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Kill Your Chargemaster

Philip Betbeze, for HealthLeaders Media, May 10, 2013

Even then, they say Medicare rates are a more relevant starting point. But this is where market dominance is so important. If you have the network insurers must have in a local area, you have a lot more firepower in negotiations, which allows you to get more "real" reimbursement than your less connected neighbor hospital. All of that is just noise to most patients.

With the release of this data, however, chargemaster pricing insanity is right there in black and white, which makes it relevant, at least in the game of perception. How should you react if, say, you are among the highest-charging hospitals in your local area? In your region? You probably don't want that label.

After all, it's as easy as the click of the mouse for patients and employers to see what you're charging and what Medicare is paying you. Besides that, local media is likely calling right now for an explanation, and they're as clueless about all of this as your patients probably are. All they see is the crazy variation.

So it's at least a public relations problem. But treating chargemaster variation as a public relations problem is what has gotten hospitals collectively into this mess.

Using the New York Times's wonderful map application to look at various hospitals is almost too easy. I spent the better part of an hour just clicking around to see the differences in local areas. Just click and compare prices. It's that easy—and it's fun—of a sort. I spent a good amount of that time looking at pricing in Nashville, where I live.

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7 comments on "Kill Your Chargemaster"

stefani daniels (5/23/2013 at 10:38 AM)
Mr. Poggio is right on target. The chargemaster is a legacy leftover from the old CBR days - which is true for many of the hospital 'business' activities. It relates closely to the hospital's continued use of LOS as the primary indicator for resource efficiency. In my HealthLeaders article, The Myth of Length of Stay, I contend that LOS is a holdover metric when it was the only measure that the hospital could easily access. Over the years its become a surrogate for efficient delivery of hospital services and physician practice behaviors. Similarly, the chargemaster is the legacy surrogate for accurately pricing hospital services.

Frank Poggio (5/13/2013 at 8:30 PM)
Here's the 'satisfactory answer you've been after... If there was ever a report that was self-indicting this is it. Yes hospital charges are non-sense, all over the map, not based on logic, etc. All true. But how'd that happen. As a former CFO I can tell you it was all done via the Medicare Cost Report, the core basis of Medicare payment system. For almost five decades the government has used the Cost Report, and a myriad of other convoluted reimbursement systems, to calculate payments to hospitals. So over the decades any good CFO would make sure that his charges maximized his governmental payments. And Medicare and Medicaid usually make up 60% or the his total payments. Some fifty thirty years ago charges became a substitute for statistics and cost accounting to estimate how much the government was going to pay you. Ever hear of RCCAC? That's the Ratio of Costs to Charges as Applied to Costs, a key calculation in the Cost Report. One of the most insane ways of 'identifying' costs ever cooked up. And it's still used today! Hospitals get paid based on DRGs, but still must do a Cost Report to justify the DRG amounts. I was around in 1983 when the feds came up with DRGs, they said back then the DRG system would replace the Cost report...and here we are 30 years later- with both! If you want to know why charges are a mess...just look at the Cost Report, and ask who created that monster?Oh, the government ...the same one that now complains about warped prices? What did they expect? Frank Poggio The Kelzon Group KelzonGroup.com

Michael Cylkowski (5/10/2013 at 3:45 PM)
Interesting suggestion Phil and one reason it probably won't be followed is the claim by hospitals about how much money they lose treating indigent patients. I listened to a Board Chairman of a large system talk about how their main hospital loses $18 Million per month just treating the indigent. He was making the case for our state to accept the Medicaid supplement. So, the more outrageous the charge master, the bigger the leverage for claiming unsustainable losses.