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Two years ago, Phil’s daughter Mary spent a month at a major San Diego nonprofit hospital, recovering from a near-fatal disease. Like one in four Californians, Mary was uninsured. The stay was billed at over a quarter-million dollars.

“I was overwhelmed,” says Mary (not her real name), a San Carlos resident who was in her late 20s at the time. She was still recovering when the bills began coming in. “At one point, I said, ‘It would have been easier to die.’ That’s the best way to put it. It’s inhumane.”

She and her father wish to remain anonymous and to keep the hospital unnamed in case she requires medical assistance in the future.

“I called the number given on the bill, gave them the account number, and said we didn’t have that kind of money,” Phil says. “The operator who received my call just said, ‘That’s okay, sir, I am authorized to offer a 50 percent discount.’ That was the very first time I called the billing department.”

A patient-advocacy group got them an additional 5 percent off the bill, but making the payment remained near impossible for Phil and his recovering daughter. Surprised by the elasticity of the charges, Phil began researching hospital-billing practices on the internet and stumbled upon hospitalbillreview.com, a medical-bill evaluation service run by Chapman Consulting. Marc Chapman, president of the Austin, Texas–based company, advised Phil to request a detailed bill with current procedural terminology codes, known as CPT codes, which hospitals use in lieu of a line-by-line description of services.

“The first bill I received was just like a credit card bill,” Phil says. It listed only the amount due. When he requested a detailed bill, they sent an itemized bill without the codes. He asked for a bill with the CPT codes, and as he recalls, “They seemed reluctant to provide it.”

For $200 (some review services charge as much as 50 percent of the amount of the bill), Chapman provided Phil with a line-by-line analysis of charges complete with CPT codes, the price charged by the hospital, the price Medicare pays, and a “reasonable and acceptable” charge of 150 to 180 percent of the Medicare price. All the charges were inflated, some as much as five times the Medicare rate. The actual hospital costs were around $60,000. Chapman said a reasonable and acceptable bill would be about $84,000.

Little wonder, then, that the billing department offered a half-price discount so readily; they were still making over 100 percent in profit.

“[Overbilling] is common practice,” says Brian Heller, Ph.D., a health-insurance consultant in Ohio. “Hospitals have to jack up their charges to offset the nonreimbursed or underreimbursed care they provide.”

However, the hospital in question states in its annual financial disclosure report that it lost $872,022 in 2008 to unpaid outpatient bills, an insignificant sum compared to the year’s $413,075,407 net patient revenue. Note that hospitals quote their unpaid bills and charity work at their billing rates, not their actual cost, which is typically about 25 percent of their billing. The hospital’s actual cost of unpaid bills was only about $220,000, or less than 0.05 percent of net patient revenue.

“Most hospitals bill an amount much greater than what Medicare pays them for the services,” says Talina Smith, a health-provider billing agent with experience in seven states and several companies, including a private ambulance service in San Diego. “This in and of itself isn’t very surprising. Medicare pays some of the lowest rates of any type of insurance coverage with the exception of Medicaid programs. Most commercial insurance companies pay more than Medicare. For people with good health insurance coverage, this is hardly ever noticed, as the hospital will typically be contracted with their insurance, and therefore, the insured patient would not see any extra charges. However, for uninsured folks like [Mary], these bills are horribly scary.”

One example of overcharging on Mary’s bill involved the daily blood tests for which the hospital billed her more than $40,000. Using Chapman’s calculation, the tests should have cost around $3500. According to Medical Billing Advocates of America, most hospitals would bill approximately $30,000 to $35,000 for a routine appendectomy. Medicare would reimburse $4200 to $5000 as payment in full. An HMO may contract to pay $7000 for the same bill. Commercial insurance companies may reimburse $9000. Uninsured patients will be forced to pay the full $35,000.

It’s difficult to believe that hospitals would charge such grossly inflated fees to the very people who can least afford them, the uninsured and underinsured. Smith is familiar with several explanations for this practice, and from a business standpoint, they all make sense. Hospitals need money to cover costs of such things as expensive medical equipment, lawsuits and malpractice insurance, and the unpaid bills of patients who cannot or refuse to pay. Meanwhile, 70 percent of bankruptcy claims in the United States are due to medical debt among insured and uninsured patients alike, according to the research of Elizabeth Warren, a professor at Harvard University’s law school.

“Ten Ways to Avoid Outrageous Hospital Overcharges,” an article on msn.com, a news website, cites a case where a patient was charged $129 for a “mucous recovery system,” or a box of tissues. Medical Billing Advocates of America cites cases of patients being charged $57.50 for a teddy bear (called a “cough support device” on the bill), $57 for a two-by-two-inch piece of gauze used to wipe down surgical equipment (called a “fog elimination device” on the bill), and $1004 for a “courtesy” toothbrush. Mary was billed for a medication, propranolol, at a price 102 times higher than Costco pharmacy charged (no one bothered to tell her that it would cause her hair to fall out) and a laxative at a 5200 percent markup. She was charged $67.83 for a bacterial culture for which Medicare pays $13.22, $29.75 for a blood test for which Medicare pays $8.38, and $536.25 for a consultation for which Medicare pays $194.45.

Virtually all hospitals charge uninsured patients more than they charge those with health insurance, said Gerard Anderson, a health policy professor at Johns Hopkins Bloomberg School of Public Health, on 60 Minutes in March 2006. Senator Chuck Grassley, then chair of the Senate Finance Committee, said that billing practices for uninsured patients are “an institutional bias against uninsured people” and “something to be outraged about.”

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elliott July 10, 2010 @ 1:13 p.m.

Great article. In these times we need stories like this and the useful supporting research. Thanks


SurfPuppy619 July 10, 2010 @ 1:43 p.m.

I agree-excellent article-thanks for sharing!

Love this one;

“[Overbilling] is common practice,” says Brian Heller, Ph.D., a health-insurance consultant in Ohio. “Hospitals have to jack up their charges to offset the nonreimbursed or underreimbursed care they provide.”

However, the hospital in question states in its annual financial disclosure report that it lost $872,022 in 2008 to unpaid outpatient bills, an insignificant sum compared to the year’s $413,075,407 net patient revenue.

**Note that hospitals quote their unpaid bills and charity work at their billing rates, not their actual cost, which is typically about 25 percent of their billing.*


mrsannoymous July 10, 2010 @ 6:22 p.m.

If you're going to write an article, you need to learn to do your research before you provide the public with a deceptive article from a woman that CLAIMS she only received 50% discount. If you have ZERO knowledge of the health care billing process, coding, customer service, and the ACTUAL steps providers take to help financial strapped patients, maybe you shouldn't always take the "supposed victim" side right away.

BTW to Chad Deal (writer), get your quotes right before you publish an article. Learn to do some math and get the real numbers before you provide the public with false information.


Origami_Astronaught July 12, 2010 @ 9:19 p.m.

"...the hospital settled for $17,000 (6.8 percent of the original bill)..."

If you are privy to "real numbers" or any relevant information, I would be interested to hear about it.


ChinaCat July 17, 2010 @ 7:15 a.m.

To mrsannoymous; Re cover story by Chad Deal; your remarks were so general and vague, it seems you missed the whole point of the story, which is Mary was offered a 50% discount up front the first time she called the hospital billing department. AFTER gross irregularities in the bill had been presented the hospital offered to settle for 6.8% of the original bill. Duh! I wonder why?

Also I can assure you, the numbers in the article are real and the fact that hospital billing departments don't seem to, or want to understand California law AB774 is also real. They are only too happy to pretend it doesn't exist or "doesn't apply in this particular case". They do not go out of their way to help "financially strapped" patients. The patients have to find the way, even though AB774 requires the hospital to state what charity care and discounts (2 very separate things) are available. I am still trying to get a copy of a certain hospital's written discount policy after months of first seeing the bill. AB774 requires that the hosital has such a written policy and presents it on request, but it doesn't happen that easily.

I'd be glad to answer mrsannoymous if he/she could be more specific.


jv333 July 22, 2010 @ 12:15 p.m.

What an eyeful!! Great article with excellent and nightmarish data about the hospitals and healthcare system. I wish your cover would have had an eye-catching subtitle to draw more attention.

The invoice cited where the article started would have been good to put on the cover...along with the actual bill for $250,000.

or a simple "get well card from a hospital: "Your cost to stay 30 days in the hospital is $60,000 ... we're billing you for $250,000. Get well soon."

And people don't think something has to be done about health care? This is abominable. The least protected get screwed the most. Welcome to America.


Jake July 22, 2010 @ 5:39 p.m.

This article came into my hands just in time for me to activate my own agenda to drive down my bill. I literally have the same situation. The hospital didn't want to admit that AB774 was even an option. Nearly everyone on the billing staff said they never heard of it. After having them read their own bill, asking for an audit, and writing letters to the billing department, my local legislators and the like, they have offered me a substantial cut in price, nearly 66 percent. But I'm not going to stop there and agree. I still will have trouble covering it and paying my monthly bills. I'm now negotiating the rate even lower, hopefully down to 85 percent of their inflated cost and then I will write a check and call it a day.

Don't let hospitals push you around. It's illegal to send you to debt collectors when you are eligible for the AB774 FAIR PRICE discount. The hospital I'm dealing with kept sending me to apply for medicare or CMS. But they never offered a FAIR PRICING discount which states that in nearly invisible ink on the back of the bill. The care was excellent at the hospital but the billing people are monsters. Why didn't they offer this discount from the gate and I would have been paying it off by now...?


PaulAllen July 31, 2010 @ 2:05 a.m.

Jake I hope you read this.

Excellent article in the Reader BTW and I agree, VERY TIMELY.

Here is the scenario. I am currently on unemployment, I am uninsured and do not qualify for Medi-Cal but may have too much money in the bank to qualify for CMS. I think I might qualify for the discount payment policy as per Assembly Bill No. 774

I just got my ER bill (still waiting on the Dr. bill) from a recent visit for a hand wound. The ER bill is just ridiculous for the service I actually received.

Here is the question, according to AB774 it seems all I would have to provide to the hospital to see if I qualify for the the discount payment policy would be recent pay stubs or income tax returns. The hospital (which will remain nameless) apparently asks for more info, according to their paperwork they ask for checking account #, savings account #, CD/IRA/Stocks/Bonds value, etc. They seem to use the same form for both Charity Care and discounted payment, that seems sneaky to me. What info did you provide?? I cut and pasted the pertinent section (1) of the bill below. Any help is appreciated.

(1) For the purpose of determining eligibility for discounted payment, documentation of income shall be limited to recent pay stubs or income tax returns. (2) For the purpose of determining eligibility for charity care, documentation of assets may include information on all monetary assets, but shall not include statements on retirement or deferred-compensation plans qualified under the Internal Revenue Code, or nonqualified deferred-compensation plans. A hospital may require waivers or releases from the patient or the patient’s family, authorizing the hospital to obtain account information from financial or commercial institutions, or other entities that hold or maintain the monetary assets to verify their value. Information obtained pursuant to this paragraph regarding the assets of the patient or the patient’s family shall not be used for collections activities.


Founder July 31, 2010 @ 7:54 a.m.

To both #7, # 8 and Chad Deal

Please consider keeping US posted about your efforts to reduce your bills!

I guess AB774 needs a penalty clause to keep providers from asking for "illegal" paperwork requests and or delaying to provide timely paperwork to their patients...

Also perhaps a followup story with a link to this one would help raise public awareness about these “These Gangsters" and you might also seek a public information request regarding these Providers financial stats as reported to the State and Federal IRS...


ChinaCat Aug. 6, 2010 @ 7:08 a.m.

Re AB774: There is a ton of information on the Internet. The bill in the original article was not negotiated in terms of AB774, but was based on a slew of double and incorrect billings, for services that were not provided.

We are however currently negotiating another ER bill based on AB774 which clearly states the difference between Discount and Charity. For a Fair Price Discount all that is needed is a statement and proof of income to determine whether a)your income is below the Federal Poverty Level(FPL) or b) your medical out-of-pocket is more than 10% of your income. The hospital we are dealing with also requested savings and bank account statements, something they are basically not allowed to do for a fair price discount. Since we told them this some months ago, we have not heard back.

As you say, the hospitals good care is ruined by the predators in the billing departments. And why do doctors all belong to these national organizations that then rent them out to the hospitals adding another layer of expense and complexity, but contributing nothing to your care?

As Churchill said "Never, never, never, never give up". Non illegitimes carborundum!(Don't let the b*ds wear you down)


Founder Aug. 6, 2010 @ 9:40 a.m.

Thanks for keeping US posted!

Other will profit by your experiences...

  • Here are some suggestions for getting billing issues ironed out fast:


PaulAllen Aug. 6, 2010 @ 3:59 p.m.

OK update.

Made my first call to the hospital billing dept to attempt to take care of the emergency room part of the bill. Explained I am unemployed and uninsured and that the bill was too much to handle, also mentioned about 5 times I was prepared to make payment while I was on the phone. The woman I spoke with asked me what I could afford. I offered to pay 1/3 of the bill. The woman said they could offer a discount of 30% , leaving me to pay the rest. I thanked her for the offer, reiterated my situation and brought up the AB774 bill. She told me I would need to apply for Charity care and Discounted care at the same time and I think she said I had to go thru CMS as well. I asked her if I could come in and speak to someone in person and she gave me the run around that it's not how their office is set up. I politely pushed her to give me someone else to speak to who was her superior.

 The next person I spoke to, a man, asked what he could do for me.  I reiterated once again my situation and after a short period he said they could offer up to a %40 discount.  I again thanked him and explained about AB774 and how I understood the law, that  "For the purpose of determining eligibility for discounted payment, documentation of income shall be limited to recent pay stubs or income tax returns."  He repeated basically what the woman told me but did say I didn't have to fill out all of the info for bank acct#'s, etc but that I would then be eligible for less of a discount.

My understanding is Charity care can pay for the entire hospital bill depending on the situation. Discounted care (by name actually) is a "discount" "..to the amount of payment the hospital would receive for providing services from Medicare, Medi-Cal, Healthy Families, or any other government-sponsored health program of health benefits in which the hospital participates, whichever is greater."

Why can I not choose specifically which programs I apply for?? again..

"..Any patient, or patient’s legal representative, who requests a discounted payment, charity care, or other assistance in meeting their financial obligation to the hospital shall make every reasonable effort to provide the hospital with documentation of income and health benefits coverage. If the person requests charity care or a discounted payment and fails to provide information that is reasonable and necessary for the hospital to make a determination, the hospital may consider that failure in making its determination. (1) FOR THE PURPOSE OF DETERMINING ELIGIBILITY FOR DISCOUNTED PAYMENT, DOCUMENTATION OF INCOME SHALL BE LIMITED TO RECENT PAY STUBS OR INCOME TAX RETURNS."


PaulAllen Aug. 6, 2010 @ 4:02 p.m.


I have NO problem giving them what they need to look at my case for Discounted care.

So here is where I am thus far.  I am wondering if I do only send in the info for Discounted care will I be disqualified due to me "...fail(ing)s to provide information that is reasonable and necessary for the hospital to make a determination..."  ??

After writing all of this it seems logical that Discounted care will cut at least %40 off an emergency room hospital bill if not more , otherwise why would they protect that option so much?

Whoever read this far thanks and any advice will be greatly appreciated. Continue the good and just fight!


Founder Aug. 6, 2010 @ 5:08 p.m.

Reply to PaulAllen (I'm also adding these to my blog (see above)).

Rule #1. Don't let them get you to agree to any payment until you CLEARLY understand all your options.

Rule #2. Call again and refer to your notes because they are referring to their notes (on what you said) and ask to speak to another Rep or better yet the Boss.

Rule #3. Ask them to explain each of the laws to you and how it affects your bill (take good notes).

Rule #4. Call another Hospital's Billing Department and ask the same questions and see what their answers are, for a quick "Reality Check"...

Rule #5. Ask the Rep for the California State's Office of XYZ that you can talk to about what you are being charged; that will get their attention.

Rule #6. Consider getting a free legal consultation to see if you have other options; take you printed out "History" and watch the Lawyers eyes light up while he reads them... Then ask him if you should seek further legal help or go to Small Claims Court yourself.

Rule #7. While you are doing this, tell yourself you are getting paid $50 per hour, that will make you smile and in reality, you will probably be saving more than that!


Origami_Astronaught Aug. 6, 2010 @ 9:26 p.m.

Excellent advice, Founder.

PaulAllen, it may also be worth your while to seek out the assistance of a Medical Billing Advocate such as Chapman or Bennetts (though your options are many with this and you would do well to shop around for the best rate) or request a bill with CPT codes from the hospital and decipher them yourself using the websites noted in the story. If you end up finding double charges, phantom charges, or upcoding (all of which are fairly common), you may be offered a better discount as was the case with ChinaCat.


ChinaCat Sept. 25, 2010 @ 10:16 a.m.

My duaghters ER bill was finally resolved by our consistently and firmly reiterating the AB774 rules and pointing out the difference between Charity Care and Discount. We were re-directed to Administration, who finally directed us (after much prompting from us) back to billing. I don't know if it's ignorance of the law, or whether they are under pressure from their bosses, but they finally responded to us by accepting our first offer (less than 1/3 of the original bill, and about Medicare plus 20%) some 8 months after we made the offer.

You have to be very firm, and you can always threaten to report them to Health and Human Services if they insist on not obeying the law. There are form letters for just such complaints on the HHS website. That usually does the trick because their licensing depends on it!! It definitely worked for us!

China Cat


Founder Sept. 25, 2010 @ 11:21 a.m.

Reply #15 Thanks and I like your advice also. Well done!

Isn't helping others is a GREAT thing!


Founder Sept. 25, 2010 @ 11:23 a.m.

Reply #16 GREAT NEWS!

I hope others will be inspired by what you did!

All the best to you and your Daughter!


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