Hospital Charges Surge for Common Ailments, Data Shows

This excellent NY Times article is based on Medicare data on over 3,000 hospitals nationwide for what they charged in 2012. The data shows that the prices that hospitals charge is highly variable and has risen across the board. The article correctly points out that these increases in charges do not necessarily affect what Medicare pays because Medicare is so large that they tell hospitals what they are going to pay them independent of what they bill.


Charges for some of the most common inpatient procedures surged at hospitals across the country in 2012 from a year earlier, some at more than four times the national rate of inflation, according to data released by Medicare officials on Monday.

While it has long been known that hospitals bill Medicare widely varying amounts — sometimes many multiples of what Medicare typically reimburses — for the same procedure, an analysis of the data by The New York Times shows how much the price of some procedures rose in just one year’s time.

Experts in the health care world differ over the meaning of hospital charges.

While hospitals say they are unimportant — Medicare beneficiaries and those covered by commercial insurance pay significantly less through negotiated payments for treatments — others say the list prices are meaningful to the uninsured, to private insurers that have to negotiate reimbursements with hospitals or to consumers with high-deductible plans.

“You’re seeing a lot more benefit packages out there with co-insurance amounts that require the holders to pay 20 percent of a lab test or 20 percent of an X-ray. Well, 20 percent of which price?” asked Glenn Melnick, a professor who holds a Blue Cross of California endowed chair at the University of Southern California. “Some hospitals will charge 20 percent of what Blue Cross Blue Shield will pay; others will play games.”
Data released by the federal government shows that hospitals across the country charge Medicare differing amounts for the same types of cases. The data includes bills submitted in 2012 by 3,300 hospitals nationwide for the 100 most commonly performed treatments and procedures like hip replacement, heart operations and gallbladder removal, among hospitals that reported at least 11 cases.

Charges for chest pain, for instance, rose 10 percent to an average of $18,505 in 2012, from $16,815 in 2011. Average hospital charges for digestive disorders climbed 8.5 percent to nearly $22,000, from $20,278 in 2011.

In 2012, hospitals charged more for every one of 98 common ailments that could be compared to the previous year. For all but seven, the increase in charges exceeded the nation’s 2 percent inflation rate for that year, according to The Times’s analysis.

Experts say the increase in the price of some of the most common procedures may be offsetting rising technology or drug costs, declines in the number of patients being admitted to hospitals and a leveling out of reimbursements from Medicare. Between 2011 and 2012, Medicare increased payment rates by only 1 percent for most inpatient stays.

The number of patients admitted for chest pain under Medicare’s fee-for-service plans plummeted more than 28,000, to 107,224 in 2012, and inpatients with digestive disorders decreased more than 29,000, to 217,514.

Over all, the number of Medicare patients discharged from hospitals for the comparable 98 most common diagnoses dropped from 7.5 million to 7.2 million. The total amount Medicare paid for their care also declined somewhat between 2011 and 2012, from $62.8 billion to $61.9 billion.
In an effort to reduce overall health care costs, hospitals have been encouraged to admit fewer patients for conditions like asthma, for example, in favor of less expensive outpatient care.

Still, hospital charges make up nearly a third of the nation’s $2.7 trillion health care bill.

The data for 3,317 hospitals, released for the first time last year by the Centers for Medicare and Medicaid Services, again shows broad variations in what hospitals charge for the same procedure. While experts debate why one hospital charges significantly more than another for the same procedure, Medicare does pay slightly higher treatment rates to certain hospitals — like teaching facilities and hospitals in areas with high labor costs.

Reasons for other discrepancies are less clear.

In 2011, the Wuesthoff Medical Center in Rockledge, Fla., a hospital with 300 beds near Cape Canaveral, charged patients admitted for a severe irregular heartbeat an average of $25,361. A year later, the average charge more than doubled to $53,597.

In Muncie, Ind., the price of treating a kidney or urinary tract infection at Indiana University Health Ball Memorial Hospital jumped 70 percent to $38,873 in a year. And at Baptist Medical Center in San Antonio, the charge for esophagitis and other digestive disorders rose 34 percent to more than $46,000. A call and emails to Ball Memorial were not returned, and a spokeswoman for Baptist said the hospital didn’t have the time to analyze the data itself.

The new hospital charge data follows the release in April of Medicare’s physician billing records for 2012. To some, the data is bringing increased transparency and fueling the ongoing national dialogue about financially debilitating health care bills faced all too often by consumers.
“We think this is a big deal. We think it’s very important that people can have conversations about prevailing charges and variation in charges among hospitals,” said Niall Brennan, acting director of the Offices of Enterprise Management at the Centers for Medicare and Medicaid Services. Mr. Brennan made his comments in Washington at Health Datapalooza, a conference focused on digital innovation in health care. The administration also announced a platform called openFDA, which includes data on millions of drug-related adverse events and errors reported to the Food and Drug Administration by doctors and members of the public from 2004 to 2013.

But the charge data may also, in part, reflect a huge shift among hospitals.

The industry has been caught up the biggest wave of mergers since the 1990s, a reaction, in part, to President Obama’s signature health care law, the Affordable Care Act. That law, experts say, is transforming the economics of health care and pushing a growing number of hospitals into mergers.
On top of that, hospitals are spending enormous amounts of money buying up physicians’ practices and groups while investing billions of dollars to upgrade to digital health records.

While those and other moves have caused hospital spending on administrative costs to soar, they still do not explain the continued surge in charges, experts say.

“It just isn’t clear what has gone into the increase in hospital charges for the past decade,” said Dr. Hamilton Moses III, chairman of the consulting firm Alerion Advisors and an adjunct professor of neurology at Johns Hopkins University. “But if you look at the Veterans Administration and the amount of administrative costs that are eating up the moneys that should go to direct health care, that’s a pattern that is repeated everywhere.”

And while there is still broad debate over whether the investment that hospitals are making in information technology will ultimately lower costs by, for instance, reducing unnecessary tests, there are growing concerns that the wave of consolidation may be increasing prices. Bigger hospital systems are viewed by some as having increased leverage in negotiating prices with commercial insurers.

Nowhere may the impact of hospital mergers be more visible than with Wuesthoff Medical Center. A nonprofit system that traces its roots back to 1941 when it opened a 10-bed community hospital, Wuesthoff was acquired in 2010 by the for-profit hospital giant Health Management Associates, recently bought by Community Health Systems.

Over all, the prices charged at Wuesthoff went from 12 percent below the national average to 32 percent above it, based on its case mix.
Between 2011 and 2012, prices for 77 out of the 98 most common ailments for which patients were admitted to the hospital increased. Treatment for a simple case of pneumonia rose by about 25 percent from $39,217 to $49,284. The average hospital charged $38,384 in 2012.

But Wuesthoff’s charges for a major a small- or large-intestine procedure rocketed 168 percent to $152,047 in 2012 from $56,704 in 2011. The average hospital charged $68,982 in 2012.

In an email, Sara Virgin, a spokeswoman for Wuesthoff Health System, said, “Although the hospital’s charges increased, the amount the hospital is actually reimbursed for these services has not significantly changed.” She added that Medicare determines what it will pay for services, commercial payers negotiate rates, and the hospital offers discounts to the uninsured.

“When considering the cost of health care, what matters most to consumers is the actual amount paid for their care, not the hospital’s charges,” she said.