The now transparent federal database of hospital prices could motivate hospital financial assistance offices to write more flexible policies for collecting from uninsured, underinsured, and Medicare Advantage patients.
Some hospital industry executives dismiss the release of the federal chargemaster list of prices for 100 types of hospital care, saying it bears little relation to the charges that are actually negotiated and paid.
But that may not be the whole story. This now transparent database could make a big difference right away for the uninsured, the underinsured, and for some Medicare Advantage patients, perhaps impacting hospital financial assistance offices that will need to write more flexible policies if they want to get paid.
"The issue will be for those folks that end up having to deal with chargemaster charges, which is the uninsured consumers," says Greg Knoll, executive director and chief counsel of the Legal Aid Society of San Diego.
"For them and their advocates, it becomes something to use in negotiation around how the cost of their care should be discounted." Knoll says he sees the chargemaster as "another arrow in the quiver" for those like him who represent the poor to negotiate lower payments.
It enables real comparison of prices at less expensive hospitals, and begging justification for much higher charges. "I think what this will do is eventually get regional areas together on what the cost really is," he says.
In California, state law says the uninsured who earn less than 200% of the federal poverty level should not see a hospital bill because for those patients, hospitals write off the charge as charity care. Release of the chargemaster data won't mean that much to them no matter what.
But people who earn between 200% and 350% of the federal poverty level have to pay what is referred to as "the government payer rate," usually what Medicare pays. For a two-person household, that means an income of between about $31,020 and $54,285 a year.
And people who earn above 350% but below 500% of the federal poverty level pay 140% of Medicare, or 40% more than what Medicare would pay for that procedure.
In Knoll's area of San Diego, as in most parts of the country, the government payer rate, or Medicare rate, for various diagnostic related groups (DRG) shown on the charge master, is highly variable.
For example, the average Medicare payment for people treated for respiratory infection and inflammation with major complex comorbidities ranges from $24,084 at the University of California San Diego Medical Center, to $18,862 at Sharp Memorial Hospital to $11,989 at Pomerado Hospital.
That's not the sticker price, but the much lower amount that Medicare actually pays. Also, these prices were are for 2011, and are probably significantly lower than what would be paid today.
The chargemaster list price for the respiratory infection described above was as high as $133,347 at Sharp Chula Vista Medical Center.
Any two-person household earning, say, $40,000 a year, may have a tough time paying for even the lowest prices. But if they knew about the variations in cost, they might have at least picked a less expensive facility if they'd had the chance.
John Cihomsky, vice president of public relations and communications for Sharp HealthCare, says however that the "chargemaster issue will have no impact on our financial assistance folks. That's because our financial assistance policy, which has been in place for years, has nothing to do with billed charges."
He said Sharp's poverty income guidelines apply 100% of all costs as "charity adjustment" for people earning 200% or less of the federal poverty level, charging the government payer rate for those between 201% and 350% and 140% of Medicare those patients who earn between 351% and 500%.
The newly released database of charges and costs may also be useful to Medicare Advantage plan beneficiaries, at least those unlucky enough to find themselves needing hospital care while they are out of state, or otherwise "out of network," where no hospital is considered in the network.
They too might see a big difference in what they might have to pay by looking at the charge master and comparing regional costs.
For example, one Blue Cross Blue Shield of Massachusetts Medicare Advantage Plan would require such enrollees to pay "20% of the cost for each inpatient hospitalization stay" for care in an out-of-network hospital, which it would be if the hospital is outside Massachusetts, according to a BCBS-MA brochure.
Whether the "cost" the brochure mentions is the sticker price, called the "average covered charge," or the much lower "average total payment" Medicare pays, is unclear. But they'd surely owe a lot more money than the $150 per day charge listed for those enrollees treated in an in-network Massachusetts hospital.
Joseph Fifer, President and CEO of the Healthcare Financial Management Association, says he thinks hospitals should publish all of their charges for all of their DRGs on their webpages. And that will happen, he thinks, but it will take some time.
Until now, he says, "hospitals didn't know what other hospitals were charging. The restraint of trade lawyers would put the fear of God into their chief financial officers saying, we can't find out what the pricing is at other hospitals for fear of (being accused of) anti-trust behavior."
He said he couldn't see much of an impact on hospital financial aid offices, because "if people don't have insurance and have something done that's pretty expensive, they're already working with the financial aid folks and they're already getting the benefit of significant charity care policies."
What that means, he says, is that for self-pay patients, hospitals are receiving between 5% and 7% of the larger hospital "sticker price." And the rest is written off.
"My point is that almost all of the self-pay revenue is written off anyway. People are already getting access to charity care and discounts."
Fifer advises hospitals that do have very high prices to "look hard at some adjustments and bring them down to reflect other similar organizations."
He doesn't think, however, that hospital executives will do this right away. "I think you're going to get reactions all over the map. There's still going to be a lot of hospitals that just blow this off, saying, 'You know what? Price doesn't mean that much anyway,' so they would try to ignore it. But that would not be my advice. They open themselves up to really pretty heavy scrutiny."
See Also:
CMS Releases Hospital Pricing Data