Special Report: Confusing Cost of Care

HAMPTON ROADS, Va. (WAVY) - 10 On Your Side investigates why your hospital bill can't be simpler to understand. It's an extremely complex system of providers, vendors and insurers -- and that's never more obvious than when we get our bill.

Before you go into a hospital for any procedure, the hospital already knows what it will charge and how much of that charge it will get reimbursed, from the combined payments of your out-of-pocket and your health insurance. However, that combined reimbursement is often far less than the original charge.

As an example, 10 On Your Side used the case of a patient from Suffolk, whom we’re calling Susan for privacy reasons. Susan had a kidney stone removed this year at Chesapeake Regional Medical Center.

Susan’s total bill was more than $25,000 for 20 different line items, including the operation, anesthesia and several drugs and supplies. We investigated where the numbers come from, and found the answer is anything but simple.

WAVY News asked Chesapeake Regional’s Director of Patient Accounts, Meg Cavallero, if she could see how the billing system can be confusing for patients.

“Absolutely I can. It is a very confusing world to navigate, health care,” she said.

Cavallero says hospitals need to stay competitive so they look at what other local and national providers charge.

“Each hospital has a charge description master for every procedure supply and drug in their system. That charging is done the same for every patient.”

We asked Alan Balch, PhD, CEO of the Patient Advocate Foundation based in Hampton about that list of charges. PAF is dedicated to health care transparency and consumer protection. Balch says it’s closely guarded.

“Hardly anybody even knows how it's set or can even explain it to you, and it varies from hospital to hospital,” Balch told 10 On Your Side. “Only two or three people in the hospital know how to build it and what it means.”

Hospitals insist the charges reflect their true, legitimate amount of what a procedure costs. But Balch says an operation has so many stakeholders - think doctor, nurses, the pharmacy, the anesthesiologist, supplies - that billing becomes more and more complex.

“It's all over the place. I wouldn't want to characterize it as illegitimate -- I think it's a function of how complicated the transactional environment is.”

When we showed him Susan’s bill from Chesapeake Regional, Balch said it was actually more transparent than most. Cavallero says the hospital has staff members dedicated to explaining bills to their patients, and her hospital’s charges are in the 25th percentile, meaning 75 percent of similar hospitals charge more.

The difference between what a hospital charges and what it recovers from patients and their insurance is another source of confusion.

In the case of Susan's $25,000 lithotripsy, her insurance paid about $5,000, and her patient portion was $1,200. That still leaves nearly $19,000.

What happens to the difference?

“It gets written off to a contractual adjustment when it's an insurance company that we contract with,” Cavallero said.

“That's true,” Balch added, but says the way the write-off works is hard to understand.

Write-off includes not only the difference between what a hospital charges and what it gets reimbursed, but also charity work and bad debt. Based on data requested by WAVY, Bon Secours wrote off 74 percent of total charges last year, Sentara 69 percent, and Chesapeake Regional wrote off 66 percent.

Federal law requires all Virginia hospitals to provide emergency room treatment to patients regardless of their ability to pay. The most recent data available from the Virginia Hospitals and Healthcare Association (VHHA) shows hospitals statewide provided $584 million in charity care in 2014.

In other words, hospitals say they're not getting rich when they charge $25,000 when they know they’ll get back only about $6,000 in reimbursement. To make up the shortfall, they have investments, affiliated practices and other assets to try to balance the books.

The VHHA says slim operating margins are common among hospitals in the Commonwealth.

“It is commonly accepted in the industry that achieving a four percent operating margin is the minimum threshold necessary for hospitals to maintain fiscal stability and provide for capital expenditures. Based on (recent) data, 16 of 30 rural hospitals fell below that mark. Statewide, 34 of 88 hospitals were in that category.”

“We're very careful with our budgets,” Cavallero said. “We have to watch our pennies.”

Cavallero says hospitals will work with patients who do not have insurance, and will offer a discount if fees are paid up front and payment plans if necessary.

Hospitals and patient advocates alike say if we're going to change the system -- let's put more emphasis on protection and clarity when it comes to the cost of care.

“I think that there's a lot more discussion that needs to be had and personally, I would hope they include providers and hospitals and physicians when they're having those discussions,” Cavallero said.

“(We need to talk more about) anything related to payment whether it's drugs, hospital bills, insurance,” Balch said. “There’s a massive effort to try to increase the level of information and access to that information.”

Hospitals encourage patients to ask questions about their bills. Susan researched her procedure with an online resource, Healthcare Bluebook. Balch says it’s generally accurate in determining what a hospital will get reimbursed from patient and insurance for various operations.  He says some legislation is in the works to increase transparency for patients and simplify their hospital bills, but so far it remains in committee.

Resources from the Virginia Hospital and Healthcare Association

 

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