Hospital data: WCPO analysis shows wide variance in Medicare charges by local hospitals

Searchable data available on 20 local facilities

CINCINNATI - Medicare data released publicly for the first time this spring and heralded by the White House as a first step toward transparency in hospital charges show dramatically wide variations in charges for the same procedures performed at different local hospitals.

But months after the release, not everyone agrees that the information is valuable and some say it may confuse the already complex world of hospital charges.

A WCPO analysis of the 2011 data of the 100 most common Medicare inpatient stays show just how different the charges can be.

Consider:

  • Atrium Medical Center in Middletown exceeded the national average on Medicare charges more than any other Cincinnati-area hospital.
  • Atrium Medical Center exceeded the national average on 48 of 72 procedures, or about 66 percent of the time.
  • Good Samaritan Hospital ranked second, with its average 2011 charges exceeding the national average 31 percent of the time, or 26 of 84 procedures.
  • Fort Hamilton Hughes Memorial Hospital exceeded the national average in 12 of 60 cases, or 20 percent.
  • Nine local hospitals never exceeded the national average and eight others fell below the national average in more than 85 percent of procedures.

You can see how local hospitals compare on dozens of procedures by searching the chart below:

 

Compare hospital costs.

 

More Than Just Numbers

Medicare charge data is “not meaningful” in determining a hospital’s true cost, said Thomas Duncan, senior vice president and chief financial officer of Premier Health, the Dayton-based parent of Atrium Medical Center. When Atrium’s charges are adjusted for the severity level of patient illness, Duncan said it ranks among the region’s lowest-cost hospital providers.

“Atrium has an open heart unit. We are a trauma center,” he said. “Those patients in many cases are going to be very ill and they stay for a long period of time. The longer they’re in the hospital, the more likely they are to have higher charges.”

WCPO’s analysis is based on data released by the Centers for Medicare and Medicaid Services in May. It shows the average amount charged by more than 3,000 hospitals nationwide for 100 popular DRG codes, or diagnosis-related groups, which is how Medicare classifies treatments for various ailments. The numbers represent the most comprehensive data ever released on hospital billing practices.

Several health care executives compared Medicare charges to the sticker price on an automobile or the retail price before markdowns in an outlet store. They’re not relevant to what a consumer would actually pay, they said, because almost no one pays full price.

Medicare, for example, sets its own price by regulation in a process that has no relation to charges. Private insurers negotiate their own price in contracts that prevent disclosure of negotiated rates. Uninsured patients often receive financial assistance to cover medical expenses, an amount that is written off as charity care by local hospitals.

But that doesn’t mean consumers aren’t hungry for numbers.

As a recent series of investigative reports on “Outrageous Hospital Costs” by ABC News demonstrates, consumers are getting increasingly frustrated about a health care system in which pricing is a mystery and costs are out of control.

Public Clamoring For Meaningful Cost Comparison

The Medicare numbers are sure to be part of a rising tide of data that will change the way Americans shop for health care. Business and labor-backed advocacy groups, health insurers and the Obama administration are all pushing for more transparency in health care to let consumers explore the cost and quality of care provided by doctors and hospitals. The numbers are far from being easily usable, but literally dozens of organizations like Leapfrog and Catalyst for Payment Reform are working to improve data disclosures on a national level. Locally, the Greater Cincinnati Health Council and Health Collaborative of Greater Cincinnati have built a quality-tracking research tool at YourHealthMatters.org.

“You should treat your health care the way the way you treat other major purchases,” said John Sinclair, president of the Ohio region for Humana Inc., a Louisville –based health plan with 500,000 area members. “Ask your physician, ‘What is this MRI going cost and why should I go to this MRI vs. that?’

The benefits of this approach can lead to more than just saving money, Sinclair insists. When his wife visited the pediatrician’s office, the doctor prescribed a cough medicine for their son that cost $120. Why so much, she asked, since over-the-counter cough syrup can be purchased for $15 or less.

The doctor explained that the prescribed medicine had codeine in it. His wife, Sinclair said, didn't want to give their child that.

“When we had low co-payment plan, she didn’t care about the cost. She never would have asked the question,” Sinclair said. “Consumers have so long been shielded from the cost of care that it’s never been part of the calculation.”

Why no one can answer: How much does it cost?

Humana is among several insurers that make cost and quality data available to its members, but the data applies only to its members and doesn't necessarily give a complete picture of a provider’s cost and quality profile. Christ Hospital is working on an online tool to reveal the average payment it receives from all insurers for its 20 most popular procedures, but that won’t offer a way for consumers to compare one hospital to another.

The Greater Cincinnati Health Council is trying to develop an “all payor claims database” that would allow hospital and physician-practice cost data to be reported in a way that is meaningful to consumers, said Colleen O’Toole, president of the nonprofit association serving more than 30 hospitals and 100 long-term care providers.

The Health Council has so far focused on quality metrics, including the hospital and physician ratings available at www.yourhealthmatters.org. Cost data is a trickier topic for hospitals and insurers because of contract restrictions, but O’Toole said the Health Council is working through the issues.

“We would like to get to the point where we could present accurate cost data,” she said. “We’d like to have as broad a data set as the owners will let us create.”

What do the numbers mean?

In some ways, Medicare charge data is a relic of an earlier time in health care, when government payments were based on fees in a hospital’s “chargemaster,” which is a database of charges that are intended to reflect the cost to the hospital of providing the service.

“Chargemasters can contain over 10,000 charges, each of which not only includes the direct cost of providing the care for that service (the variable costs for medications, implants and the like), but also the huge fixed cost base, like facilities, IT systems and nursing staff,” said TriHealth spokesman Kelley. “Charge factors vary significantly depending on an individual hospital’s mission, patient and case mix, and other factors.  These competing influences and hospitals’ efforts to address them often result in charges which may not relate directly to costs.”

As several hospitals pointed out to WCPO, Medicare charge data does not represent the actual cost of providing care. Medicare charges at Christ Hospital are 3.5 to 4 times its actual cost, CFO Bergman said.

Hospitals explain their Medicare charges

But until hospitals develop apples-to-apples price sheets or make their internal cost data public, Medicare charges remain the best option for discerning how hospitals compare on cost.

The numbers are hard to fathom. Look up “Chest pain,” for example.

Atrium Medical Center had the highest average charge among the 18 local hospitals for which Medicare released data. Its average charge per procedure of $20,052 was 47 percent higher than Ohio’s average, 18 percent higher than the national average and nearly three times that of Clinton Memorial Hospital in Wilmington.

Atrium’s Tom Duncan said sicker patients are the biggest reason for the disparity.

“If you look at the hospitals with higher severity rates, they’ll pretty much correlate to the higher charges,” Duncan.

Spokesman Joe Kelley said Good Sam’s Medicare charges “are at the regional mean or below,” based on the hospital’s own analysis over time.

“When looking at individual charges, case mix is a key consideration,” he said. “For example, in treating patients with heart failure, it stands to reason that Good Samaritan’s Medicare charge is higher because on average Good Samaritan treats patients with the most severe cases in the region.  More severe cases require greater use of resources.”

Christ Hospital makes a similar argument in explaining why its Medicare charges exceeded the national average in 11 of 90 procedures, or 12.2 percent.

“We tend to take care of that sicker population,” Bergman said. “If you’re really sick with a lot of complications, physicians will refer you here because of the type of care and quality we provide.”

Mercy Health spokeswoman Nanette Bentley said a hospital’s Medicare charges can also be affected by the “cost of uncompensated care it delivers to the patient population it serves.” Mercy Anderson had only one Medicare DRG on which its 2011 average charge exceeded the national average.

Fort Hamilton Hughes Hospital in Hamilton has changed its “billing scale” since the 2011 fiscal year and now charges the same price for all services across its seven hospital network, said spokeswoman Elizabeth Long. Fort Hamilton ranked above the national average on 12 of 60 Medicare DRG codes, or 20 percent.

“Comparing treatment charges is never going to be apples to apples because each case is different,” she said. “Some patients are sicker and/or have more co-morbidities (more underlying chronic health conditions such as diabetes and asthma). The length of stay has an effect on the cost, as do the equipment, materials and supplies used to treat the patient.”

Seven months after the Medicare data release, hospital officials say they’re not aware any major changes in the local health care market caused by the numbers. Humana President John Sinclair agreed that the data release had little impact. Christ Hospital spent a day analyzing the numbers before concluding it was in the middle of the road on charges.

“I’m not sure consumers have learned much from the data,” added TriHealth spokesman Joe Kelley. “It just added confusion and incorrect data interpretations.

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