Hospitals: New cost data is off
Recently released pricing data for common procedures at hospitals across the country is meant to allow people to look up how much their local hospital would charge for a procedure and how much Medicare would reimburse that hospital.
But while the numbers released by the federal government last week show wide differences in individual hospital pricing, hospital administrators say those charges are virtually irrelevant because few patients would ever have to pay them.
The charges listed in the new report from the Centers for Medicare and Medicaid Services are called “chargemaster” prices.
But they’re thousands of dollars higher than what Medicare actually pays hospitals for care. And they’re also higher than what private insurers pay—insurance companies negotiate rates with hospitals, and those rates are also far below the chargemaster.
“It’s a chargemaster; it doesn’t have a relationship to reality in terms of payment,” said Katharine Webb, senior vice president at the Virginia Hospital and Healthcare Association.
The CMS data show that in the Fredericksburg region, Mary Washington Hospital’s chargemaster prices are a bit higher than those at Stafford Hospital, which Mary Washinton Healthcare also owns, or Spotsylvania Regional Medical Center, which is owned by the HCA health care chain.
For example, if you go into the hospital with simple pneumonia and pleurisy, without a major complicating condition, Mary Washington’s chargemaster price is an average of $23,226. At Stafford it is $15,823; at Spotsylvania, it is $13,148.
The Medicare reimbursement rates, though, are far lower—Mary Washington would get paid about $4,869 to treat a Medicare patient with pneumonia, while Spotsylvania would be reimbursed about $3,790.
Webb said “an endless number of components” go into the calculation of Medicare’s reimbursement rates, and those differ by hospital.
Like the actual cost paid by non-Medicare patients, Medicare’s rates have little relationship to the chargemaster prices.
“No one is actually paying the charges the CMS put out in their file,” said Eric Fletcher, senior vice president of marketing and communications at Mary Washington Healthcare.
In addition to Medicare reimbursement rates that he said are lower than the actual cost of care, and the negotiated rates with insurers, Fletcher said Mary Washington gives discounts to those who qualify for charity care or who negotiate discounts with the hospital.
Fletcher said the chargemaster rates are “a little bit of a relic,” from a time when hospital pricing bore more relationship to cost and payment. He said that the federal government, though, still wants charge information from hospitals.
However irrelevant hospitals’ chargemaster prices may be, Fletcher said they’re higher at some hospitals, like Mary Washington, that treat more acute cases. Mary Washington is the largest hospital in the Fredericksburg region.
“The patient acuity at Mary Wash is the highest of any hospital in the region, by far,” he said. “So it’s not at all strange to see that the hospitals that provide higher levels of clinical capability are most likely going to have higher charges, because they’re caring for the patient longer. And they’re caring for a more complex patient.”
Officials at Spotsylvania Regional Medical Center also said their prices don’t reflect the costs patients pay.
In an emailed response to questions, Spotsylvania’s Chief Financial Officer Michael Thomson said the hospital offers reduced payment options to any patient not covered under Medicare, Medicaid or private insurance.
He said the chargemaster rates reflect a lot of variables.
“Charges are based on both historical data and negotiated payments. In addition, uncompensated care, which has risen steadily over time, is figured into overall hospital costs,” Thomson wrote. “Charges also reflect the costs of being able to respond 24 hours a day, seven days a week and these costs must be allocated across all consumers who receive hospital services. Current federal regulations are tied to the chargemaster, so making changes to the chargemaster can be complicated and problematic. Hospitals recognize that billing is complex and are working to make their bills more patient-friendly.”
Like Fletcher, Thomson said the focus should be less on the chargemaster prices and more on what hospitals receive in payment.
But payment information is much more difficult to come by—private insurers don’t want their competitors knowing what rates they’ve negotiated with hospitals.
Virginia is trying to move toward more transparency in actual payment information. Last year, the legislature approved a new initiative called the all-payer claims database. It will ask insurance companies to voluntarily report what they pay—not what the hospital charges are, but the actual payment rates—for various types of care.
Already in Virginia, patients can look up much of the pricing information in the CMS report—and do it more easily than trying to plow through the huge, dense Excel spreadsheet CMS provided.
The VHHA keeps a database called PricePoint where consumers can look up how much a hospital charges for a particular procedure. That doesn’t include Medicare reimbursement rate information, though, nor does it include private payment rates.
Webb said the VHHA is hoping to eventually get that Medicare data to incorporate into the all-payer claims database.
While the chargemaster rates listed in the CMS report may bear little relationship to payment, Webb said she thinks it’s a step forward in cost transparency.
“I think transparency is a positive thing,” Webb said. “It does allow us as both consumers and frankly as people who work in hospitals to ask questions and try and understand this crazy system that we have.”
She said patients with insurance are often disconnected from the actual cost of care, insulated from needing to know or ask what their care costs.
“We all should be very conscious of what health care costs, and how we can be smart, educated consumers,” Webb said. “But I think also unless we really have economic responsibility it’s hard to get there, hard to make those decisions.”
Chelyen Davis: 540/368-5028