This editorial will appear in Tuesday’s print edition.
One of the deeper mysteries facing a patient who’s entered the bewildering labyrinth of the hospital world is why – after he’s discharged – those nice people send him a bill high enough to empty his 401k.
Then another bill comes: His insurance has paid an inexplicably low rate, and the hospital is inexplicably satisfied with it.
If he has insurance, that is. If he doesn’t, it may be time to look at that 401k.
The nation’s capricious and incomprehensively high hospital bills came under harsh light last week when the Department of Health and Human Services released a database showing what American hospitals charge for common inpatient services.
Try to compare one hospital’s bills against another and you quickly wind up in Wonderland.
According to HHS, inpatient charges for a joint replacement runs an average of $5,300 in Ada, Okla.; in Monterey Park, Calif., it’s $223,000. Bills can vary wildly even in the same area.
Typical inpatient treatment for heart failure costs from $21,000 to $46,000 at various Denver hospitals, for example.
In New York City, one hospital charged an average of $34,310 for difficult cases of respiratory illness; another charged an average of $8,159. (These are all 2011 numbers.)
Disparities aren’t so wild closer to home – but the charges are still eye-popping. Treatment for heart failure costs $43,996 at Tacoma General, according to HHS, and $44,812 at St. Joseph Medical Center.
The thing is – as hospital people will hurry to tell you – patients don’t pay those rates in real life. The actual charges, after Medicare or private insurers have ridden to the rescue, are typically much lower.
For example, a major lower joint replacement at Providence St. Peter in Olympia is billed at $60,934. But Medicare – which reportedly covers about 90 percent of the hospitals own actual costs – pays 14,972.
Those scary and irrational initial bills are generated by each hospital’s “chargemaster” – a database of what to bill patients for every component of their stays: gowns, blood tests, acetaminophen and so forth. This is where you get the stories of $1.50 ibuprofen tablets.
The chargemaster functions like the sticker price on a car in the dealer’s lot. It’s a negotiating position. Hospitals want insurers to bargain down from there. Insurers want to bargain up from Medicare reimbursement rates and the hospitals’ actual costs.
But heaven help you if you’re middle-class and have no insurance at all. The professional negotiators aren’t looking out for you. You’re one of the unfortunates the hospital can dump costs on to offset concessions made to the big guys. Many Americans are driven into bankruptcy each year by such medical bills.
Will Obamacare defeat rogue chargemasters? By itself, maybe not. But forcing transparency onto hospitals’ opaque billing practices is bound to nudge the system in a more rational direction. Health and Human Services’ first-time-ever release of this data is a good place to start.