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May 27, 2013

Health Care Leaders Say Hospital Charges Aren't As Simple As They Seem

The recent release of Medicare data on hospital charges by the Centers for Medicare and Medicaid (CMS) was hailed as an unprecedented move toward transparency of hospital costs, with a list of hospital services and their corresponding charges to Medicare provided to the public in a comprehensive report for the first time.

But while understanding how much hospitals charge for specific services and how they stack up against neighboring hospitals provide insight into the real cost of health care, industry officials in Central Massachusetts say it's only a piece of the puzzle.

The release of the data is part of a larger trend to educate consumers about health care costs while federal health care reform is being implemented. And those costs have been felt through policies and initiatives by payers, providers and government. For example, there's the rise of consumer-driven health plans, which incent patients to choose lower-cost providers through the use of deductibles.

Until Medicare released the charge data earlier this month, there was no way to do a line-by-line price comparison between two hospitals to get more or less for a specific procedure. And there hasn't been much need, as individuals are rarely on the hook for the full cost of medical services, given private and public health care coverage options.

But Patrick Muldoon, CEO of HealthAlliance Hospital in Leominster, said that's changing. Price data is becoming more relevant to patients, many of whom are getting general information from their insurance providers about which hospitals provide the lowest-cost services. The Medicare data is just another tool consumers can use, Muldoon said. Pricing information between hospitals and private payers remains private, however, so the vast majority of costs remains unclear.

And even the Medicare data, which can show significant disparities, is limited in how much light is shed on the true costs of health care, hospital officials said.

As Jeanne Lynskey, vice president of finance and CFO for Milford Regional Medical Center, pointed out, how much hospitals charge doesn't correspond with how much Medicare reimburses. For example, Milford Regional reports average charges for treatment of a brain hemorrhage or stroke of $17,552, but average payments from Medicare are $7,544, according to the Medicare data.

"No one is paying us (based on) charges," Lynskey said. "They're paying a negotiated rate for the service."

The charges reported by CMS came from hospitals' "charge masters," or lists of services and prices that aid hospitals in the billing process. Aron Boros, executive director for the Massachusetts Center for Health Information and Analysis, said almost no one pays a hospital based on a charge master, except a tiny percentage of uninsured people, making the release of Medicare charge data a little underwhelming.

But "in the absence of anything else, it's something," Boros said.

The availability of the Medicare data is setting the stage for what is to come under federal health care reform. Boros said that this starting this summer, hospitals will begin to publish relative pricing data on their websites, showing how they compare to others without revealing specific price information. And next year, hospitals will have to publish cost transparency data.

Still, the Medicare data provides meaningful insight into a particular hospital's cost structure.

UMass Memorial Medical Center eclipses all others in Central Massachusetts when it comes to Medicare charges. For example, it lists charges of $28,866 for treatment of a gastrointestinal hemorrhage, to $9,998 for Saint Vincent Hospital's, $15,650 at Milford Regional, and $18,911 at HealthAlliance.

Similar differences are seen for the treatment of other common conditions.

Though charges don't reflect actual reimbursements, they do reflect costs to the hospitals to some extent, according to Lynksey, and like any business, they include a mark-up.

Milford Regional is also a teaching hospital, through an affiliation with UMass Memorial Health Care, which Lynskey said comes at a cost.

Robert Brogna, a UMass Memorial, spokesman said in a statement that the costs of being a teaching hospital are one factor that drives costs for the Worcester-based health care system, along with the high rate of low-income patients treated there and advanced medical services that are unique in the area.

"UMass Memorial Medical Center is Central New England's only academic medical center and leading safety net provider of care, and offers a high level of advanced services not available elsewhere in the region," he said. "As a result, charges at UMass Memorial Medical Center tend to be higher than those at community hospitals."

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