Federal data shows hospitals typically bill at several times rate Medicare considers to be near actual cost of services
Published DateLACONIA — According to the data released earlier this month by the federal Centers for Medicare and Medicaid Services (CMS), billed charges for selected common services at Lakes Region General Hospital (LRGH) are relatively high compared to those stated by a sample of other hospitals in the state.
For the first time, CMS published the posted charges, together with the Medicare reimbursements, of some 3,300 hospitals across the country for the 100 most frequently billed in-patient services, which represent about 60-percent of all Medicare billings. The fiscal year 2011 data shows wide disparities in charges among hospitals for treating the same condition. For example, Bloomberg News found that the price of treating pneumonia and pleurisy, the most common of the 100 services, ranges from $5,093 to $124,051 while for the treatment of psychoses, which displayed the greatest discrepancies, the most expensive hospital charges $144,523, 52 times more than the least expensive.
Medicare reimbursement rates, which reflect what CMS calculates is a reasonable payment for a particular service, represent approximately 90-percent of the actual estimated hospital costs for providing those services. But, on average, they also represent only about a quarter of the amounts hospitals actually bill for. And they vary much less from hospital to hospital than the hospitals' own published rates.
In taking a closer look at the data regarding LRGH, The Daily Sun picked treatments for five of the 100 services — chronic obstructive pulmonary ideas (COPD), simple pneumonia and pleurisy, heart failure and shock , major joint replacement and kidney and urinary tract infections, each corresponding to medical conditions frequently treated at the hospital. The charges and payments for these treatments at LRGH were compared to the data reported for five other New Hampshire hospitals — Frisbie Memorial Hospital in Rochester, Wentworth-Douglass Hospital in Dover, Cheshire Medical Center in Keene, Concord Hospital in Concord and Portsmouth Regional Hospital in Portsmouth. (See chart, p. 12)
As a multiple of Medicare payments, LRGH scored the highest among the nonprofit hospitals at 3.26 selected for comparison. That is, the hospitals published rates — "chargemasters", they are called — are an average of 3.26 times the Medicare reimbursement rates. Wentworth-Douglass followed closely at 3.24. They were the only hospitals in the group with multiples of more than three. Cheshire Medical Center, with a multiple of two, ranked the lowest.
Portsmouth Regional Hospital, which is owned by Hospital Corporation of America and the only for-profit hospital in the group, ranked the highest of the six with charges 4.14 times more than payments, Moreover, Portsmouth charged the most for four of the five treatments focused on, with major joint replacement the lone exception. The data indicated that for-profit hospitals accorded the highest multiples throughout the country.
Among the nonprofit hospitals, LRGH charged the most for three of the five treatments — COPD, pneumonia and pleurisy and kidney and urinary tract infections — and not much less than Wentworth-Douglass for a fourth — heart failure and shock.
Henry Lipman, senior vice-president for financial strategy and external relations at LRGH, said that pricing reflects the character of the population the hospital serves and treatment the hospital provides. More than 60-percent of the in-patients served at LRGH are enrolled in Medicare, the greatest share of any of the 13 largest hospital in the state.
Lipman said that that of the three hospitals in the state that receive a specific base rate for Medicare patients, LRGH receives the lowest rate. Likewise, the hospital serves a relatively large population enrolled in Medicaid, the federal program for the poor. The higher charges, Lipman explained, reflect the shifting of costs to privately insured patients to offset the difference between the cost of treating those enrolled in Medicare and Medicaid and the reimbursements received.
At the same time, Lipman noted that LRGH mix of patients includes a relatively high proportion with chronic and recurrent conditions that do not lend themselves to procedural solutions but require continual monitoring, care and treatment. These so-called "medical cases," he said are generally more costly than conditions that can be treated and reversed by surgical procedures.
On the other hand, Lipman said that to retain the most profitable services, both for in-patients and out-patients, they must be priced competitively. Among the five selected treatments, major joint replacement is an example of this competitive pricing. Only Cheshire Medical charges less for the procedure than LRGH among the six hospitals.
In releasing the data, CMS said that it intended to bring a measure of clarity to what Ron Pollack, executive director of Families USA, an advocacy group, called "the craziest of crazy quilts." Some commentators have been quick to stress that very few patients pay the posted charges of hospitals. Insurers bargain discounted rates while most hospitals, including LRGH, offer financial assistance or provide charitable care, to uninsured and needy patients.
However, others claim that hospitals use the posted charges to strengthen their bargaining position with the insurance companies and sustain income at discounted rates and, by charging few the full rate, inflate the value of the charitable and uncompensated care they provide.