Economics

Health Care and Hospital Enigmas

I’ve been radio-silent for more than a month, primarily due to a serious injury I suffered from an impact that sent me sailing over my handlebars.  Breaking off the tips of two of my teeth with blood flowing freely from my face, I was considered a priority case and immediately admitted after walking through the entrance to the emergency room.

As my face began swelling up, ER nurses began an IV as the ER doctors determined the extent of my injuries.  Things took a decided turn for the worse when I began vomiting blood, which led to two CT scans being performed that night.  After midnight, my face stitched back together and my hands splinted from impact injuries, I was transferred to a ward hospital bed.

The following morning, after being inspected by facial and oral surgeons, I again became nauseous; leading to a third CT scan.  Through the haze of painkillers, anti-nausea medicine and antibiotics, I vaguely remembered having read this months ago:

Patients are captive consumers who don’t know what they’re buying from hospitals or what things cost, Brill wrote. Janice, for instance, was charged for something listed on her bill as NM MYO REST/SPEC EJCT MOT MUL. It turns out it’s a stress test that uses radioactive dye and a CT scan.

Stamford Hospital billed her $7,997.54 for that. Medicare would have paid the hospital $554. Janice was charged another $872.44 for the radioactive dye.

The third CT scan I experienced involved a radioactive dye as well.  Steven Brill’s TIME piece emblazoned the term “chargemaster” onto my brain:

How did Stamford Hospital come up with the charges on her bill?

They’re from the “chargemaster,” hospital spokesman Scott Orstad told Brill. The chargemaster is an enormous computer file that lists prices for thousands of products and services, and all hospitals maintain them.

But Brill reported that he did not find hospital administrators in Stamford or elsewhere who could explain the basis of chargemaster prices. Prices appear to be unrelated to actual cost, they vary from hospital to hospital, and they go up automatically.

Orstad told him not to pay attention to the chargemaster. “Those are not our real rates,” Orstad told Brill. “It’s a list we use internally in certain cases, but most people never pay those prices.”

“Not our real rates”—“never pay those prices.”  I think Janice S. would beg to differ, and my experience is similar (though I was spared Connecticut’s exorbitant rates).  My bill also topped $17,000, and the three CT scans (which were coded as a single scan) listed at just shy of $10,050.  Why the price disparity?  Because CT scan prices are all over the map:

CAT Scan Costs Averages

As noted above, CAT Scan costs can vary by thousands of dollars and it’s important that you shop around for your procedure. For example, listed below are some real examples or CAT Scan prices from around the United States.

Testing Facility Location

Test Type

Average Cost

Houston, TX Cat Scan $3,016
Chicago, IL Cat Scan $2,237
Atlanta, GA – Testing Facility A Cat Scan $698
Atlanta, GA – Testing Facility B Cat Scan $2,214
Phoenix, AZ Cat Scan $2,199
Omaha, NE Cat Scan $1,611
Portland, OR – Testing Facility A Cat Scan $1,520
Portland, OR – Testing Facility B Cat Scan $678
Cleveland, OH Cat Scan $1,075

Prices for CAT (also known as CT) scans fall over quite a range:

CAT scan procedure costs can range between $270 and $4,800. Costs are broken down into two areas:

Technical Fees: this is the cost of the CAT scan procedure itself and where there is a potential to save a considerable amount of money.

Professional Fees: : this is the fee associated with having the radiologist interpret the test result.

When you contact a testing facility make sure you identify the complete cost of the CAT scan because often all the additional fees and technical fees can add up and cause for a rather large bill.

Thanks…that’s really helpful when the patient is brought into the emergency room, fearing for his/her life.  The CT scan likely is being performed to look for internal bleeding—refusing the scan could be suicidal under some circumstances.  Shopping around is quite difficult when the hospital choice is made by paramedics. 

Going back to Brill, I still find it fascinating that he sees Medicare as wielding the only cost-control sword in the turbulent sea of health care price inflation:

Medicare determines on its own what it will pay, and private insurers negotiate their prices with hospitals. But the chargemaster prices are so high that private insurers don’t negotiate down from there — they negotiate up 30 percent to 50 percent from the Medicare prices, Brill reported. Then insurers tell customers how much they “saved” them.

I carry employer-sponsored insurance and the hospital cost statement (which clearly indicates it is not a bill, though payment options are also “offered”) lists “insurance pending” under amount due.  I believe I can be reasonably certain the hospital is listing chargemaster rates.

Asked for comment, Orstad emailed a statement from Stamford Hospital that reads, in part, “It is no secret that health-care finance in the United States is complex and not always logical or fair. … It is unfortunate that some would use isolated facts and unusual circumstances as the basis for conclusions about an industry in general or a hospital like ours in particular.”

The statement says the chargemaster “is nothing more than a compilation of `list prices’ which — as is the case for products and services ranging from cars and television sets to air travel — consumers rarely pay. It is wrong to blame hospitals for a system they did not create; the chargemaster is a regulatory requirement for all hospitals.”

This last statement seems easy to verify.  So I conducted a simple online search and found this:

In California, a regulation known as the “Payers’ Bill of Rights” (which is unique to the state) requires all hospitals to provide their chargemaster to the state, which then posts them online for the public.[6][17]

The chargemaster procedure is generally only regulated in Maryland; author Peter Reid Kongstvedt notes in Essentials of Managed Care, “Of particular importance, other than in Maryland, hospitals are generally free to charge whatever they want in their chargemaster.”[11]

I am reasonably certain Stamford Hospital, in Stamford, CT, is free to ignore California and Maryland regulations.  In fact, the only regulatory concern that appears to having hospitals running wild is the implementation of ICD-10 next year:

ICD-10 is coming, and it will affect virtually every department within a hospital or health system. A question many are asking is, “How exactly will it impact the revenue cycle?”

At the 2012 AHIMA Convention and Exhibit, Jeff Pilato, director of revenue cycle at coding firm HRS, broke down how a hospital’s chargemaster fits within the scope of its ICD-10 transition — and why it is so important to the hospital revenue cycle.

For anyone involved with a hospital’s revenue cycle — CFO, CIO, revenue cycle directors, case managers, health information management staff, CDI specialists and others — here are five things to know about the chargemaster and ICD-10.

1. The chargemaster, which is the hospital’s electronic list of all services, procedures and supplies charged to payors, is the central mechanism of the revenue cycle. “All charges for services and supplies, whether inpatient or outpatient, reside in the chargemaster,” Mr. Pilato said.

So, the chargemaster “is the central mechanism of the revenue cycle.”  Okay, so what is ICD-10?

ICD-10 is the 10th revision of the International Statistical Classification of Diseases and Related Health Problems (ICD), a medical classification list by the World Health Organization (WHO). It codes for diseases, signs and symptoms, abnormal findings, complaints, social circumstances, and external causes of injury or diseases.[1]

The code set allows more than 14,400 different codes and permits the tracking of many new diagnoses. The codes can be expanded to over 16,000 codes by using optional sub-classifications. The detail reported by ICD can be further increased, with a simplified multi-axial approach, by using codes meant to be reported in a separate data field.

The WHO provides detailed information about ICD online, and makes available a set of materials online, such as an ICD-10 online browser,[2] ICD-10 Training, ICD-10 online training,[3] ICD-10 online training support,[4] and study guide materials for download.

The International version of ICD should not be confused with national Clinical Modifications of ICD that frequently include much more detail, and sometimes have separate sections for procedures. The US ICD-10 CM, for instance, has some 68,000 codes. The US also has ICD-10 PCS, a procedure code system not used by other countries that contains 76,000 codes.[5]

Work on ICD-10 began in 1983 and was completed in 1992.[1]

Completed in 1992?  Twenty years and counting, and the U.S. hospitals haven’t yet implemented this WHO standard?

The deadline for the United States to begin using Clinical Modification ICD-10-CM for diagnosis coding and Procedure Coding System ICD-10-PCS for inpatient hospital procedure coding is currently October 1, 2014.[10] The deadline was previously October 1, 2013.[11][12] All HIPAA “covered entities” must make the change; a pre-requisite to ICD-10 is the adoption of EDI Version 5010 by January 1, 2012.[13] Enforcement of 5010 transition by the Centers for Medicare & Medicaid Services (CMS), however, was postponed by CMS until March 31, 2012, with the federal agency citing numerous factors, including slow software upgrades.[14] The implementation of ICD-10 has been subject to previous delays. In January 2009, the date was pushed back by two years, to October 1, 2013 rather than a prior proposal of October 1, 2011.[15]

Seems that health care providers are claiming they are “suffering” because WHO (of which the U.S. is a participating state) is asking for international coding standards for all billing (i.e.: no regulation of prices will stem from ICD-10).  Pardon the question, but how is billing coding standardization a bad thing?

How exactly are hospitals embattled under the circumstances?  Are Stamford Hospital’s chargemaster rates for radiology procedures (like CT scans) reflecting underlying costs?

Brill reported that when he looked up Stamford Hospital’s latest filing, he found that its total expenses for laboratory work in 2010 were $27.5 million, but total charges were $293.2 million. So the hospital charged 11 times more for lab tests than what they cost.

Um, no…unless 1,000% markups are normal (I’m guessing this is not common outside the healthcare industry).  So, is CMS (Medicare & Medicaid) responsible?

Orstad said Stamford, like other hospitals, is pressured by cuts in Medicare and Medicaid reimbursements. Brill wrote that financial officers of hospitals often say they lose up to 10 percent treating Medicare patients.

But even if Stamford Hospital charged 10 percent more on the $13.94 Medicare allows for a troponin test, for example, the price would be $15.33. Yet the hospital charged Janice $199.50.

Okay…is EMTALA (Emergency Medical Treatment and Active Labor Act) at fault?

In the statement Orstad also said that Stamford, like other hospitals, loses millions each year serving patients who can’t afford to pay. But Brill found that hospitals tally charity care based on chargemaster prices. The American Hospital Association says hospitals provide $39.3 billion in care for the poor but the actual cost is more like $3 billion, or less than half of 1 percent of the annual revenue of U.S. hospitals, Brill wrote.

Wait…what kind of profit levels are hospitals are experiencing?

Brill found that Stamford Hospital, even with an unusually high share of discounted Medicare and Medicard patients, managed a 12.7 percent operating profit margin, higher than the average 11.7 percent for nonprofit hospitals, an already healthy margin.

What?  American non-profit hospitals have 11.7% profit margins system-wide?  Oh, non-profit under the circumstances means…

[Brill] reported that nonprofit, tax-exempt hospitals such as Stamford have become hugely profitable businesses in the United States. Internal Revenue Service rules state that nonprofits may take in more money than they spend as long as no profits go to shareholders.

…a status which Stamford apparently uses to act like a corporate raider:

Nonprofit hospitals are buying other hospitals, doctors’ practices, building their own labs and becoming monopolies in cities nationwide, Brill reported. Doctors and nurses aren’t getting wealthy, but hospital administrators earn hefty salaries.

Stamford Hospital CEO Brian Grissler earns $1.86 million a year. The hospital bought the former St. Joseph Medical Center years ago and now is in the middle of a $450 million renovation and expansion.

The hospital I was treated at is also undergoing a massive expansion.  Funny how that works.

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