Health Care In The States

The Dramatic Difference: What A Hospital Charges Vs. What Medicare Pays

By Annie Feidt, Alaska Public Radio Network

May 13th, 2013, 6:01 AM


For the first time, the federal government has publicly shared what hospitals bill Medicare for the 100 most common diagnoses and treatments.

The information shows hospitals across the country — and across Alaska — bill dramatically different prices for the same things.

Hospital veteran Rick Davis, the CEO of Central Peninsula General Hospital in Soldotna, was eager to review the massive Excel spreadsheet on hospital charges as soon as it was out.

“It’s going to create ripples across the nation, really, on pricing,” he says. “It does show some pretty big disparities between hospitals.”

For example, Alaska Regional, in Anchorage, charges Medicare $46,252 for a patient with heart failure and a major complication. Alaska Native Medical Center, also in Anchorage, charges $20,839.

In both cases, Medicare doesn’t pay anywhere close to the full charge. The government reimburses Regional $13,950 and Alaska Native, $12,935. Private insurance usually pays more than Medicare, but negotiates the amount.

The system doesn’t make much sense, but Davis says more transparency will help:

“For there to be pressure on pricing on the consumer side, the consumer has to understand what it’s going to cost them. And so, I think this is a good report. I think it’s going to force hospitals to address their pricing.”

Davis says the data show the prices at his own hospital, Central Peninsula, are fair. And he doesn’t expect to make any adjustments.

But Bruce Lamoureux, CEO of the Providence health system, says his hospital will consider changing some prices, down or even up, based on the report:

“There are some instances where our charges for a particular procedure are, in one case, half of a different provider’s, and in a different case, twice a different provider.”

Lamoureux thinks the information actually gives consumers some negotiating power when it comes to health care costs, something they’ve never had before. He says the system of hospital pricing and reimbursement is badly broken and this step toward more transparency is long overdue.

But a hospital bill is only one part of the overall health care cost picture.

“That’s kind of like a rack rate in the hotel room,” says Karen Perdue, president of the Alaska State Hospital & Nursing Home Association. “Most people aren’t paying that one rate in the hotel. Different payers are demanding different deals at the hospital, so I think what consumers need is not only a more accurate way to determine what their costs are going to be, but also what the full cost will be, not just the hospital cost.”

Like the charges from doctors and anesthesiologists, which aren’t included on a hospital bill. Perdue says her board is looking at ways to make hospital cost data easily available to consumers. But health care is a complicated industry and it’s not an easy task.

“Transparency, for us, feels like the future and where we should be going, and where we should be putting our effort,” she says. “How we should do that in a way that is meaningful to the consumer is the challenge ahead of us.”


This story is part of a collaboration with NPR, Alaska Public Radio Network and Kaiser Health News.

This article was produced by Kaiser Health News with support from The SCAN Foundation.

13 Responses to “The Dramatic Difference: What A Hospital Charges Vs. What Medicare Pays”

  1. norman says:

    Hospital administrators are nothing but a bunch of deceptive shysters, dishonest fraudsters and unscrupulous charlatans. They all belong in prison.

  2. norman says:

    These cockroaches have been operating in the dark for far too long. It’s time to turn on the lights, throw open the windows and let the fresh air in.

  3. Leonard says:

    The poor person who doesn’t have insurance. No wonder 50% bankruptcies are because of medical bills.

    Hospitals always talk about the money they spend on free care to the needy. Could it be they use billed charges to calculate how generous they are.

  4. David says:

    Looking at the price charged without considering the full scope of services the hospital provides is like looking at the tires on a car without considering the vehicle being driven. Sure, you can find cheaper tires, but are you putting tires on an economy vehicle or a full size sedan. One has to consider whether it is a teaching hospital or a community based facility. How many of the patients who arrive through the emergency department are insured, and how many will require critical care? Does the facility have advanced diagnostic equipment or are the clinicians basing their decisions on fuzzy images? Sure we can continue to complain about the cost of healthcare, but we should stop to think what is we are complaining about.

  5. Why should there be such a “shell game” with hospital charges? Charge everyone the same published price as they do at Walmart and then give assistance to those who need it. At least those who pay the full price will know how much of their bill goes to pay for their non-paying neighbor.

    Saying they cannot estimate the cost of a hospital procedure is just an excuse to perpetuate this over priced but highly profitable business for doctors.

  6. There is competition in health care. But it is not motivated by trying to provide better care at less cost. Competition in health care is directed toward vertical integration where a not-tax-paying but a running-for-profit hospital-based entity is looking to obtaina larger and larger market share.

  7. Monique says:

    What is most remarkable is that no one seems to know how much it actually costs hospitals to provide services. According to A Study of Hospital Charge Setting Practices, a report prepared by the Lewin Group for the Medicare Payment Advisory Commission:

    “The Medicare Payment Advisory Commission (MedPAC) has expressed concerns about the accuracy and fairness of the current Medicare hospital in- and out-patient prospective payment systems (PPSs). Payment rates for these systems are based, to varying degrees, on hospital charges. However, little is known about how hospitals set their charges.”

    In fact, a report by the Congressional Budget Office (CBO), “Key Issues in Analyzing Major Health Insurance Proposals,” looked at the issue of cost-shifting and found that higher private insurance payments may actually be driving costs up:

    “Instead of low Medicare payment rates causing private rates to be higher, high private payment rates at some hospitals may be leading them to relax their efforts to control costs. In turn, that tendency may have pushed up per-patient costs and thus caused payment-to-cost ratios for Medicare (and private) patients at those hospitals to be lower than they would be at hospitals that have lower per-patient costs.”

    As The New York Times reported, Representative Pete Stark of California, chairman of the Ways and Means Subcommittee on Health, also does not accept the argument that Medicare is grossly underpaying doctors and hospitals:

    “Many of the private plans are poorly managed,” he said. “They are the General Motors of medical care delivery. Medicare is paying the right amounts. To suggest that a heart surgeon has to make $600,000 or $700,000 a year, as opposed to only $400,000 under Medicare fees, does not get much sympathy from me.”

    http://www.insurancecompanyrules.org/which_side/fixing_the_game_14/

  8. Veronica Pszoniak says:

    It is about time that some light is being shed on the costs that are charged for any medical service. It is unbelievable that one of the most important services that we may require through our life has been such a black hole to us. No matter what other service we I’ve ever used, with the exception of medical, I’ve known my cost up front and been able to make a choice which product and brand, store, service level, etc. that I wanted to pay for based on it’s value!

  9. Jay Edwards says:

    It’s the Medical Business…SALES (Drs, Nurses), ADMINISTRATION , TECHNOLOGY, BIG PHARMA… Interested only in generating wealth for themselves and their shareholders, like any business.

    They ” provide” nothing, they sell it.
    They sell no ” care”, at all, but their time, as ” care” is something that can only be done without charge.
    They sell no ” services” at all, as a ” service” is something done gratuitously

    So why the absurd euphemisms of ” health care “‘ ” health care services” and the true howler, your ” health care provider “?

    The medical business axis has hijacked all the terms of care and concern and altruism…while they practice devoid of any such concerns.

    The whole medical business axis is red in tooth and claw… It’s about profit and that’s all it’s about .

  10. Ed Hutt says:

    It is unfair to single out hospitals, but it’s a darn good start.

  11. Don Levit says:

    This article brings to light the joke that MSRP prices for health care, really is.
    What is needed, is for the Exchanges to coprise boards of representatives for consumers, hospitals, physicians, and insurers to come up with one price, per provider, per procedure.
    This authority will be enforced by the power of the Exchange.
    No more networks, no more need for insurers to individually negotiate network prices, saving insurer costs, and making the discrimination bdetween in and out of network providers, irrelevant.
    Don Levit

  12. lawrence says:

    Hospitals are deceptive scam artists. Not much better than credit card companies.

  13. Until we address the various monopoly protections provided to our healthcare delivery industry, we cannot expect any sense of normalcy in pricing.

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