In addition to the bloated prices that appeared on Mary’s bill, Phil uncovered multiple charges for services that never took place. Among them were physical therapy sessions started during a period when Mary was barely conscious and incapable of leaving her bed, a $180 psychiatric evaluation that Mary does not recall and that the hospital has no records of, three $607 ultrasounds that don’t exist, and an $81.30 flu shot that Mary declined upon her discharge from the hospital. Phil also observed a 7.2 percent increase in charges at the beginning of the fiscal year, bearing no correlation to annual inflation rate, which was 2.8 in 2007 and 3.8 in 2008.
In 1998, a study on hospital billing procedures led by Dr. Kimberly Elsbach of UC Davis found that hospitals intentionally make their bills difficult to analyze in order to discourage patients from contesting the charges. Many contain wording meant to “scare patients into paying quickly.”
“Citizens are becoming more educated about hospital billing and taking responsibility for ensuring that their charges are correct,” Elsbach said. “Hospitals are countering that with their own efforts to discourage people from becoming involved with challenges or audits because it costs them a great deal of time and money.”
The CPT codes are available to the public on the American Medical Association website, along with the Medicare fee schedule. The website notes, “This fee schedule applies to Medicare payments only and may not reflect the true cost of the services provided.”
A chargemaster is a hospital’s list of procedures and the prices it charges for them. It is available upon request. The prices are generally several times higher than what Medicare pays. For example, the Sharp chargemaster lists cardiopulmonary resuscitation at $767, while Medicare prices range from $190.20 to $375.68 (prices vary by region). Chargemaster prices are billed to everybody. However, Medicare rates are set by the government. Insurance companies usually pay a little more than Medicare, as per their contract with the hospital. Only uninsured and underinsured patients end up paying the full chargemaster price.
“Chargemasters are not related to cost,” says Dr. Geni Bennetts of Healthcare Billing Advocacy in Napa. “They are what the market will bear.”
Sharp’s website notes that “the charges contained in the [chargemaster] may not reflect Sharp HealthCare’s actual reimbursement from all patients or insurance companies.” And later, “The [chargemaster] is not necessarily a useful document for consumers who are ‘comparison shopping’ between competing hospitals because the descriptions for a particular service could vary from hospital to hospital. Procedure charges may be comprised of several separate line items that are not necessarily in the same department. It is very difficult to try to independently compare the charges for a procedure at one facility vs. another.”
In a California HealthCare Foundation study conducted in 2005, shoppers from Devon Hill Associates, a San Diego–based mystery shopping company, posed as uninsured patients and requested pricing information for various procedures at 64 California hospitals. The mystery shoppers contacted hospitals both in person and by telephone over the course of three months and asked the price of 1 of 25 procedures or tests. They also asked about financial assistance.
The study found that “obtaining a price depended primarily upon luck and persistence.” Experiences varied, even at the same hospital. While 76 percent of the mystery shoppers’ inquiries were ultimately answered with a firm or estimated price, more than a third had to make three or more calls to arrive at a price. One mystery shopper went through 17 points of contact to obtain a price. Only 32 percent of callers and 25 percent of those who visited the hospitals in person were able to get a price in one attempt.
When I called Alvarado Hospital to inquire about their chargemaster, I was transferred six times. Many of the six people I talked to had never heard of a chargemaster. I eventually left a message that has yet to be returned.
The report notes that “the hospitals did not appear to have a designated person or department to provide pricing information, resulting in referrals to multiple sources. At hospitals that did have someone designated to provide pricing information, most staffers were apparently unaware of who that person was, as they frequently referred shoppers to other departments instead.… While most hospitals posted information on financial assistance programs, the information was often hard to find and usually not comprehensive.”
The mystery shoppers could have gone online to consult the chargemasters, but at least one hospital — Sharp — discourages this, disclaiming on its website, “This document should not be used to accurately estimate or determine the final patient cost of a given hospital stay at Sharp HealthCare.” And, perhaps ironically, “Our primary concern is ensuring the accuracy of your bill.”
To complicate matters, hospital billing is often outsourced to work-at-home processors who may easily introduce errors. In fact, Mary recently ran into an old neighbor who said she was working from home, processing medical bills. She said she found the job on the internet, and the bills are emailed to her. Mary notes that the woman, from her experience, is “not the brightest bulb.”
A series of class-action lawsuits was filed against four of California’s largest hospital chains and one physicians’ group on behalf of nearly a million uninsured patients who alleged that the organizations engaged in price gouging. Scripps Health, John Muir Health, Sutter Health, Catholic Healthcare West, and California Emergency Physicians Medical Group (which provides emergency-room care at over 55 hospitals statewide) returned over $1 billion to patients in the 2006–2008 settlements.
“At a time when there is a national crisis of uninsured people vulnerable to financial devastation due to their lack of health insurance, it is unconscionable for any hospital or medical group to price gouge,” said Kelly Dermody of Lieff Cabraser Heimann & Bernstein, the San Francisco law firm that filed the class-action suits. The suits generated enough media coverage to revive Assembly Bill 774, which Governor Schwarzenegger had vetoed in 2004.