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View Diary: Pressure mounting on call to fight hospital price gouging (164 comments)

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  •  I worked at NYC's public health care system (14+ / 0-)

    for my entire career. The one thing public hospitals, community hospitals, proprietary hospitals all other hospitals have in common is that they do not accurately identify costs so they have scant notions about what accurate pricing should be. (This is separate and apart from identifying those services that might be profitable -- that's fairly easy to do.)

    Hospitals identify costs via a method known as cost finding and is a hold-over method from the days when inpatient reimbursement rates were determined at the per diem level. Now, with a prospective payment system (DRGs) reimbursing on diagnoses and treatment rather than length of stay it would behoove the hospital industry to understand costs at a granular level, and price accordingly.

    That would mean establishing a bonafide cost accounting system. Just as the Ford Motor Company knows exactly how much it costs for their various vehicles and which assembly line is the most efficient and profitable, hospitals should know in fine detail how much it costs for the component parts of a patient stay/DRG. They do not.

    For example, do hospitals know exactly how much it costs for a know replacement? No. Do hospitals know how much it costs per knee replacement by Orthopedic surgeon? No they do not. By other parameters? No.

    Now, very specialized costs studies can be conducted and reimbursement rates for DRGs have been formulated by these studies; likewise, by special cost finding projects hospitals can determine P&Ls, but as a matter of routinely capturing all component costs on a timely basis to accumulate for cost accounting purposes -- no.

    Cost accounting systems are complex and it would be arduous to establish cost accounting systems in a robust health care system. We gave it a try...it was called PADBARS, or, the Patient Accounting Database and Reporting Systems. It wasn't entirely accurate and we never got to a level where we could base our Charge Description Master on costs compiled; but, it became a powerful analytical tool because we established the rudiments of cost accounting.

    I've ben out of the business for a while and would like to know if progress has been made, I think not though.

    Speaking of Charge Descriptions Masters -- most are gobbledygook and unrelated to reality, and which no one at the hospital knows very much about. At one point in my career I spent a couple of weeks poring over the CDM correcting the most egregious mistakes.

    •  Thanks Mike (3+ / 0-)
      Recommended by:
      arlene, ER Doc, OhioNatureMom

      This is exactly the point I was making in my comment.

      The hospital charges are an artifact from when insurance companies did not set rates and hospitals were paid on what they charged.

      That has not been the way things work for 30 or 40 years now.

      It is a PR nightmare for the hospitals to continue to use their antiquated charge methods when they know good and well up front they aren't going to get paid anywhere near what they are charging.  They do it out of convenience but people not in the industry are understandably confused by this and think the hospitals are charging and getting paid for these enormous amounts.

      They aren't.  They are getting the contracted rates that they have negotiated with each individual insurance company.

      The hospitals better wake up to this PR nightmare, because it's confusing people and making them very, very angry.

      I can speak for doctor's offices on this as well.  A physician may have 10 - 15 contracts with different insurance companies all paying different amounts for an office visit.  Some insurance companies pay $50 and some pay $85.  This is made more confusing by the fact that Aetna may have different plans (HMO and PPO) that pay very different rates even though it's the same company.

      So instead of the physician's office trying to wade through all this complexity, they charge $120 for an office visit and then write off the amount between what they charged and what the insurance company 'approves' and they get paid what the insurance company tells them they are getting paid, not what they charge.

      Hospitals have this same problem only 1000 times more complex.

      So they just overcharge, write off the difference and charge the patient what the insurance company tells them to.  It's lazy, but it's how it works and it makes them look very, very bad.

      •  they don't just look very, very bad (0+ / 0-)

        the are very, very fucking bad. Scumbag price gouging profiteers! Fuck 'em all!!!

        Power to the Peaceful!

        by misterwade on Thu Jan 23, 2014 at 07:58:23 PM PST

        [ Parent ]

      •  I think all patients should ask about balance (1+ / 0-)
        Recommended by:
        SoCalSal

        billing and if the hospital/dr accepts insurance payments in full (accounting for co-pay liability, too).

        Agree fully with your comment.

      •  Except the uninsured DO end up paying the $120. (2+ / 0-)
        Recommended by:
        SingleVoter, nchristine

        Those least able to afford it.  And doctors and hospitals do not negotiate with them to reduce it to what the insurance company would pay.

      •  Recently heard a doc talk about billing (2+ / 0-)
        Recommended by:
        SingleVoter, wa ma

        He's a surgeon at one of the the top national heart centers.

        He says they're having a hard time collecting co-insurance and out of pocket costs that private insurance and Medicare don't cover.

        He said the out of pocket costs are getting outrageous, people can't pay them.  Their hospital only collects 18 cents on every dollar billed.

        Maybe they should lower their prices a little.  People can only afford so much, then its tap city.

        Money is property, not speech. Overturn Citizens United.

        by Betty Pinson on Fri Jan 24, 2014 at 07:55:58 AM PST

        [ Parent ]

        •  It wouldn't matter a bit if they lowered their (0+ / 0-)

          prices.

          What your surgeon friend is talking about is out of pocket expense that are not covered by the insurance company.

          Lowering prices would mean the insurance companies get to pay less, not the patients.

          Here's an example:

          Your heart surgeon charges $2500 for a heart transplant.  A few years ago the insurance company would say that they approve $1000 for that surgery and will pay 100% of that cost.  The surgeon would write off $1500 by contract.

          What he is complaining about is rising deductibles that people are signing up for to lower their premiums.  It's the only way people are able to afford insurance these days and it sucks.

          Today, that same surgeon would charge $2500 for his surgery, the insurance company would then lower the charge to $1000 by contract and pay $500, leaving the patient to pay $500 because of their deductible.

          Now let's see what would happen if the surgeon lowered his price from $2500 to $500.  The insurance company would say this is a fair price to charge and then apply that amount to the patient's deductible.  The insurance would pay nothing and then the patient would be liable for the $500 because of their deductible.

          That is what he means when he says they are having a hard time collecting copays and out-of-pocket costs.  They are having trouble collecting the patient share of the bill because insurance is covering less and less of the cost and making the patient pay more.  

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