Las Vegas Sun

September 21, 2014

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Health Care:

Question remains: How much does it really cost to go to the hospital?

Southern Nevada got its first peek at the cost of health care in hospitals last week, when the Centers for Medicare and Medicaid Services released an enormous data trove detailing how much hospitals across the country charge the government for similar services.

But the view has raised more questions than it has settled about the real cost of common health procedures.

As a general rule, hospitals in the Las Vegas Valley appear to be charging the federal government more than the national average for most procedures, and more than hospitals in other parts of the state.

Treatments for pulmonary, orthopedic and infectious procedures can be up to five times as expensive in Las Vegas as they are in the Reno area.

And there is still a vast discrepancy in reported costs among hospitals in Las Vegas and its suburbs.

“We want to pay attention to what we’re getting for what we’re paying,” said Chris Cochran, director of UNLV’s degree program in health care administration and policy. “We’ve got big disparities in what is being charged.”

Having a heart attack? It may be cheapest to patch that up quickly at St. Rose Dominican Hospitals — Rose de Lima Campus in Henderson, which charges the federal government $77,471 for the same billing category of your average acute myocardial infarction. If you go to Valley Hospital Medical Center, know that the hospital will try to recoup an average $178,478 — more than twice as much — to save your ticker.

Have severe back pain and disc degeneration? Sierra Surgical Hospital says spinal fusion therapy costs about $67,739. At Spring Valley Hospital, the same procedure is billed at $171,255.

Or need to get a major joint replaced? It could cost anywhere from $95,684 at St. Rose's Siena Campus to $213,614 at Spring Valley, according to what they charge the government.

In almost every case, the Las Vegas average cost per procedure is higher than the going rate charged by hospitals nationally. The costs most Las Vegas hospitals quote are also significantly higher than what the federal government is actually willing to reimburse them for under Medicare.

But the numbers still raise the question: If Las Vegas hospitals are billing Medicare such wildly different costs, how is the average patient — particularly the average uninsured patient — supposed to know whether they are being taken for a ride?

Even armed with these numbers, they can’t.

“What patients pay has more to do with the type of coverage they have than charges,” said Stacy Acquista, spokeswoman for Sunrise Health, a division of the Hospital Corporation of America, which runs Southern Nevada’s Sunrise, MountainView and Southern Hills hospitals.

“The data released by the Center for Medicare and Medicaid Services do not reflect the amounts that patients pay for medical care provided,” said Gretchen Papez, spokeswoman for Valley Health System, which runs Centennial Hills, Desert Springs, Spring Valley, Summerlin and Valley hospitals. “Our hospitals ... have a discount policy available for all uninsured patients.”

But Papez did not respond when asked for more information about how costs to the uninsured and insured compared with the now-public Medicare charges.

“I’m not sure that the transparency that we’d like to see ... is ever going to be there,” Cochran said. “In Las Vegas, most of our hospitals are for-profit hospitals. So that means that they’re shareholder-based hospitals, so they want to make a profit. But reimbursement rates for Medicare shouldn’t be based on whether a hospital is for-profit or not-for-profit.”

Private companies Dignity Health, which operates St. Rose Dominican Hospitals, and Sunrise Health and Valley Health System run most of the hospitals in and around the city and, for most procedures, bill Medicare significantly more than Clark County’s main public hospital, University Medical Center.

While the difference between how much a hospital bills Medicare varies widely across the valley, the difference in how much Medicare actually pays each hospital is comparatively slight.

“Medicare pays everybody the same,” said Brian Brannman, CEO at UMC, shrugging at the logic of other hospitals trying to bill significantly more than UMC. “We try to be close to where the costs are and then buy a little bit of a margin on it.”

A hospital always sets the bill charge for a procedure higher than costs, Brannman explained.

“For us, our bill charge number probably is somewhere like two to three times our cost. It depends on diagnosis or product line,” he said. “The markup — it's like the markup at Macy’s, I guess. You don’t know what the wholesale price is of the shirt you bought. It’s a similar sort of thing.

“But nobody really pays bill charges — it’s a number that’s out there. The insurance carriers all negotiate a discount off bill charges, which is closer to what your actual costs are.”

And Clark County residents paying cash get an automatic 50 percent discount to bring their bills closer to what an insurance company would pay.

“But nobody really shares the rates they negotiate with the various players,” Brannman said.

He noted that, overall, of $1.2 billion to $1.3 billion in a given year’s billing, the hospital also records $400 million to $500 million worth of discounts, either through insurance companies or directly to individuals who pay cash or are entitled to discounts because of an inability to pay.

If anything, Medicare figures can sometimes be a high watermark, hospital and insurance officials said.

“For Medicare, those reimbursement rates can cover your costs, and there may even be somewhat of a margin under certain services,” Brannman said. “Insurance companies, their negotiated rates are sort of all over the place. Some negotiate 60 or 70 percent of what the Medicare rate is — it’s a plan-by-plan thing.”

“I have never known Medicare to get charged the cheapest or pay the least,” said Leonard Barend, president of the Clark County chapter of the National Association of Health Care Underwriters. “They tend not to understand the profit-making system in this country, and they usually don’t negotiate that well.”

Barend looked at the Medicare numbers and was puzzled. Why stress the billing for Medicare when Medicare is never paying hospitals their asking price?

“This is a comparison they did to prove a point, but I’m not sure what that point is, other than there is a comparison between pricing across the country,” he said.

Barend dismissed the notion that the point may have been to pull back the curtain on the clandestine world of health care costs.

“Most people won’t look at it ... because their insurance covers everything,” Barend said, noting that $10 and $20 co-pays made most Americans immune to and uninterested in the real costs of health care. “The people who look at it are the insurance companies, the brokers and the doctors. ... The patients are going to go wherever they want to. They don’t care about the price.”

He suspects instead that the numbers are a warning to hospitals that as Washington debates entitlement reform, lawmakers may look to save money by enforcing more national cost comparability among programs.

“Medicare sets the rates. And the doctors decide whether they’re going to take it or not. But the doctors are concerned that Medicare’s going to cut it again,” Barend said. “The only possible explanation that I can think of (for these numbers) is that they eventually want to bring all hospitals onto the same rates regardless of geography, which will make people not want to take Medicare patients.”

Others see the release of the Medicare numbers as the beginning of a more organic trend to reduce the cost of care.

“I think, to be honest, what you’re going to see more of is a trickle-down effect,” Cochran said, explaining that people and insurers comparing Medicare numbers with their own bills may start to push back against area hospitals for better deals.

But in Las Vegas, despite the high cost of care, there might not be that much room for the hospitals to respond.

“Las Vegas has long been among the highest-cost health care markets in the country. ... We also have one of the highest uninsured rates in the country and Medicaid reimbursements among the poorest in the country,” Brannman said. “You’re now seeing a situation where the Vegas hospitals have some of the smallest margins in the system. So looking at these numbers doesn’t really give you an accurate picture.”

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  1. I'm guessing that for-profit hospitals have the highest book charges. Since Medicare and insurers generally pay the same deeply discounted rate to any provider, a for-profit can show the difference as uncompensated care and reduce its taxable income into a loss category.

  2. My question is... Quoting the story above... "For us, our bill charge number probably is somewhere like two to three times our cost. It depends on diagnosis or product line," he said. "The markup -- it's like the markup at Macy's, I guess. You don't know what the wholesale price is of the shirt you bought. It's a similar sort of thing.

    If a procedure costs $30000 and there is a markup of $60000, I'm in the wrong business. I understand overhead. I understand having liability insurance. I understand having to pay staff and benefits.

    Why does healthcare need to be a "for profit" industry? Wouldn't we all benefit from a reasonable charge to cover costs, maintenance, salaries, research, etc. How much does the CEO make? What is the salary of the COO? How many nurses would their salary cover?

  3. Two comments from the CEO at UMC, Brian Brannman, stand out: 1) "For us, our bill charge number probably is somewhere like two to three times our cost." and 2) "The markup -- it's like the markup at Macy's, I guess. You don't know what the wholesale price is of the shirt you bought."

    With experience in the retail trade, it would be a really poor operation that can say only that their retail price is 2-4 times their cost. Most can tell you, to the nearest % (and often to the nearest 1/10 of a %) how their cost prices relate to their retail prices. That doesn't mean, of course that they WILL tell you, but go to their P & L and look for a line reading "Cost of Goods Sold" or something similar. Most hospitals have no vague idea what a specific procedure costs them.

    As for Macy's - of COURSE they don't show you their cost and I'd not think of requiring them to. But the buyer has the option to go across the mall/street to the competition and seeing what THEY charge for the same thing. Try asking three different hospitals for their retail price for a specific procedure...