Taming the Willd West of Hospital Overcharging

Washington’s Winner-take-all Hospital Billing Environment

Why do we tolerate a 300% difference in treatment for the same procedures among our hospitals? Washington Health Alliance, a nonprofit consortium of healthcare organizations has just published the results of a statewide survey of hospital billing for treatment of stroke and a variety of other conditions.[1] The data for the analysis was extracted from Medicare records through 2012. While I worked for a hospital network I was involved in a value proposition to increase recovery efficacy for stroke patients by getting them into treatment quicker, which was funded with a $6,250 per patient Medicare incentive. This article reviews the high and low price points for stroke treatment by facility and explains the reason for this phenomena and what we can do to fix it.

                                      

I.  Price

Tacoma is the Most Expensive Place for Stroke Patients in Washington

Washington Health Alliance reviewed diagnostic related code information for treatment of stroke across the state of Washington and the nation, looking for variations in price for the same services.  In Washington, the nonprofit Multicare-Tacoma General Hospital, was found to have the most expensive stroke treatment with an average Medicare billing of $37,066 and a reimbursement of $5,001. The second most expensive facility for treatment of stroke was also in Tacoma, the nonprofit, St Joseph’s Hospital with a Medicare billing of $33,948 and a reimbursement of $4,227. How can two facilities in the same city have a $700 price variation for the same procedure and why is Tacoma the most expensive place for stroke treatment? These are the kinds of questions consumers and health policy analysts need to be asking. FYI, the third most expensive place for treatment of stroke was also a Multicare facility, Good Samaritan Hospital, with $33,581 in billable charges and a reimbursement of $3,703 in reimbursement.

The Least Expensive Places for Stroke Patients are Rural Hospitals

In this same study, Washington Health Alliance found that the least expensive facility for treatment of stroke was Olympic Medical Center in Port Angeles, gateway to our jewel Olympic National Park, with $10,835 in charges and $4,119 in reimbursement. Olympic Medical Center is a community hospital and not part of any hospital chain. The second least expensive facility for stroke treatment was Yakima Valley Memorial Hospital with $12,946 in charges and $4,778 in reimbursement. In third place for the most frugal was Central Washington Hospital with $13,811 in charges and $4,408 in Medicare reimbursement. Lest you think only rural hospitals are inexpensive, non-other-than Virginia Mason Medical Center in Seattle was the 4^th most economical place for treatment of stroke, with $16,965 in charges and $5,563 in Medicare reimbursements. This is quite amazing since wages alone are much higher in the Seattle area than in rural Washington Communities.

Comparing Comprehensive Hospital Billing Data

Washington Health Alliance also compared multiple hospitalization codes across all state hospitals to develop a profile and what emerges is not a shock, in areas where there is only one hospital, the hospital becomes the economic price maker, which means it gets away with charging more. Here are examples of this phenomena:

Harrison Medical Center-Charges above average prices for a plethora of treatments including: pneumonia, COPD, UTI’s, back fusion surgery, and not a surprise, orthopedic surgery (someone has to pay for their deluxe new facility). Of note, their award winning cardiac program does not charge above average prices for treatment of cardiac conditions.
Skagit Valley Hospital charges were above average for treatment of: heart failure, dehydration/nutritional disorders (?), and Urinary Tract Infections.

Providence Hospital in Centralia posted above statewide averages for these conditions: dehydration/nutrition, UTI’s, and Anemia. Providence also posted an unusual outlier; even though there are multiple hospitals in the state capitol of Olympia, Providence had the most expensive charges in nearly every category: COPD, dehydration/nutrition, anemia, unblocking a heart artery, back surgeries, and orthopedic surgeries. They were more expensive than Capital Medical Center for all criteria in the Washington Health Alliance report except for treatment of heart failure. Capital Medical Center is part of a national group called Capella Health, which specializes in operating smaller hospitals.[2] Providence, of course, is one of the largest nonprofit hospital groups in the state.

II. Quality

Comparing Quality and Price

The highest safety scoring hospital mentioned was Virginia Mason Medical Center, which consistently scores as a top hospital by the nonprofit patient safety advocacy group, Leapfroggroup.org and is also a good price performer. This is an indication of health care efficacy, which means value created through clinical outcomes and efficiency of operations. In the latest survey, Virginia Mason scored 100% in the main patient safety criteria and 75% in the newest metric, safety focused scheduling.  

Here are the hospital rankings for the other facilities highlighted in this article based on the Leapfrog Group’s patient safety survey.[3]

Tacoma Hospitals

Multicare Medical Center-Good Samaritan Hospital received perfect scores for the four patient safety metrics, preventing medication errors, appropriate ICU staffing, steps to avoid harm, and managing serious errors, in the 2013 Leapfrog Hospital Survey. Tacoma General, another Multicare facility, which was the most expensive for stroke treatment in the state, did not do as well in the survey, with only a 75% score for the steps-to-avoid-harm criteria. It should be noted this information is current as of August 2014 and was voluntarily submitted by the hospital, so any hospital which participates in the Leapfroggroup Hospital Survey is committed to vigorous peer review and improvement of patient safety.[4] In the same survey, St. Joseph’s Hospital in Tacoma did poorly in appropriate ICU staffing, with only a 25^th percentile score (yikes). Certainly something to consider for stroke treatment, where speed is of the essence.

Rural Hospitals With Low Prices

So, how did the rural hospitals score in the annual Leapfroggroup Patient Safety Survey?  None of the rural hospitals submitted a response to the patient safety survey, which means there is no consumer friendly way to compare their efficacy for safety and price.

National Outlook

In March 2014, I wrote an article on hospital price transparency,[5] which is practiced in Maryland and other states are adopting this practice. Maryland also happens to have a hospital pricing policy that limits the spread between what may be charged and what the actual reimbursement is for hospitals.[6] This has resulted in lower charges for Maryland hospital patients and ultimately impacts what employers and everyday consumers pay for health treatment. Twenty-seven states have enacted hospital pricing transparency laws.[7] The Obama Administration has an initiative to spread the adoption of the Maryland hospital pricing across the nation, which could just save us all money.[8]

This article was written by Roberta E. Winter, MHA, MPA, a health care policy analyst and advocate and author of http://www.amazon.com/Unraveling-U-S-Health-Care-Personal/dp/1442222972#

Feel free to share this article virally, but do provide appropriate author attribution if quoting, and this is the healthpolicymaven signing off.

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[1] http://wahealthalliance.org/wp-content/uploads/2014/10/hospital-sticker-shock-report-standard.pdf

[2] http://www.capellahealth.com/about-us/history/

[3] http://www.leapfroggroup.org/cp?frmbmd=cp_listings&find_by=state&city=&state=WA

[4] http://www.leapfroggroup.org/cp?frmbmd=cp_listings&find_by=state&city=&state=WA

[5] http://healthpolicymaven.blogspot.com/search/label/hospital%20transparency

[6] http://healthpolicymaven.blogspot.com/2013_12_01_archive.html

[7]http://healthpolicymaven.blogspot.com/search/label/hospital%20transparency

[8] http://www.americanprogress.org/issues/healthcare/report/2014/04/03/87059/shining-light-on-health-care-prices/