Chills! Horror! It's hospital claims data!
First things first. A hospital visit includes a bunch of stuff, so I'm going to give you the full price for the entire episode of care, but I'll also break it down so we can see the component parts. And special thanks to CIGNA, who upgraded their Web site and now allow me to get claim records from more than a year ago. I'm now with Aetna as of January, and I haven't dealt with their Web site yet...
Episode of Care:
Total Charges: $28,089.62
Total Paid: $8,324.25 (real cost)
29.6% of charges paid. In other words, my bill was three times higher than the negotiated price between those providers and my insurance company. If I had no insurance, my bill would be three times higher than the going rate for a pretty nice PPO.
This includes the emergency room, radiology, surgery, and two physician visits. Disclaimer: I was told to go back to the hospital to have my staples removed, but I elected to go to the wound care doctor who is literally next door, so he charged me for a physician visit and the "surgery" of removing the staples. I'll break it down in a minute. I added in my whopping $40 in two copays as part of the real cost.
Episode One and a Half
Also, for a giggle, I'm going to add up the whole year's worth of care. This includes:
1. Going to Hospital A, then leaving before being triaged (free!)
2. Going to Hospital B, getting the appendicitis diagnosis, then running away.
3. Seeing a gastroenterologist a week later.
4. Going to Hospital C and getting the little bugger out.
5. Doctor's office visit to have the staples removed.
6. Follow-up a couple of weeks later to get the all clear.
7. Drugs. Also free, as I never cashed in the pain killer prescription. I'm Welsh. If we're in pain, we simply punch ourselves until we can't feel it anymore.
Total Charges: $32,327.92
Total Paid: $8,898.80 (real cost)
That makes it 27.5% of charges paid.
Let's look at just the single hospital visit, from ER to surgery to discharge, charges first then what was actually paid.
Emergency Room: $1,185.00 - $419.68
Emergency Room Physician: $1,461 - $460.60 (more info)
Cat Scan: $2,015.00 - $713.64
Operating Room: $3,250.00 - 1,151.03
Surgeon: $1,740.00 - $626.81
Anaesthetist: $1,601.00 - $787.50
Recovery Room: $3,100.00 - $1,097.91
Pathologist: $35.00 - $35.00
Semi-Private Ward: $5,000.00 - $1,770.81
X-Ray: $127.00 - $44.98
Per Diems: $5,850.70 - $5,850.70
Labs, Supplies, General Medical Services: $1,627.04 - $652.65
(Plus the New York State Service Charge: $523.64 - $523.64)
Total Hospital Charges: $22,718.70
Total Paid: $12,078.38
So the hospital visit was reimbursed at 53.2% of charges.
Hospital Versus Doctors
And finally, one more split. Let's see hospital charges versus the various physician charges:
Physicians Charges: $4,837
Physicians Received: $1,909.91
for a 39.5% reimbursement rate.
Hospital Charges: $19,342.70
Hospital Received: $10,629.07
for a 55% reimbursement rate.
Choosing A Hospital
By the by, a report card I happen to know a bit about lists this particular hospital as having an average charge for an appendectomy as just under $11,000 with a 2.4 day average length of stay.
In all fairness I didn't have a laparascopic procedure so I ended up staying a bit longer. I should also point out that I chose this hospital using the afore-mentioned report card based on the lower-than-average length of stay.
I wanted in and out as quickly as possible, so I shortlisted the three with the shortest average stay and chose from there, not wanting to be at one of them based on hearsay. That left two and I chose the one with the cheapest average charges. I'll be asking my boss for a kickback on that saving any day now...
Why Should I Care?
So many reasons...
For one thing, there's a myth that insurance companies underpay. This is based on hospitals not getting their full charges paid. However, it's important to note that these prices that are paid are negotiated business agreements between the hospital and the insurer. No-one stiffs anyone, it's a business agreement. As in, it was agreed.
The charges are based on a chargemaster list, every hospital keeps one, and those charges are so rarely used they don't really reflect the real cost of doing business. If an X-Ray was set at $25 a couple of decades ago, every year the hospital might add 4% to the chargemaster as a way of not dealing with every last line item and that X-Ray charge goes up and up.
On this bill, the X-Ray was charged at $127.00, but the hospital had agreed with Cigna that $44.98 was good enough. That's because the $44.98 is based on hospital costs, not charges, and unfortunately, getting cost data is nigh impossible.
Trust me. I've tried.
The Little Guy
The person who actually gets stiffed is the person who doesn't have an insurer bargaining on their behalf like I do, that person gets a non-negotiated bill for the full amount, $127.00. (In New York last year, about 5% of discharges were uninsured.) From here, two things can happen.
One, the person pays it, and the industry quietly nods and says that uninsured people who pay are generally wealthier individuals who are propping up the underpayments they're getting from everyone else.
Two, the person doesn't pay because, as is most likely, they're poor, and the hospital sends their bill to a collection agency.
Then what happens is the hospital bills you and me, the taxpayer, for uncompensated care. They tell New York State at the end of the year that Joe Blow had an X-Ray and didn't pay, therefore they bill us the $127.00. At least we assume they do.
That $523.64 NYS Service Charge goes towards uncompensated care, in New York there's a big pool of money that gets divvied up at the end of a financial year and pays the hospitals for their "charity" care. This bugs me for three reasons:
1. Hospitals operate tax-free, on the premise that they perform community service, maybe I could call that charity care. So which is it? Tax-free or get compensation from the state? Apparently it's both. I'm sure it all works out somehow, but it just smells funky.
2. I believe that most hospitals use the full charge as the "cost" of charity care, when in fact they should use a more reasonable cost-based rate. Charging the state or writing off $127 for a $45 X-Ray just doesn't seem right to me.
(I waded through one year's worth of charity care filings once, I haven't been right since. If anyone knows more than me on the subject, please comment below.)
3. The bill possibly went to collections. Some portion of it was collected on top of the amount that was claimed as charity, does that get deducted from the claim? If a hospital sold the debt to a collection company for ten cents on the dollar, do they still claim the full amount as charity care? I don't know, but I know which way I'd bet.
4. The patient who doesn't pay possibly gets sent to collections. In return for receiving charity care, which we all paid for in some way, the poor guy has bad credit for seven years minimum. Does that make sense?
(I know that's four reasons. I just thought of number three.)
So, if I figure this right, a $45 unpaid X-Ray gets maybe $4.50 from the credit agency, some unknown portion of $127 from the uncompensated care pool, let's take a stab at 75%, and the hospital then gets a tax break for doing so, which is probably worth more than all that combined. Some credit agency further recouped, say, $20.
By my ridiculously unscientific calculations, that $45 X-Ray generates about $200 in revenue. I wish I could give a better answer, I do. Which is why I do what I do.
This stuff shouldn't be so darned complicated.
I keep saying this, but all too few people seem to get it. I could have gone to a hospital that charges three times what this one did. That would have generated a bigger bill for my insurance company. They would then have charged my company where I work. My company would then refigure it's health care expenses next year and either (a) make me pay more for my health care, (b) not have as much money hanging around to give me a raise, and or (c) change the health plan to include fewer benefits.
It's that simple.
Health System or Health Sector?
Health care, among other things, is a business. That's the goal of this blog pretty much, to stress the fact that doctors and hospitals and dentists and chiropodists, all lovely people for the most part, are in business. It's not offensive, it's not an attack, I just think we should spend a little more time paying attention to how much we pay for this stuff.
Health care gets a bad rap from a lot of angles, and most of this is based on lack of insight. What we don't know, we don't trust.
Open up your books. Simplify your billing and claims. I can see from my bill that my surgeon, a guy who cut me open, cut a bit of me out, then put me back together again, got paid $626.81. I think that's fair for three hours work. Actually, I think that's a bit low. $209 an hour seems a bit thrifty, I'd go $300. If someone asked me the value of cutting bits of me out safely, I'd say about $300 an hour.
But knowing it makes me a better consumer. Knowing it makes me understand his angle. Knowing it makes me understand my impact when I go for surgery.
And I bet knowing it would help you too.
I think I managed to get all this into OutOfPocket.com and I urge you to check them out. They store details on charges compared to actual money paid.
And if you'd like to compare the cost of your care, have a look at Consumer Health Ratings, a directory of the many report cards available in the country.
Tuesday, February 19, 2008
Disclosures and Disclaimers
My employer is compensated through funding to provide analytical research, technology solutions, and Web-based public and private health care performance reports by the State of New York, the State of Illinois, the Centers for Medicare & Medicaid Services, the Agency for Healthcare Research and Quality, the Commonwealth Fund and Bridges to Excellence. I am not being compensated by any of these organisations to create articles for or make edits to this Web site or any other medium; and all posts authored by me are as an individual and do not represent my employer or the agencies I work for.