David Lazarus, a consumer rights columnist for the LA Times, just wrote an excellent article about hospital bills and how complicated they are. In light of my recent post about this very same subject, I thought I'd repost his article in full (in case you are blocked by LATimes.com which sometimes happens).
This column is also very relevant to me because like the subject in this piece, I had emergency gall bladder surgery in January 2015. My hospital charges only came to ~$80,000 thankfully. :)
Denis Robinson wasn’t bothered in the least that he was
billed nearly $100,000 by Providence Tarzana Medical Center for the recent
removal of his gallbladder.
“What do I care?” he said. “I have Medicare Plan F, the
Cadillac of Medicare plans. They covered every dime.”
Actually, Robinson, 69, should care a great deal. Medicare
is a taxpayer-funded system, so any claim submitted by a doctor or hospital
affects the financial integrity of the entire program. The fact that Medicare
paid less than $4,000 for a $97,000 claim — we’ll get back to that in a moment.
What sizzled Robinson’s bacon was the explanation of
benefits he received from Blue Shield of California, through which he purchased
his supplemental Medicare coverage and which covered about $900 of his massive
hospital bill. It features three pages of itemized costs, each listed only as
“surgical services.”
Seriously. Three pages of individual charges, ranging from
$1 to $66,607, and no way to tell what any particular one might be for, or
whether there were any errors or instances of double billing, or just the
perverse satisfaction of knowing that $100 was paid for a Tylenol.
I pointed to a charge for $49.50. What’s that for? What
about this one for $132.04?
“I have no clue,” Robinson replied. “I have no way of
knowing.”
He could narrow down the possibilities. Each listing for a
surgical service was accompanied by a billing code. A little rooting around
online will reveal, for instance, that code 0636 is pharmacy-related. But it’s
anyone’s guess what that may be.
This is, to put it mildly, nuts.
How can a hospital charge $97,000 for a procedure that
Medicare and Blue Shield say is fairly valued at closer to $4,500, the total
Providence received? Why aren’t all costs made clear to patients in their
explanations of benefits, which insurers send policyholders ostensibly to shed
light on the billing process?
“The way it’s set up, medical billing isn’t at all useful to
the patient,” acknowledged Paul Ginsburg, director of public policy at the USC
Schaeffer Center for Health Policy and Economics. “It’s not designed to let you
understand things.”
A key problem is that almost the entire financial
conversation regarding healthcare goes on behind closed doors between insurers
on the one hand and doctors and hospitals on the other. The patient, who
typically pays only a fraction of the overall cost, is little more than an
afterthought.
However, that system was established before the current era
of rising deductibles and co-pays, leaving patients responsible for an
ever-growing share of medical costs, and before hospitals started defraying
overhead expenses by charging $10 for a Band-Aid, say, or $50 for a piece of
gauze.
“Hospital spending is so difficult to get under control
because the patient has no idea about actual costs,” said Craig Garthwaite, an
assistant professor of strategy at Northwestern University who focuses on
healthcare.
The explanations of benefits that patients receive typically
contain “fictional numbers that have no relation to the economics of what’s
going on,” he said.
Clinton McGue, a Blue Shield spokesman, demonstrated the
lunacy of medical billing by explaining that even though the insurer receives
its own receipt from the hospital for all services rendered, spelling out
details of each and every cost, Blue Shield feels no need to share such
information with policyholders in its explanations of benefits, or EOBs.
“Blue Shield provides industry-standard EOBs to its
members,” he said, in effect admitting that the company denies patients helpful
information because everyone else does. McGue said that if people want a proper
explanation of benefits, they can request one from the hospital.
I pointed out that since Blue Shield is sending out an
explanation of benefits anyway, why not include real information?
“We adhere to an industry standard with EOBs,” McGue
reiterated. “We will provide the detail if asked, but we think that it is best
for the member to review and discuss the services with the provider.”
Patricia Aidem, a spokeswoman for Providence Health &
Services, which runs half a dozen hospitals in Southern California,
acknowledged that the billing system can be a challenge for most people.
“This is absolutely something that needs to be fixed and
Providence is working to create and implement solutions that will make this
easier for patients,” she said.
Well, let’s start with Robinson’s bill. Providence charged
$97,000 for his operation and then, according to the explanation of benefits,
willingly wrote off more than $90,000 as the “amount saved by using a network
provider.” That’s a pretty hefty markup for anyone visiting the hospital on an
out-of-network basis.
Aidem declined to elaborate on how the hospital arrived at
these figures. She said only that “Medicare pays a preset, non-negotiable rate
for diagnoses and procedures” and that “hospitals almost always lose money on
Medicare cases.”
The federal Medicare Payment Advisory Commission says the
average hospital is paid about 95 cents for every dollar spent treating a
Medicare patient. Hospitals recoup some of those losses from the rates they
charge private insurers. Hospitals also balance their books by charging
uninsured patients about three times, on average, what Medicare allows,
according to the journal Health Affairs.
If that sounds like a profit grab, Providence’s initial bill
to Robinson — the starting price, presumably, for someone without coverage — was
more than 20 times higher than what it received from Medicare and Blue Shield.
“This just shows that the system is crazy and that it’s
manipulated by healthcare providers for their benefit,” said Alain Enthoven, a
Stanford University health economist.
Here’s a thought: How about a requirement that explanations
of benefits truly explain benefits, clearly and precisely?
Or we can just keep things as they are, forcing patients to
seek explanations for their explanations.
