Want to find out what your upcoming hospital stay will cost?
Hospitals use a mysterious billing system in which charges aren’t publicly posted – and bear no resemblance to what most patients and insurance companies wind up paying. The bills that hospitals send patients, meanwhile, are often hard to decipher.
This lack of transparency makes it all but impossible for patients to comparison shop or to effectively question prices. It also helps hospitals make more money, experts say.
“No one knows or can understand the prices a hospital charges, so it makes it much easier for them to increase their prices with no one looking,” said Gerard Anderson, director of the Johns Hopkins Center for Hospital Finance and Management.
Charges dwarf actual costs
In the arcane world of hospital billing, the charges for most procedures far exceed what it costs to perform them.
Full charges in the Charlotte region are, on average, about three times as high as costs, according to federal data.
Hospital officials say that for most patients, charges are meaningless. That’s because hospitals provide large discounts to private health insurers, while Medicare and Medicaid pay based on rates set by the government.
In that sense, hospital charges resemble the hotel rack rates that almost no one pays.
But here’s the rub: Some patients and insurers do get stuck paying the full charge, or something close to it. Among them are uninsured patients who earn too much to qualify for charity care.
“It’s the conscientious working people who get screwed,” says Tom Getzen, who heads the International Health Economics Association.
Most hospitals offer discounts to uninsured patients who don’t qualify for charity care. But even after providing such discounts, hospitals can profit handsomely.
At Catawba Valley Medical Center in Hickory, for instance, an uninsured patient who doesn’t qualify for charity care can get a 25 percent discount off the full charges if he or she pays immediately.
That would bring a $20,000 hospital bill down to $15,000. But on a typical hospital stay, even that would amount to more than twice what the hospital spent to provide care.
At hospitals run by Carolinas HealthCare System, uninsured patients who don’t qualify for charity care get a 40 percent discount. At the three Presbyterian hospitals in Mecklenburg County, the uninsured discount is 30 percent.
Officials for area hospitals say they don’t make money on such patients because many never pay their bills.
Paying full freight
At most hospitals, charges are increasing rapidly. That means bills for the uninsured – and for some other patients – are also rising fast.
Among those hurt most by the growing charges:
• Motorists. Car insurance carriers routinely pay full hospital charges. So rising charges contribute to rising premiums.
• Employers. Under North Carolina law, workers’ compensation insurers can’t get a discount of more than 25 percent from hospitals. That leaves employers paying more for coverage.
• Taxpayers. Until recently, North Carolina paid 100 percent of billed charges for state prison inmates who received hospital care. Under a new law, the hospitals can receive either 70 percent of charges or twice the amount paid by Medicaid. That still allows them a substantial profit.
Presbyterian Hospital charged the state $204 each time it performed an EKG test on two prison inmates in 2010, according to bills examined by the Observer. The average cost of an EKG to the hospital is less than one-eighth that amount – $23, according to the American Hospital Directory.
Higher hospital charges can also translate into higher health insurance premiums. The reason: Most insurance contracts with hospitals include provisions for paying a percentage of billed charges. That’s why “it matters what they charge,” said Jarvis Leigh, Aetna’s top hospital contract negotiator in the Carolinas.
All of this, experts say, gives hospitals a strong inducement to boost their charges.
“Every incentive is for the hospitals to charge as much as possible,” said Jason Beans, who examines medical bills for payers. “It’s driving up our costs drastically.”
Patients with insurance have a “bodyguard” who negotiates on their behalf, Beans said.
“The people who do not – their lives can be absolutely ruined by it,” he said.