Sign Up for Updates


Billing charges that hospitals say are meaningless stir controversy

Pharmacy Choice. First appeared in Ventura County Star, CA, 5/15/13

Hospitals in Ventura County used billing charges in 2011 that exceeded their actual costs by a range of 339 to 598 percent, according to data from the California Nurses Association.
Released at a news conference on the steps the state capitol on Tuesday, the numbers show hospitals across California set charges that in 2011 were an average of 451 percent higher than their total costs.

Hospital officials say the billing charges have no relevance on what insurers or patients pay. Insurance companies negotiate their payment rates with hospitals and uninsured patients either fit into assistance programs or, in general, receive other discounts, they said.

Hospital representatives offered the same response a week ago when the Centers for Medicare & Medicaid Services released data that compared hospital billing charges for similar health conditions.
Treatment for a major joint replacement and similar conditions triggered billing charges of $62,909 at Ventura County Medical Center in fiscal year 2011, according to the Medicare data. Treatment for the same condition triggered charges of $96,566 at St. John's Pleasant Valley Hospital in Camarillo.

"Charges are completely irrelevant. No one pays charges," said Jan Emerson-Shea, spokeswoman for the California Hospital Association. She blamed the use of inflated numbers on federal regulations that mandate hospitals have one set of charges for all payers, though insurance companies negotiate differing rates with different hospitals.

"We think it should be changed," she said of the billing system. "But it's extremely complex."

Outside observers acknowledged the billing charges don't reflect what insurers or patients pay. But they contend that in some instances, the charges influence formulas used to determine what a hospital is paid.

"These formulas will sometimes pay the hospital a small fraction of its billed charges," said Glenn Melnick, a USC health economist. "If they're meaningless how come hospitals spend all this money on consultants to raise them? Why haven't they stayed flat for the past 15 years? Why do hospitals keep raising them if they have no impact?"

And though at least one local hospital Community Memorial in Ventura contended their billed charges decreased over the past several years, the CNA data showed the rates across the state jumped 14 points to 451 percent from 2010 to 2011.

Los Robles Hospital & Medical Center, a for-profit hospital in Thousand Oaks run by the Hospital Corporation of America, set billable charges that exceeded their costs in year 2011 by 597.6 percent, according to data from the nurses union that represents 85,000 people. The mark was the highest in Ventura County.

The Ventura County Medical Center had the lowest ratio with charges 339.3 percent higher than costs. That mark still exceeded the national average of 331 percent.

Other hospital ratios in the county included: Community Memorial, 564 percent; St. John's in Camarillo, 477 percent; St. John's in Oxnard, 442 percent; Simi Valley, 410 percent; and Ojai Valley Community Hospital, 369 percent.

Across the state, the charge-to-cost gap is highest at for-profit hospitals and lowest at public hospitals, said CNA spokesman Chuck Idelson. He said government-run hospitals are generally more accountable and transparent.

"Their primary mission is not turning their facility into Fort Knox," he said, contending that the inflated prices helped fuel record profits. Hospital officials said that reimbursement from Medicare and Medi-Cal don't cover their costs.

CNA's numbers come from Medicare data. The charges are not what insurers or patients pay but are a tool used to drive up those prices, Idelson said. In turn, insurance companies charge higher premiums and employers push more of the burden on their workers.

"What these charges mean for the public are huge increases in their out-of-pocket costs or the loss of health coverage entirely," he said, referring to employers who no longer offer insurance.
Emerson-Shea characterized the CNA release of data as a publicity stunt designed to publicize legislative proposals that deal with charity care and workplace violence.

"All they're trying to do is be opportunistic," she said.

Officials at Los Robles Hospital & Medical Center said in a written statement that what a patient pays has more to do with their coverage than billable charges. The government sets its reimbursement rates and private insurers negotiate their rates.

"Everyone else is eligible for our charity care program or they receive our uninsured discounts, which are similar to the discounts a private insurance plan gets," the statement said.
As far as billable charges, CMS officials said the dramatically different prices used by hospitals for the same treatment shows the need for more transparency.

"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 U.S. Health and Human Services Secretary Kathleen Sebelius in a statement issued last week.

Hospital officials maintain the charges are irrelevant. But many of them also acknowledge the current system makes little sense.

"I don't know of any CFO who wouldn't like to drop their charges to what they actually get paid and make this issue go away," said Dave Glyer, chief financial officer at Community Memorial Hospital in Ventura. He contends Medicare regulations stand in the way.

Jim Lott of the Hospital Association of Southern California noted that while uninsured patients don't pay the billable charges, some of them do get that bill in the mail with its message they owe far more than they could ever pay.

"I don't argue that this is untenable for the uninsured," he said. "That's the population we need to fix the problem for."

Back to News »