Hospital prices out of line with actual costs, experts say

Americans like to consider their health care the best of the best.  But in the most recent Central Intelligence Agency life expectancy estimates, the U.S. ranks 51st in the world.  And the cost?  Americans pay at least twice as much for their health care than most developed nations, including England and France.  These costs hit uninsured Americans the hardest.  And the charges vary from hospital to hospital.

Rickey Dana is one of millions of Americans living with a long-term illness.

“I would wake up in the middle of the night, vomiting whatever I had eaten, if there was anything left in there.  It was disastrous,” said Ms. Dana.

The diagnosis: chronic Lyme disease, a tick-borne bacterial infection.  Her pre-existing condition of depression had already caused insurance companies to either deny her coverage or offer unaffordable policies.  And the bills kept adding up.

“March. March. March. March. These were all due within a week of each other,” she said.

Her doctor put her on four different drugs and told her she needed rest.  But all she could think about was how to get by after losing her job and racking up tens of thousands of dollars in medical bills.

“I have to pay rent, and you’re charging me $400 for a 30-minute consult.  But you don’t want me to have stress in my life,” she said.

New data released from the government this month reveal the costs of care vary wildly from hospital to hospital.  For example, the same procedure can cost $12,000 or $37,000 in Arkansas; $35,000 or about $100,000 in different California hospitals; and $14,000 or $32,000 in Virginia.

Gerard Anderson heads the Johns Hopkins Center for Hospital Finance and Management.  He says hospitals have marked up the charges so much over the past 30 years that they no longer have any ties to actual costs.

“It’s not the input prices.  It’s not the cost of nurses and labor and those kinds of things.  It is just what they choose to charge,” said Anderson.

Michelle Katz is a nurse and health care consultant.  She says those pricing practices are unfair.

“There needs to be some sort of regulation, some sort of transparency, where if I go to the hospital I know I’m not going to go into debt because I went into the hospital,” said Ms. Katz.

Millions of Americans like Ms. Dana are hoping when a key part of the Obama Administration’s health care reform initiative goes into effect next year, it will fix these sky-rocketing costs.  The Affordable Care Act will give tens of millions of Americans new access to health care services.  But Anderson says the wild and inconsistent charges won’t be going down.

“It’s not bringing them back to a normal, reasonable amount.  It’s just constraining the rate of increase,” he said.

Ms. Dana applied for financial aid and reduced her bills from $40,000 to $10,000.

“I didn’t even have to fight them or anything.  They were great,” she said.

But even then, the remaining double-digit cost has placed such a burden on her that she’s had no choice but to leave her home for a cheaper place to live.

In another case, Tatyana Schum was at home with her dogs when a burning sensation ripped through her body.

“Unbelievable pain like I’ve never felt before,” said Ms. Schum.

The pain was from an inflamed gallbladder that had to be removed in emergency surgery.

And that 90-minute procedure produced about $18,000 in bills.

“$18,000 seems a little bit crazy,” said Ms. Schum. “But then how do you know?”

You don’t, according to Anderson at Johns Hopkins.

“If you go to a hospital in the United States and you want to know what you’re going to get charged for an MRI or a day in the hospital or anything, they’re not going to tell you.  And they’re not required to tell you by law,” said Anderson.

“That’s hard for me to swallow, and I’ll tell you why: It’s because everybody’s going to need a hospital at some point,” said Ms. Schum.

Michelle Katz, a nurse and health care consultant. looked at the $18,000 bill.  She’s written two books on how to bring down hospital costs.  Ms. Katz says patients can look out for additional charges or errors in bill coding.

“You know when you’re typing on your iPhone and you accidentally push “P” instead of “O”?  That happens to people, and unfortunately it may be a code that’s $50 compared to a code that’s $1,000,” said Ms. Katz.

Gallbladder surgery is seen as a moderate problem, or Level 3 in hospital speak.  But Ms. Schum was charged for a hospital stay with a Level 4 or high severity problem, the nurse noted.

Ms. Katz says sometimes a hospital charges a patient under a code that includes things that have already been billed.

“It’s kind of like getting the Happy Meal [at McDonald’s] and knowing what comes in it, then they charge you for an extra hamburger, and you didn’t order it,” she said.

“And don’t forget the high cost of medication and medical supplies.  These $60 charges?  They’re bags of salt water – or saline solution.  You can buy them online for less than $2.50 each.”

“And you say, ‘but it doesn’t cost $60.’  And they say, ‘but that’s how much it costs in a hospital,'” said Anderson.

Ms. Schum took her bills to the hospital and the doctors to try to reduce her charges.  In all, they agreed to cut her bills from nearly $18,000 to $10,000.

“It’s amazing.  And it’s much more manageable,” she said.

They even gave Ms. Schum a payment timetable that works with her income.  And she hopes hospitals will start providing more cost transparency to patients so everyone can know they’re getting good care at a fair price.

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