When Pam Pouchot was diagnosed with parotid cancer, the Yorktown resident asked about the cost of tests and procedures to address the aggressive disease.
No one could tell her specifics, only that she would be billed through her insurance.
When she opted for treatment at Johns Hopkins Hospital in Baltimore, where they repeated tests she'd already had, she noted a significant difference in the charges. For example, a CT scan in Baltimore cost $187 compared to the $966 she paid in Newport News.
Her experience is typical of most patients. They receive treatment without knowing how much it will cost, not because they don't want to know but because it's virtually impossible to find out. And the charges not only vary widely, but often have little bearing on what insured patients pay.
That was clearly demonstrated last month when the Centers for Medicare & Medicaid, CMS, prompted by the Affordable Care Act's push to make health care "more affordable and accountable," released numbers on the average allowable charge for 100 procedures at 3,000 of the nation's hospitals, alongside the average Medicare reimbursement. CMS could find nothing to explain the differences — not volume, nor geography, nor complexity of procedure explained the major gaps in prices charged (see accompanying chart for a few comparisons at local hospitals). This month, the agency followed with the equivalent data for outpatient procedures.
The action by CMS has raised numerous questions and jumpstarted a conversation about medical costs and billing. In doing so, it has created a public push for greater transparency. That, in turn, has raised hopes among some that prices will be pushed down and become more closely tied to costs of care.
"These large institutions have effectively lobbied to restrict public knowledge about charges and fees. Public disclosure and discussion will become a powerful antidote!" Gloucester physician John C. Partin wrote in an email.
How much will it cost?
It is virtually impossible for the insured health consumer to shop around for a better deal. Their cost is mired in layers of obfuscation. It depends on the rate negotiated by their insurance company with the providing hospital, and then on the terms of their individual insurance contract, on their deductible and co-pay.
"You can call the billing office and get a range … the billing people aren't going to know. There might be co-morbidities. … We can't with certitude give a fixed price," said Rob Broermann, chief financial officer for Sentara Healthcare.
"It has never been supply and demand," said Stephen Norfleet, a family physician with Tidewater Physicians Multispecialty Group, TPMG. In April, he conducted an informal survey of the cost of various scans — CTs of the head and abdomen, MRIs of the knee and shoulder — by health systems on the Peninsula. His findings showed that one local hospital charged $2,670 plus a radiologist's fee for a CT of the pelvis and abdomen with contrast, as compared to $318, including the radiologist's fee, for the same procedure by TPMG. In every instance, the hospital charged anywhere from two to five times more than physicians' offices. Some were unable to provide the information, and one responded that it would take five days to get a price.
"We want transparency," said Norfleet, who blames hospital charges for rising insurance premiums.
What drives charges?
There's no one reason for why a hospital can't give a straightforward answer to the cost of a particular procedure. Financial officers for the Peninsula's three health systems explained some of the intricacies involved in hospital charges and billing practices. "The difference gets adjusted off. Every bill has that concept," said Sentara's Broermann. "It is just the way the hospital billing system has worked for decades."
Another reason given for high charges, shared by all, is that they set them higher than the lowest negotiated price with commercial insurers, or that figure gets driven down. "Historically, health systems have to put their charges at or above the highest reimbursement," said Andrew Woughter, Riverside's vice president for revenue cycle.
Unlike private physicians, local hospitals on the Peninsula, all of which operate as nonprofits, are required by law to provide emergency care regardless of a patient's ability to pay. "When a patient comes in the door, we don't know what their financial situation is. At a minimum, they'll have a medical screening by a physician," said Broermann. He conceded that "emergent and other medically necessary procedures can get into a gray area. The doctor makes that differentiation."
Woughter concurred. "We provide service to all of our patients regardless of ability to pay — except for elective surgery. The physician would determine that."
The hospitals provide millions in uncompensated care annually as a condition of their nonprofit status. Joe Ingold, vice president, revenue cycle service, Bon Secours Virginia, explained that to meet the requirement for tax-exempt status, they must provide in community benefit at least what their taxable obligation would be. "That's one of the thresholds," he said. "We far exceed that."
The COPN (certificate of public need), a state-issued certificate necessary for them to conduct business, requires they provide a certain percentage of their gross revenue each year — 4.2 percent in 2012 — in charity care to people at 200 percent or less of the federal poverty level. Last year, the FPL was $22,340 for a one person household, $30,260 for two, and $46,100 for a family of four.
In 2012, Bon Secours Hampton Roads, whose three hospitals include Mary Immaculate Hospital in Newport News, provided "more than $74,546,000 in uncompensated care and other benefits to the Hampton Roads community," according to spokeswoman Lynne Zultanky. That number divides into almost $46 million for direct charity care, close to $21 million for the shortfall between Medicaid reimbursements and costs, with the rest in "other community benefits." Riverside provided an almost identical amount, $75.7 million, including providing free specialty care to the uninsured through Project CARE.