Survey Reveals Disparities in Medicare Charges at Area Hospitals

Wednesday, May 15, 2013


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The federal government via its Centers for Medicare and Medicaid Services (CMS) recently released data revealing significant disparities in what hospitals charge for common inpatient services.

The data, made public through an Obama administration transparency initiative to make the health care system more affordable and accountable, reveals that hospitals within the same communities charge differing amounts for same and similar inpatient procedures. 

Transformation requires greater transparency.

"Transformation of the health care delivery system cannot occur without greater price transparency," said Risa Lavizzo-Mourey, M.D., RWJF president and CEO in the release. "While more work lies ahead, the release of these hospital price data will allow us to shine a light on the often vast variations in hospital charges."

A sampling of Rhode Island hospitals shown in the survey included Rhode Island Hospital, Memorial Hospital and Women and Infant’s Hospital.

The data provided by CMS included hospital-specific charges for more than 3,000 U.S. hospitals that received Medicare Inpatient Prospective Payment System (IPPS) payments. The survey included the top 100 most frequently billed discharges paid under Medicare, based on a rate per discharge using the Medicare Severity Diagnosis Related Group (MS-DRG) for Fiscal Year 2011.

Billing charges and funds received for services are not the same.

Individual hospitals determine the charge for individual items and services provided to patients and the amount the hospital bills Medicare for an item or service, per the CMS release.

Although hospitals determine the charges billed for services, the government determines Medicare amounts paid out.

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“The hospitals determine the charges,” said Edward Quinlan, President of the Hospital Association of Rhode Island. “They don’t determine the payments. CMS sets the payments and the hospitals receive what is determined by CMS. They have no control over what is received. It is not challengeable nor is it approachable.”

The charges showed significant differences from one institution to another. For instance, for in-patient services, the average covered charges for respiratory system diagnosis with ventilator support (greater than 96 hours) at Rhode Island Hospital were $135,692.79, with average total payments of $47,912.70. At Memorial Hospital, average covered charges for the in-patient stay were $68,783.31, with average total payments of $22,471.88.

Discrepancies are due to differing and significant variables.

The discrepancy in charges for each hospital is dependent on a number of variables, whether they be economic, geographic, size or population.

“The survey is based on information regarding charges that is meaningless,” said Quinlan. “The amount of money a hospital receives is set by CMA standards, not the hospitals. The charges made can be dependent on whether the hospital is small, large, urban, suburban, number of patients, specialty services, volume of charitable care and much, much more.”

The average covered charges for pulmonary edema and respiratory failure at Memorial Hospital in Pawtucket were $26,845.86, with average total payments of $11,925.86. At Rhode Island Hospital, the same procedure showed average covered charges of $38,594.66, with average total payments of $12,311.97.

The number for Rhode Island Hospital is based on seventy-nine (79) patient discharges and the Memorial Hospital number only 14 patient discharges for the same procedure.

Disparities in charges were shown in similar comparisons involving Women and Infant’s Hospital. An in-patient charge for a Gastrointestinal Obstruction (w/CC), showed average covered charges of $28,381.75, with average total payments of $8,360.65 at Women and Infant’s Hospital. The numbers were based on twenty (20) discharges.

The same procedure at Rhode Island Hospital, right next door revealed an average covered charge of $28,807.76, with average total payments of $9,452.07 and was based on only (13) discharges.

“It’s apples and oranges, apricots and bananas,” said Quinlan. “Every hospital in the state in every community plays a unique role in delivering medical care.”

Among the highest procedures at area hospitals, were major small and large bowel procedures at Memorial Hospital with average covered charges of $82,983.08, with average total payments of $49,051.67; major cardiovascular procedures at Rhode Island Hospital with average covered charges of $76,506.12, with average total payments of $26,945.79; and respiratory infarction or inflammation at Memorial Hospital, at average covered charges of $48,064.13, with average total payments of $19,248.31.

Data is available to consumers.

“Currently, consumers don’t know what a hospital is charging them or their insurance company for a given procedure, like a knee replacement, or how much of a price difference there is at different hospitals, even within the same city,” said Secretary of Health and Services, Katherine Sebelius. “This data and new data centers will help fill that gap.”

HHS made approximately $87 million available to states to create health care pricing data centers to assist consumers and to continue enhancing their health insurance rate review programs according to information provided.

Funding to data centers to collect, analyze, and publish health pricing and medical claims reimbursement data. The data centers’ work helps consumers better understand the comparative price of procedures in a given region or for a specific health insurer or service setting. Businesses and consumers alike can use these data to drive decision-making and reward cost-effective provision of care.

The release also noted new consumer tools made available under the Affordable Care Act in ensuring that consumers, Medicare, and other payers get the best value for their health care dollar.

“Medicare is beginning to pay providers based on the quality they provide rather than just the quantity of services they furnish by implementing new programs such as value-based purchasing and readmissions reductions. HHS awarded $170 million to states to enhance their rate review programs, and since the passage of the Affordable Care Act, the proportion of insurance company requests for double-digit rate increases fell from 75 percent in 2010 to 14 percent so far in 2013.”


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