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Sticker Shock

By Dr. Chris Lillis

“One patient, 34 days in the hospital, $7000 syringes and a $5.2 Million bill.”  This is the title of Ron Winslow’s outstanding article in the Wall Street Journal from August, 2001.  It chronicles the experience of a wonderful man, with a very rare bleeding condition, who was admitted to Duke University Hospital while I was a resident there.  In a failed attempt to save his life, physicians administered $4.8 million in Factor VIII (a clotting factor) alone.

This case represents an outlier.  This was a very rare circumstance, and physicians exhausted medical science in an attempt to help a single patient with a rare disease.  But seeing the hospital bill does not cause sticker shock in just these cases.    

Heart disease, while on the decline, remains the leading cause of death in our country, and afflicts as many as 18 million Americans.  While many with heart disease can be managed with medications, or perhaps with a catheter based procedure, there are over 250,000 coronary bypass surgeries performed in the US each year.

In writing this blog piece, I attempted to research the average cost of a coronary artery bypass graft (CABG) surgery in the United States.  Dozens of Google© searches produced exactly one article.

A study performed in Philadelphia, PA, conducted by the Pennsylvania Health Care Cost Containment Council looked at the average total hospital bill for heart surgery in four regional hospitals.  They discovered that the average hospital bill for heart surgery ranged from $63,767 all the way up to $162,051 (By now I hope you are doing some simple math in your head…and are not holding your jaw wide open).  The direct costs in the United States for this one surgery- for this one disease- is estimated to be in the hundreds of billions of dollars, and happens to cost 82% more than the same procedure in Canada.  Trying to find the average cost of CABG in the United Sates is a fruitless endeavor – the data does not exist.      

The average hospital bill hardly matters, however, unless you are uninsured.   Medicaid, Medicare, and private insurers all negotiate prices for procedures with hospitals and providers.  When I speak to audiences about health reform, I lovingly refer to the process as “the game.”  Medicaid reimbursement, prior to the new health law, consistently reimburses the least for doctors visits and procedures.  Medicare comes next, followed by private insurers, who reimburse the most – but also have each negotiated their own rates. 

I spoke to a hospital CEO yesterday, off the record, who gave me some ballpark figures: Medicaid reimburses about 64% of the cost of providing care, while Medicare reimburses closer to 90% of cost, leaving hospitals little choice but to set their prices very high to get a better reimbursement from private insurers.  This is where hospitals (and doctors, medical goods providers, etc.) make up the gap between cost and reimbursement, and may even try to turn a profit.  Guess who loses in this scenario?  The uninsured, or cash-pay patient will be handed a bill for the set price – the amount that is much higher than the cost of providing care and would represent a healthy profit margin for the provider.  The set price is more than any large third payer is willing to pay.  But that individual patient did not have the bargaining power to negotiate a lower price as Medicaid, Medicare, or the private insurer did.   And these differing reimbursements say nothing about the cost of uncompensated care to providers – which runs in the hundreds of billions of dollars, leaving providers to try to make that loss up on the backs of those able to pay.

There is some hope on the horizon.  Watchdog groups are forming all over the country to push for price transparency in an effort to reign in “sticker shock.”  In my home state of Virginia, the Virginia Health Information project is attempting to help individuals without insurance or high deductible plans navigate the wild differences in prices that exist among various providers of care.  Once the health insurance exchanges are running in 2014, and 32 million uncovered Americans have new health insurance, uncompensated care will decrease allowing providers to set more fair prices.  That is, so long as the partisans attempting to nullify the individual mandate for health insurance continue to fail in the courts.

The “game” is happening all around us: Pharmaceutical companies set a cash price for brand name drugs that is sky high in attempt to coax third party payers to pay as much as they are willing.  Durable medical goods providers set prices for wheelchairs that recoup costs plus very healthy profit margins knowing that a third party payer will pay them less than the asking price. And even doctors play the game – setting prices high in an attempt to get as much out of payers as possible. I don’t believe this is always done maliciously – this is done in an effort to spread the cost of care across multiple populations and continue to be able to run a business.  But consistently, it is the patient who is losing.  Patients who are uninsured are powerless to negotiate the rates that large payers can.  And more and more, rising deductibles are causing sticker shock, even among the insured.

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