When Bill Rose broke his leg in a motorcycle accident, he knew he’d end up paying for surgery himself-- he was temporarily uninsured. So he asked the hospital for an estimate and negotiated a 30 percent discount, bringing the price down to $8,260 in exchange for paying up front.
But a month after the operation, the hospital told Rose, an insurance salesman from Defiance, Ohio, that the price had soared: He owed $10,000 more. One reason for the bigger bill was his surgeon's decision to use a $7,500 bone graft product that is only used sometimes in such procedures, and was clearly not anticipated in the hospital's estimate, according to documents provided by Rose.
Rose's story shows the difficulties faced by consumers – especially the uninsured -- when they try to shop for the best price or negotiate. More than 30 states, including Ohio, require hospitals to disclose at least some of their charges, according to the National Conference of State Legislatures. Congress included such a provision in the new health overhaul law and similar proposals are pending in the House. But many experts say these efforts don’t help much.
Paul Ginsburg, president of the Center for Studying Health System Change, a research organization in Washington, says published hospital charges are "useless for consumers." One reason, as Rose discovered, is that hospital prices are moving targets, varying with patients' needs and doctors' treatment strategies.
"Every doctor does it differently," says Dr. Steve Neeleman, a surgeon at Intermountain Healthcare in Utah. Doctors, who are usually not hospital employees, may not be thinking about costs when they choose treatments, he says. Complications may also lead to bigger bills, though Rose's surgeon noted there were none in his case.
Estimates Are Unreliable
Patients can't depend on estimates because they're often based on a hospital's average charges for treatments. For instance, Tampa General Hospital charged as little as $48,631 and as much as $89,969 for gall bladder removals between July 2008 and June 2009, according to a Florida state website created under a 2004 price transparency law.
When bills come in above the estimate, patients have little recourse. Rose's attorney pointed out in a letter to the Ohio attorney general that state law protects car owners from mechanics' charges that exceed estimates by 10 percent but does nothing for patients. Rose, 63, who has recovered, says the hospital could have consulted his surgeon about the treatment plan and calculated a more accurate estimate.
Last October his lawyer negotiated a final $1,250 payment. In all, Rose paid $9,510 of the $27,133 charges calculated by the hospital. The hospital did not respond to questions about Rose's bill.
The American Hospital Association says it supports plans to expand existing state efforts to make hospital charge information available to patients. But a spokesman recently told Congress that "making meaningful 'up front' pricing" available is difficult in part because patients' needs vary.
This is part of one page from Bill Rose’s four page hospital bill, which includes 101 items totaling $27,133. (Click to see full page)
Uninsured patients and those with high-deductible health plans - a small, but growing, portion of the market - are the most sensitive to price because they pay more out-of-pocket. "If they don't have to pay for it, they just don't care," said Aetna executive Kathleen Campbell, noting that the Hartford-based insurer's high-deductible policyholders were three times more likely to use its online price information than those with less at stake.
Beginning in 2014, the new health law is expected to vastly increase the number of Americans with insurance. The law could make people even less concerned about shopping for better health care deals, says Michael Leavitt, secretary of Health and Human Services during the George W. Bush administration.
But that hasn't stopped members of Congress from pushing hospitals to disclose information about their charges. A provision of the overhaul law will require hospitals to publish "standard charges" for all goods and services, but regulators have yet to define such charges.
Meanwhile, the House commerce committee's health panel held hearings last month on three proposals, all of which would require hospitals to publish charges. The bills have stalled, despite bipartisan support.
But hospital charges don't give consumers what they want: a firm price. "Charge masters," as these lists are known, might include 65,000 items, and a single procedure may include any mix of them. Rose's bill, from University of Toledo Medical Center, listed 101 items ranging from a $3 towel to $5,000 worth of recovery room time.
California requires publication of charge masters, but Jessica Rothhaar of the advocacy group Health Access said "no human being can decipher" them. UCLA Medical Center, for example, includes on its state-required charge master list "GRMS EXT PIECE HOWMED STRYKER." It's $10,290, with no explanation. (It's a prosthetic bone).
Insurers don't have to deal with charge masters. They negotiate prices individually with hospitals and often pay based on a patient's diagnosis or the type of procedure performed -- the ways that Medicare, the federal program that insures the elderly and many disabled persons, pays hospitals.
Advocates Urge Single Price
Medicare would have paid the Toledo hospital $9,819.24 for surgeries like Rose's - had he been an inpatient - regardless of which products or services his surgeon used. Private insurers often pay based on Medicare's rate, plus or minus a percentage. State laws typically do not require hospitals to disclose the often confidential prices they negotiate with insurers.
There are limited exceptions. In New Hampshire, the state publishes the negotiated prices for 41 procedures, based on information provided by insurers. Aetna also provides policyholders prices for a handful of procedures on its website.
Price information could be made useful to consumers by requiring hospitals to publish prices for set diagnoses or procedures, rather than the charge lists of individual items, experts say. That way, there would be a single price for a gall bladder removal or hip replacement.
"If the goal is for Americans to understand it,” and be able to compare prices, "then one number is the only way to go," said Gerard Anderson, a health policy professor at Johns Hopkins University.
Rep. Steve Kagen, D-Wis., a physician who is sponsoring the Transparency in All Health Care Pricing Act, observed at a congressional hearing last month that Subway restaurants charge flat rates for sandwiches no matter which toppings customers choose. "If the owners of Subway can figure out how to make money by lumping their prices," he said, "so can our nation's hospitals."