Trying to figure out what your hospital bill will be in South Jersey can be very difficult, despite the U.S. government’s effort this year to increase price transparency at more than 3,000 hospitals.
Oddities of the system became apparent when the U.S. Centers for Medicare and Medicaid Services published data allowing consumers to compare what hospitals billed Medicare — the U.S. government insurance program for those 65 and older or with qualifying disabilities — for 100 common procedures in 2011.
There were huge variations in Atlantic, Cape May, Cumberland and Ocean counties, including a more than $60,000 higher initial charge for a cardiac pacemaker at AtlantiCare Regional Medical Center compared to Southern Ocean Medical Center.
Those initial charges bear little resemblance to what nearly everyone — insurance companies, the U.S. government and the uninsured — pays.
Asked why the federal data show it bills Medicare significantly more for some procedures than other area hospitals, AtlantiCare said there are several factors involved. Among them are the complex specialties it serves, including a Level Two Trauma Center, the Neonatal Intensive Care Unit and the Heart Institute for complex cardiac issues, said James Nolan, senior vice president of finance for AtlantiCare.
AtlantiCare also provided more than $49 million in charity care last year — the most by far of area hospitals — but was reimbursed only $24.5 million, Nolan said. And as one of two safety net hospitals in southern New Jersey, AtlantiCare said it incurs a great deal of bad debt from treating significant portions of patients from low-income and indigent backgrounds.
The amount hospitals actually received from Medicare was significantly less. For cardiac pacemakers, it varied by only about $1,500 among AtlantiCare Regional Medical Center in Atlantic City, Shore Medical Center in Somers Point, Vineland’s South Jersey Healthcare Regional Medical Center (now called Inspira), Southern Ocean Medical Center in Manahawkin and Cape Regional Medical Center in Cape May Court House.
What Medicare pays is somewhat closer to what a procedure costs, and that amount is used as a baseline by many insurers and the U.S. government. Medicare reimbursements cover about 91 percent of a New Jersey hospital’s cost to deliver the service provided and is not negotiable, said Kerry McKean Kelly, a spokeswoman for the New Jersey Hospital Association, a trade group based in Princeton.
That leaves hospitals — which do negotiate rates with insurance companies — to make up the typical 9 percent Medicare shortfall by charging insurers and HMOs more. They also need to cover charity care for uninsured patients.
For most uninsured patients, a 2009 state law says hospitals cannot charge more than 15 percent more than what Medicare pays for procedures. Tied to income levels, a family of four earning less than $118,000 is covered by the law, for example.
“There’s an inherent cost shift (to private payers) built into rates,” said Jim Foley, chief financial officer of Shore Medical Center.
At hospitals in southern New Jersey, and elsewhere in the nation, trying to compare surgical procedures can be tricky based on the needs of the patients.
“When someone comes in for a certain procedure, not every patient is the same. What they consume while they’re here is different based upon the total health system. It makes it a challenge to quote exactly what the price would be,” said James Nolan, senior vice president of finance for AtlantiCare.
Jim Albano is vice president for network management at Horizon Blue Cross Blue Shield of New Jersey and is involved in negotiating contracts with hospitals. His company helps patients make the connection between hospital costs and insurance premiums.
Horizon has a Web tool for its members to compare pricing and costs associated with various procedures, including an estimator for out-of-pocket costs.
“In other businesses, what someone is charging is obviously critical. That’s what people use to make their buying decision,” he said. “Where health insurance coverage is in place, many times that charge gets masked, or at least it’s not as easy to focus on because the health plan is picking up the lion’s share of the bill. But what people fail to realize is that amount we’re paying is directly impacted by the charge. As the charge goes up, so goes up the reimbursement, which ultimately makes the premiums go up.”
The trend toward health coverage with higher deductibles — less expensive for employers to provide — is also increasing attention to hospital costs.
Tom Baldosaro is vice president for finance at Inspira Health Network, which oversees Inspira Medical Center Vineland.
“You see a lot more high-deductible health plans, which puts more of an onus on the consumer understanding what they’re paying for because they’ll be responsible for a rather large deductible,” he said.
The Kaiser Family Foundation, a nonpartisan research group, said 19 percent of covered workers were enrolled in high-deductible plans in 2012, compared with 13 percent in 2010 and 8 percent in 2009.
But ultimately, the pricing data put out by the government falls short in helping explain prices to consumers, said Kelly, of the New Jersey Hospital Association.
“It’s really a broken system. The fact this information on charges is out there and it doesn’t make sense to individuals does tell us it’s a broken system that evolved over time to the point where it is meaningless to most health care consumers,” she said.
Some states have adopted policies to make average actual costs more publicly available.
In March, the HealthCare Incentives Improvement Institute and the Catalyst For Payment Reform said New Jersey was among 29 states to get an F on a state price transparency law report card. Massachusetts and New Hampshire each received an A.
Massachusetts has a Web tool through the Massachusetts Health Care Quality and Cost Council. There, for example, one can compare knee-replacement costs using prices that health plans paid hospitals. It also allows a side-by-side comparison with quality of care, such as incidents of surgical site infections.
Joel Cantor, director of the Center for State Health Policy at Rutgers University, said it is still undetermined whether individual states’ transparency efforts have the desired effect.
“There’s really no good research out yet whether this drives down the large variations or the level of prices,” he said. “In theory it should, but it depends on whether people use it.”
The New Jersey Hospital Association offers NJ Hospital Price Compare at www.njhospitalpricecompare.com, which was started in 2007.
The data on the site includes 25 medical conditions and their average and median prices at different hospitals. However, the website has not been updated since the 2009 figures were published, and Kelly said the nonprofit association is in the process of switching to a different data source to provide the information.
Katherine Hempstead, senior program officer at the Robert Wood Johnson Foundation in Princeton, said the U.S. government’s release of the hospital database should prompt more questions about health care costs.
“What does it make people think about the prices they are paying? They’re thinking at some level, ‘This isn’t good for me.’ This creates a real interest and hunger for price information,” she said.
Health care spending in the U.S. totaled $2.7 trillion in 2011, compared with about $1.5 trillion in 2001 and $724 billion in 1990, according to the Centers for Medicare and Medicaid Services.
In 2011, spending at hospitals accounted for $851 billion, nearly one-third of health care spending.
Kelly said there are ways for consumers to learn more about their health care costs.
“Go right to the source for the information — talk to hospitals, health care providers, insurers and get the specific information you need,” she said. “The database can be a helpful starting point, but it doesn’t provide the precise level of information most individuals need.”
Contact Brian Ianieri:
To access the government database, go to www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/Inpatient.html