Dr. Eric Ford (Management) was interviewed May 8, 2013 by WFMY explaining why the same medical procedure can differ widely in cost at local hospitals: http://www.digtriad.com/news/local/article/283953/57/Report-Triad-Hospitals-Charge-Different-Fees-For-Same-Service
Greensboro, NC — In a report released Wednesday by the Center for Medicaid and Medicare Services, consumers have a glimpse of what hospitals across the country charge for their services.
The CMS compiled data from 3,300 hospitals. It lists their fees for the top 100 most frequently billed treatments as determined by the Medicare Severity Diagnosis Related Group.
The report shows dramatically different costs for the same surgeries not only varying state to state, but by hospitals in the same city.
WFMY News 2’s Morgan Hightower looked at the charges for major joint replacement, chest pain and simple pneumonia from Moses Cone Memorial Hospital, Wake Forest Baptist Hospital, and Forsyth Medical Center.
Baptist charged Medicare $40,193 for major joint replacement surgeries like knee or hip replacements. Medicare paid $18,656.
Forsyth Medical Center’s bill was about one thousand dollars cheaper. They charged $39,205 for the same surgery. Medicare paid them $14,075.
In Greensboro, Moses Cone charged $25,577. That’s a difference from Baptist’s fee of $14,616. Medicare paid Cone $13,758.
What’s the reason for the difference? UNCG Professor Eric Ford says there is an explanation.
He says hospitals are just like any other business. Before they bill, that have to look at their bottom line.
“The hospitals are looking at their underlying cost structure and they are trying to put together a good faith estimate of what it really ought to cost,” explained Ford. “They have different cost structures with their employees that they have, where they are located.”
Ford says teaching hospitals, like Baptist, often cost more.
“They typically have higher cost structures, they’ve got a lot of teachers, in addition to students present as well as they tend to draw more sick patients. In other words, the patients they see are sicker. They call this greater acuity. And all of these make the cost of care go up and therefore they have higher charges,” said Ford.
This is the first time comparable data like this has been released by the federal government. The CMS said it’s a part “of the Obama administration’s work to make our health care system more affordable and accountable.”
Ford predicts releasing this information will cause a shift in the prices we see at local hospitals.
“As we start to bring more light to bear on these different practices, the hospitals want to be rational and they too don’t have all the information about their competitors so as they start to see more, they’ll start to balance out. This is a good thing. This is the way markets are supposed to work. Better information leads to better pricing and better customer service,” said Ford.
When it came to chest pain – Baptist, Forsyth Medical and Cone were more aligned. They charged $9,600, $10,401, and $9,657, respectively.
As for treatment of simple pneumonia, Baptist charged $16.591. Forsyth Medical billed Medicare $16,242 and Cone charged $12,691.
To see a complete list of the hospitals and fees charged, read the report here.
Kenneth Kubisty, Associate Vice President, Corporate Revenue Cycle, Wake Forest Baptist Medical Center says Baptist cannot negotiate their prices with Medicare.
“Wake Forest Baptist Medical Center is reimbursed by Medicare based on a fee schedule and diagnosis-related group (DRG) methodology established by Medicare, not Wake Forest Baptist (our prices are irrelevant to Medicare). For Medicare and Medicaid, Wake Forest Baptist is a “price-taker” and has no ability to negotiate prices with government payers. The difference in average covered charges relates to differences in service intensity. Healthcare services delivered by any institution are customized to the needs of the individual patient and are not commodity consumables easily compared through average price analysis. As a result of our differentiated capabilities, Wake Forest Baptist tends to attract sicker patients and more complicated cases as evidenced by our case mix index of nearly 2 times that of the average Medicare hospital. Every Medicare patient is subject to the same Medicare deductible, but may experience small variations in coinsurance liabilities due to our teaching facility designation.
Approximately 93% of the charges Wake Forest Baptist produces are subject to reimbursement mechanisms that make “prices” irrelevant (including Medicare). Against the remaining 7%, Wake Forest Baptist provides a significant amount of free or highly discounted care through our charitable mission.
Wake Forest Baptist is continuing aggressive restructuring and cost optimization initiatives begun many months ago in response to understood challenges relative to overall healthcare reform. Publication of this data in no way alters our plans.”
Jeff Jones, Executive Vice President and Chief Financial Officer with Cone Health says they’re proud to offer the lowest medical costs in the area.
“Cone Health and Alamance Regional Medical Center are among the lowest cost providers in our area. We are proud that we are able to keep our costs low and quality of care high. However, what hospitals charge rarely reflects what they are actually paid by government or private insurers and hospitals in North Carolina are being squeezed by payments that aren’t keeping up with costs. It is important to remember that Cone Health received approximately 90 cents for every dollar we spent caring for Medicare patients in 2011.”
WFMY News 2