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Sunday, September 6, 2015

SOMC, Chargemaster, and Ridiculous Health Costs


"When we debate health care policy, we seem to jump right to the issue of who should pay the bills, blowing past what should be the first question: Why exactly are the bills so high?"

(Steven Brill. "Bitter Pill: Why Medical Bills Are Killing Us." Time. April 04, 2013.)
Investigative journalist Steven Brill explored just that in a recent, hot-button Time magazine cover story. After spending seven months analyzing hundreds of bills from hospitals, doctors, drug companies, and medical equipment manufacturers, he discovered that health care costs are largely arbitrary, inflated, and unfair.

Steven Brill's 2013 story broke online records, selling 16 times more than an average week for digital single copy sales and digital subscriptions and becoming the most viewed magazine cover article on Time.com.

Brill's central point -- that medical prices are much higher in the U.S. than elsewhere -- has been known to health policy scholars for a long time, but he has done a great public service by bringing this message to the general public in words all people can understand.

“The health care market is not a market at all. It’s a crapshoot,” Brill concluded. “Everyone fares differently based on circumstances they can neither control nor predict.”

Here is just one example: Let's say you need a lower joint replacement. The following are some average charges for the procedure in the states:

Maryland -- $36,000 by University of Maryland Medical Center in Baltimore

Texas -- Las Colinas Medical Center just outside Dallas billed Medicare $160,832

Texas -- Five miles away and on the same street, Baylor Medical Center in Irving, Texas, billed the government an average fee of $42,632.

Experts attribute the disparities to a health system that can set prices with impunity because consumers rarely see them — and rarely shop for discounts. Although the government has collected this information for years, it was housed in a bulky database that researchers had to pay to access.

"One hospital charges $8,000 — another, $38,000."
The Washington Post.

The Highly Mysterious, Consistently Confusing, Often Used But Cleverly Considered "Irrelevant" Chargemaster 

The hospitals contend that these high prices come from an aptly named, involved, master list known as a “chargemaster,” and the prices are rarely relevant to consumers. Chargemaster (also known as charge description master -- CDM) is a comprehensive listing of items billable to a hospital patient or a patient's health insurance provider. In practice, it usually contains highly inflated prices at several times that of actual costs to the hospital.

(Rosenberg, Tina  "Revealing a Health Care Secret: The Price."
The New York Times. July 31, 2013.)

Chargemasters include thousands of hospital services, medical procedures, equipment fees, drugs, supplies, and diagnostic evaluations such as imaging and blood tests. Each item in the chargemaster is assigned a unique identifier code and a set price that are used to generate patient bills.


Every hospital system maintains its own chargemaster, and hospitals update their chargemasters at least annually but often more frequently. Some hospitals might simply raise every price in the list by the same percentage once a year. Others might update prices for particular items or procedures separately, by different percentages, which makes it difficult to know by what overall percentage a hospital has increased its prices.  In general, the process appears to be ad hoc, without any external constraints—.


(L. Lagnado, "California Hospitals Open Books, Showing Huge Price Differences."
The Wall Street Journal. December 27, 2004.)

“The chargemaster can be confusing because it’s highly variable and generally not what a consumer would pay,” said Carol Steinberg, vice president at the American Hospital Association. “Even an uninsured person isn’t always paying the chargemaster rate.”

"The 'full charges' reflected on hospital Charge Masters are unconscionable," wrote George A. Nation III, professor of law and business at Lehigh University and author of Determining the Fair and Reasonable Value of Health Care, in a 2005 article for the Kentucky Law Journal.

Steven Brill in "Bitter Pill" asserted that chargemasters routinely listed extremely high prices "devoid of any calculation related to cost," and were generally regarded as "fiction" in the healthcare industry, despite their significant role in setting prices for both insured and uninsured patients alike.

Although hospitals dismiss their significance altogether, chargemasters are used as a basis to extract far higher payments from uninsured patients than those who have coverage. Brill examined the medical bills of seven people who lacked insurance or were underinsured, and found large markups in all instances. In one case, the bills to treat a case of heartburn ran $21,000. He writes ...

"Although every hospital has a chargemaster, officials treat it as if it were an eccentric uncle living in the attic. Whenever I asked, they deflected all conversation away from it. They even argued that it is irrelevant."

A couple months after Brill's expose, the Centers for Medicare and Medicaid Services published inpatient prices for hospitals across the country in a publicly available format. University of California, Berkeley professor of health economics James C. Robinson called for much greater transparency as well as increased price standardization as steps to help remedy the incomprehensible foundation of hospital cost accounting and prices.

In a 2012 article titled "High US Health-Care Spending and the Importance of Provider Payment Rates" in the Forum for Health Economics & Policy, Gerard F. Anderson said this of patients' inability to read and understand chargemaster:

"Furthermore, most of the items on the chargemaster file are written in code so that only the hospital administrators and a few experts in the field can interpret their meanings."

George A. Nation III gives you this scenario:

"Imagine that you are a patient entering the hospital for surgery.

"If you were told that the list price for the surgery, based on something called a chargemaster, is about $14,000, but that the hospital has agreed to do the same surgery (with anesthesia and everything) for $5,600 for HMO patients, $4,700 for patients with Blue Cross/Blue Shield, $3,500 for Medicare and $2,800 for Medicaid, would you agree to pay the list price of $14,000? Of course not; if you offered $6,000, the hospital would likely agree, and you would save 50 percent.


"But the hospital will not give you this information. Welcome to the wacky world of hospital billing, a strange place where customers purchase health care without knowing the price and unknowingly agree to pay outrageously high chargemaster prices for charges not covered by insurance.

"As the Affordable Care Act stumbles out of the gate, many believe incorrectly that it will put a stop to these outrageous prices or that exorbitant chargemaster prices don't matter, since no insurers — public or private — actually pay them. But they do matter.

"Self-pay patients are expected to pay these inflated charges, and these constantly increasing charges lead indirectly to higher prices for insurers. A new report from the Department of Health and Human Services' Office of Inspector General released last month reveals that hospitals with higher chargemaster rates receive higher payments for Medicare outlier payments. This is just one example of how higher chargemaster prices raise actual prices for all payers."


(George A. Nation III. "Reduce hospital charges for patients without insurance.
The Morning Call. January 14, 2014.)

An Unacceptable Conclusion?

Matthew Yglesias, executive editor of Vox and author of The Rent Is Too Damn High, concludes the following:

"When an individual patient comes through the door of a hospital for treatment, he or she is subjected to wild price gouging. Insane markups are posted on everything from acetaminophen, to advanced cancer drugs, to blankets, to routine procedures. Because these treatments are so profitable, internal systems within the hospital are geared toward prescribing lots of them. And even though most hospitals are organized as non-profits, most of them in fact turn large operating profits and their executives are well-paid.


"In addition to providing insurance services, a key service that a proper health insurance company provides is bargaining with hospitals so you get screwed less. No insurer worth anything would actually pay the crazy-high rates hospitals charge to individuals. But in most markets, the hospitals have more bargaining leverage than the insurance companies, so there's still ample gouging. The best bargainer of all is Medicare, which is huge and can force hospitals to accept something much closer to marginal cost pricing, although even this is undermined in key areas (prescription drugs, for example) by interest group lobbying."

(Matthew Yglesias. "Steven Brill's Opus on Health Care." wwwslate.com. February 22, 2013.)

So, how do patients fight the high costs of medical bills? Brill wants to alter medical malpractice law, tax hospital operating profits, and try to mandate extra price transparency. Yglesias believes when Americans force prices to be lower (via Medicare), they get lower prices. He says if patients want lower prices, the way to get them is to write laws mandating that the prices be lowered.

All I know is that the prices are too high. Far too high. Health care facilities and health insurance companies choke premium-paying Americans. My consternation increases as I think about my bloodwork as part of highly prescribed preventive maintenance that should save a considerable amount of time and money as certain adverse conditions are detected early.

Yes, I know the old cliché -- "I can't afford to get sick." But now, I believe the accuracy of that statement is ironically honest in respect to dollars spent on healthcare.

In their own investigation, Reader’s Digest learned that it pays to try to get to the bottom of your medical bills because they’re subject to more errors and overcharges than you might think. Here, Pat Palmer, founder of Medical Billing Advocates of America, a group that helps patients handle medical bills, reveals examples of ridiculous overcharges on a patient’s itemized bill (which you usually need to ask for—and review with a fine-toothed comb).

1. Tylenol
Charge to patient: $15 per individual pill, for a total of $345 during average patient stay

2. Patient belonging bag
Like a grocery bag, to hold your personal items

Charge to patient: $8

3. Box of tissues
Sometimes listed as “mucus recovery system”

Charge to patient: $8

4. Gloves

Charge to patient: $53 per non-sterile pair (sterile are higher), for a total of $5,141 during average patient stay

5. Cup medicine
Cost is for the plastic cup used to administer medicine, not the actual medicine inside it

Charge to patient, per cup: $10, for a total of $440 during average patient stay

6. Marking pen
To mark the body for surgery

Charge to patient: $17.50

7. Cuff, BP Adult
Use of blood pressure cuff

Charge to patient: $20

8. Oral administration fee
Charge for nurse to hand you medicine taken by mouth

Charge to patient: $6.25 per instance, for a total of $87.50 during average patient stay

9. Swabs, alcohol

Charge to patient: $23 per swab, for a total of $322 during average patient stay

10. Headlight

Cost of use of overhead light in operating room

Charge to patient: $93.50

(Lauren Gelman. "10 Wildly Overinflated Hospital Costs." Readers Digest.)


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