Published on the Intelligencer.com
On Jan. 1, the U.S. Centers for Medicare and Medicaid Services began requiring all hospitals across the country to post machine-readable lists of their standard charges, also known as chargemasters, on their websites.
That’s the difference between the top charge for the same thing at two area hospitals.
At St. Mary Medical Center in Middletown, the top charge for 200 milligrams or a 40 milliliter vial of ipilimumab, a monoclonal antibody used in the treatment of certain types of cancer, is $172,169. Across the Delaware River at Virtua Memorial Hospital in Mount Holly, New Jersey, the top charge for the same treatment is $278,913.84.
The difference is significant, but according to hospitals and groups that represent them, it also doesn’t mean much. That’s because they are standard charges and not typically what patients, insurance companies and others pay.
However, they are not meaningless, according to some experts.
On Jan. 1, the U.S. Centers for Medicare and Medicaid Services, also known as CMS, began requiring all hospitals across the country to post machine-readable lists of their standard charges, also known as chargemasters, on their websites. While the goal of the rule was to promote price transparency, some experts say the charges have mainly caused confusion.
“It’s the right idea but it’s just the wrong execution,” said Linda Schwimmer, president and CEO of the New Jersey Health Care Quality Institute, which advocates for quality, cost-containment and other changes in health care. “If the point was to tell people what they’re going to pay or what their insurance companies are going to pay, it really doesn’t give you any of that.”
CMS Administrator Seema Verma has acknowledged as much, and wrote in a November blog post that the rule is just a first step.
“We also need to drive towards consumer-friend tools presenting information that is both personal and actionable at the time people seek care,” she wrote. “We need to meet patients where they are and integrate cost information into their health care decision-making, making it easy for patients to analyze cost differences across all care options.”
CHARGES & COSTS
In response to the rule, more than a dozen area hospitals posted their chargemasters between mid-December and early January. Some are easier to find than others, commonly under links for patient information, and page titles like “Price Estimates” or “Financial Information.” Site searches for terms like “chargemaster” or “hospital charges” usually return the right result.
All area hospitals provide Excel files with hundreds or thousands of rows of technical descriptions of products and services and their charges. But along with the lists, most also provide definitions of terms like charges and costs, as well as disclaimers about the chargemasters.
“There can be variations, sometimes large ones, in the charges that hospitals set for the same item or service — even within the same health system. This is due to the many factors that go into determining the hospital’s cost of delivering those items and services. Some hospitals have higher cost structures due to the complexity and expense associated with the services they provide (such as trauma, transplant and neonatal intensive care services). Others have higher mission-related costs, such as teaching, research and providing care for low-income populations,” Jefferson Bucks (formerly Aria) Hospital’s page states.
“No one pays these specific charges, including uninsured patients and those who pay their own costs out-of-pocket. Medicare and virtually all other health insurance companies pay inpatient and outpatient costs based on various fee schedules, and their policies have different requirements for deductibles and co-payments or coinsurance,” Doylestown Hospital’s page states.
In light of the CMS rule, health care advocates and industry groups have encouraged hospitals to post such information as well as provide resources to help patients figure out their individual costs based on insurance coverage, income and other factors.
Most area hospitals already have such resources in place, including financial counselors who are available by phone or in person to go over patients’ insurance information and provide them with estimates.
“While we charge all patients the same, regardless of whether they have insurance or not, charges, by themselves, do not tell a patient what their personal liability will be for a service,” said Kim Roberts, vice president of revenue cycle at Abington-Jefferson Health.
For those with insurance, the health system estimates their financial responsibility based on their plan and out-of-pocket coverage, the hospital’s typical charges for the services, and the health system’s contract and expected payment from their insurance company.
“All of those three elements help to determine our best ‘estimate’ of the patient’s liability,” Roberts said.
For those who are uninsured, the health system will work with them to determine self-pay rates and whether they are eligible for financial assistance, as well as help them to get coverage.
St. Luke’s University Health Network also offers a PriceChecker tool online that allows people to search for tests, procedures and other services, then plug in their insurance information, and receive estimates as well as discounted cash prices.
Some area hospitals also linked to a video created by the Hospital and Healthsystem Association of Pennsylvania that explains the chargemasters and how to utilize the hospital resources as well as contact their insurers to figure out their individual costs.
In a December blog post about the rule, association President and CEO Andy Carter outlined similar information for patients.
Like Verma, he explained that chargemasters are an incomplete tool and simply give the total amount that a hospital can bill.
“The chargemaster shows a hospital’s ‘list prices,’” Carter wrote. “These charge rates represent standard or regular prices, not the actual — and typically much lower — payment rates that hospitals receive from health insurers, Medicare, and uninsured patients with low incomes.”
Michael Keen, chief financial officer for Grand View Health, said the West Rockhill hospital calculates charges based on purchase price, the time involved and resources utilized.
“We also consult any available sources of already established fee schedules with a department manager,” he said.
Other factors such as pharmaceutical costs and vendor pricing also can play a role in the charges. And Schwimmer noted that chargemasters don’t include charges for other providers or facilities that may be involved in procedures and services, however.
For example, a pregnancy in some places can cost between $9,000 and $16,000 and a C-section between $16,000 and $25,000, but there are a lot of providers, services, tests and other charges included in those amounts that wouldn’t be captured on chargemasters.
“It’s not a number that anybody pays and it’s not a complete number so it doesn’t really do much,” Schwimmer said.
Niall Brennan, president and CEO of Health Care Cost Institute in Washington, D.C., agreed that the charges, by themselves, aren’t helpful to people.
“Charges are arbitrarily high fantasy numbers produced by hospital accounting departments as all part of the cat-and-mouse game that exists between both public and commercial payers and hospitals,” he explained.
But based on her research, Ge Bai, an associate professor of accounting at the Johns Hopkins Carey Business School, said that’s a myth.
“Most hospitals say (it) is not relevant but it is in fact very relevant,” she said.
Especially for two groups: one includes patients covered by automobile, workers’ compensation and other non-traditional commercial health insurers, which typically have less negotiating power with hospitals. And the other includes patients with traditional commercial or private health insurance, such as what many employers offer.
“On the surface, (patients in the second group) are not affected by the chargemaster prices because the insurance plans are negotiating a price for us,” she said. “However, fundamentally, the chargemaster prices do play a large role in the price we pay. Higher chargemaster prices give hospitals leverage when they enter the negotiations.”
If insurance companies don’t agree to pay more for services, Bai explained, their members may not have in-network access to hospitals, and they may be balance billed based on the higher chargemaster prices.
“It’s a credible threat,” Bai said.
And, when insurance companies pay more for services, members ultimately pay more for things like premiums, she added.
Bai said patients with rare or complicated conditions also are affected by high chargemaster prices because there are fewer places for them to go and shop around.
“Due to the emergent nature of the episode or due to the complexity of the service, the patients don’t have options and they are more likely to face a high chargemaster price,” she said.
“(The chargemaster) is really a revenue-generating tool for hospitals.”
Medicare and Medicaid pay standard rates for services, so patients with those types of coverage are not affected, but Bai added that there are “definitely” others facing chargemaster prices, or close to them.
In a 2014 blog post, former New Jersey Hospital Association president and CEO Betsy Ryan wrote that at the time about 4.5 percent of the state’s hospital patients, most of whom were uninsured, were being charged the prices.
Most uninsured patients in New Jersey are protected, however, by a state law passed in 2009 that prohibits hospitals from charging those who earn below 500 percent of the federal poverty level more than 115 percent of Medicare rates.
“Yes, it’s complicated, and we admit that hospital charges don’t make much sense,” Ryan wrote. “No one actually designed this system; it just evolved over time as hospitals tried to adapt and survive in our broken reimbursement system.”
PRICE & TRANSPARENCY
No area hospitals reported an increase in calls from people about the charges since they’ve been posted on their websites, but chargemasters have been publicly available, and a source of confusion, for years.
“There’s no doubt that hospital charging, physician charging, is confusing to the end user,” said Doug Hughes, chief strategy officer for Grand View.
“Unfortunately, every scenario is different,” Hughes said.
There are a lot of questions that have to be answered, the first being about insurance.
“Is your deductible paid up for that year? Are you in an in-network hospital or an out-of-network hospital?” Hughes continued.
Throughout his career in health care, Hughes has seen copays and deductibles go up, and recently there’s been a greater shift in costs onto patients. It’s also resulted in a rise in people’s interest in charges and costs.
“Suddenly that factor means so much more now because you’re sharing some of that expense,” Hughes said.
“If people are paying more, or if they’re going to have a (health savings account), they really have to have a sense of what they’re in for in terms of what they’re going to pay,” Schwimmer said.
In 2018, nearly half of people under age 65 who had private health insurance were enrolled in a high-deductible plan without a health savings account, according to an August report from the U.S. Centers for Disease Control and Prevention’s National Center for Health Statistics.
The percentage increased more than 21 percent since 2010. And over the same time period, the percentage of people under 65 who were enrolled in a similar type of high-deductible health plan with a health savings account nearly tripled, according to the report.
That’s one of the reasons CMS passed the rule and is taking further steps toward price transparency, according to Verma.
“The case for price transparency throughout the health care system is clear, and the need to shop is growing ever more compelling as high-deductible plans become the norm,” she wrote in the November blog post.
The chargemasters rule may not go far enough, but it is reigniting the conversation about price transparency, Schwimmer said.
“If (the chargemasters rule) is where the conversation ends or if the execution means let’s give up on price transparency, then it’s a failure. But I don’t think that’s the way it’s going to go because there’s enough voices saying … let’s look at transparency and discuss it and see where transparency can lead,” she said.
Carter, of the Hospital and Healthsystem Association of Pennsylvania, agreed.
“This mandate and the public discussion it will likely engender does indeed have the potential to foster a better understanding of what useful health care price transparency might look like — if policymakers, the media, and consumers can agree on some basic realities of how we in America pay for our health care,” he wrote in the December blog post.
He added that it will take time, effort and collaboration.
“Let’s start by developing a common understanding of concepts like hospital charges as compared to hospital payments and what consumers pay out of pocket for health care, as determined by their health plans,” he wrote.
The need for price transparency has led to startups and sites like the Health Care Cost Institute’s Guroo, which allows people to search for services and find bundled costs for their area.
It gives people more power over their health care decisions, but it’s indicative of a broader issue, Brennan said.
“The first thing consumers should do is take a step back and ask why they, as the weakest actor in the health care system, are suddenly having the important decisions of pricing and choices of where to go foisted upon them,” he said. “While I’m in support of transparency and more consumer empowerment, it is indicative of how badly payers and providers have failed to adequately address rising costs.”
He added that not every service is shoppable.
“If you get hit by a car the last thing you want to do in the back of an ambulance is whip out your phone and figure out who has the best rates for car trauma,” Brennan said.
It’s not all just about the cost, but that’s another, broader issue, Brennan said.
“Most people would say you shouldn’t base your decisions purely on cost and you should base them on cost and quality, but I think we’ve struggled to present consumer-friendly information about that cost/quality continuum,” Brennan said.
Schwimmer agreed. There’s a lot of quality information out there, but not as much as is needed, and there’s a disconnect with cost.
“Just because something is the highest cost place doesn’t mean it’s better in terms of quality, and the other way as well,” she said. “It’s so murky, this is not in anyway a transparent, free market.”
It’s something CMS also wants to move toward improving, according to Verma.
“Putting patients in the driver’s seat means we also need to integrate quality information with price transparency,” she wrote. “Once consumers can see the whole picture, they will be truly empowered to seek out high value care among providers competing on both cost and quality.”