This is what a summary of costs for open heart surgery and 14 days in the hospital looks like. It does not include doctors, who bill separately, nor does it include in patient rehab and out patient rehab and medications. pic.twitter.com/XiXhNhpZO8
— Jackie Kazil (@JackieKazil) April 24, 2019
I am assuming that these are charges and not contracted rates. But my god, this is a lot of money. Even assuming a net 75% discount to the contracted rate, it is still a lot of money. And it is not the entire cost of the episode as professional fees that go to clinicians are a separate set of bills, outpatient rehab is a distinct set of claims and all the ancillary costs are elsewhere too.
This episode of care is an outlier at whatever contracted rate is applied. It is wicked expensive. And it destroys any cost sharing incentive designs. A deductible only model has the out of pocket maximum met in the first seventy seven seconds of the episode. A copay model that is heavily charges inpatient stays maxes out in a few days at the hospital. A coinsurance model of say 20% coinsurance on surgery charges is maxed out after two or three days in the ICU.
There is no benefit design structure that changes marginal costs or incentives. In this case, open heart surgery is most likely not a shoppable service, so it is irrelevant but there are enough other cases where something is both wicked expensive and somewhat shoppable. Someone with a cancer diagnosis in Chapel Hill can go to Duke or UNC hospitals. Right now the only insurance steering mechanism for that decision is network design. My personal insurance steers me to Duke Hospitals while some of the folks at my gym would be steered to UNC hospitals.
I think that the outlier cases are where the money is and rejiggering cost sharing and steering structures is a possible way to get a little more value and competition.
Alain
Lets hope this isn’t a harbinger of the bill my FIL will see. He’s on Medicare, not sure what other things. I know the financial concerns are worrying him and his wife so much when they should be focusing on feeling better. Surgery schedule still uncertain so more days in hospital. I’ll keep you informed on the billing stuff for your discussion.
cain
Didn’t expect to see an acquaintance’s tweet on the front page this morning. Jeszus the prices are crazy…
Doug R
Who needs AirBnb when you can rent a hospital bed for about $1500 a DAY?
OzarkHillbilly
Yeah, death is looking better and better. Pretty sure that’s a feature, not a bug.
Leto
I should have you take a look at my accident bill from last October.
Also the tweet says that it doesn’t cover in patient rehab, but there’s a charge for ~$1400 for “*Physical Therapy Services”. Isn’t that in patient rehab? Just wondering.
@OzarkHillbilly: Can’t say that I disagree with that.
Spanky
@Alain: I’m not quite to Medicare myself but have been looking into it and supplemental, and the contracted rates are waaaay discounted. Good news for your FIL! And even better if he has a supplemental plan.
OzarkHillbilly
@Leto: I’ve had a couple of *lengthy* in hospital stays and was responsible for my youngest’s. If it hadn’t been for carpenter’s insurance, I would have been screwed.
**where lengthy equals one week or more
Leto
@OzarkHillbilly: When my insurance company finally stopped fucking around, the amount we owed was less. It’s still currently going through legal wrangling, but the initial sticker shock (seven figures) was breathtaking. Knowing it was reduced, helped.
Btw, how is your son? How’s he coming along? I remember you saying he was doing better but checking to see.
Cathie from Canada
Wow — I have had 12 surgeries in my life — some relatively trivial, others requiring hospital stays of one to three weeks. Now I really do thank Dog I live in Canada, where the biggest expense is the parking charges at the hospital.
Zelma
And how are those fees determined? What does it mean that using the operating room cost $70,000? What kind of medical surgical supplies cost $50,000? With $12,000 in “Anesthesia services,” is there also going to be a big bill from the Anesthesiologist? I wonder how long the critical care room was needed? Even 5 days of critical care would price out at $40,000 a day.
I had a mastectomy in February and have not yet received any info on the cost. Thank God I have Medicare and really good supplemental insurance. I don’t expect to pay anything. But I am one of the lucky ones.
As an aside, the list price of the estrogen blocker I am taking is more than twice what it was when I took it 5 years ago. And it’s gone generic in the meantime.
This is insane.
gene108
David, I have a question, which I am not sure there is an answer to:
How do hospitals decide what to charge and what rate of discounts to accept from insurers?
There really seems to be no market mechanism determining the pricing. By market mechanism, I mean if it costs Gene108’s Ye Olde Widget Shoppe $1.50 to make 1 Widget, and I have fixed overheads of $100,000 per month, and if I sell them for $2.50 each, I would need to produce and sell 100,000 to cover my fixed costs.
At this point, I am not sure hospitals know what how to determine their costs, and I really think hospitals just run on volume. They funnel enough patients in to get enough cash flow to keep things running, and when the finish the accounting at the end of the year they hope there’s a surplus.
japa21
My guess is that Medicare would bring that down to about $50,000. Which means the patient, without supplemental insurance has out-of-pocket of $10,000, just for hospital bills. For surgeon, anesthesiologist, etc. the patient would also pay 20% of the bill, which could end up being another $2-3,000. Then add OP follow-up care. Then add in meds. Point is Medicare for all is not a solution unless those other itmes are taken care of one way or another, particularly meds and co-pays.
And if you work out a system that adequately handles everything else, it is no longer Medicare. This is why I really get upset with the purists who scream it is Medicare for All or nothing.
japa21
@gene108: I can give a partial response, as I used to contract with facilities and providers for an insurance company. Hospitals do have a cost evaluation. They then set up what is called a chargemaster, a listing of all their retail list costs, based on several items.
1) What their actual costs are.
2) What they receive from Medicare (this is really a critical factor, particularly for facilities that have a large elderly patient base). They actually end up charging high in their retail list to cover what they see as losses from Medicare.
3) What they estimate their insurance contracts will run. They contract with insurance companies based on a couple of things. Size of the patient base a carrier has. Payment history with insurance company. This is why companies like BCBS contract for lower rates than smaller carriers.
However, all that being said, you will still find vast divergences in charges between facilities, even in the same market place. Some facilities charge more because they have a large footprint in an area and know that patients don’t/can’t shop around for treatment so they are going to get patients. Insurance companies try to work around this with their contracts by offering narrower networks, but aren’t always successful as the insured population will find other carriers.
The long and short of it is that medical care pricing is basically out of hand and with no real governing system will remain so. The GOP tries to say that medical care is the same as the automotive industry. Buyers shop and choose for care the same as they do for a car. This is not true.
Brachiator
Just want to say that these prices are frightening.
@japa21:
The GOP approach to medical care issues is also frightening.
Richard Guhl
I got billed $75 K for a hip replacement in 2017. Medicare and my supplemental paid about $15 K, and that was the end of the story.
Gelfling 545
So how many chickens would equal $400K?
janesays
@japa21: Do they factor in the amount of non-payment they anticipate? Because a lot of people who get a $400,000 bill are just going to (quite understandably) say, “screw this, I’m filing for bankruptcy”.
jl
This looks like putting out their highest level charges in order to see how much they can collect. I have students, who before they went back to med or pharm school who worked on both sides of this filthy business. There are armies of drones on the hospital and the insurance side who will fight bureaucratic trench warfare over these bills.
Countries that have found a way to do Obamacare right have methods to avoid this kind of complete waste and pointless rent-seeking. Some allow industry wide negotiation of allowable price bands for charges to keep price discrimination and price gouging under control, with various approaches to enforcement. In Switzerland, a formal request to charge outside of the price band typically triggers an federal open book audit, since federal inquiring minds would like to know why the hell your organization is so special it needs to charge so much. I’ll need to go read up on what would happen if an organization just decided to send out a bill like this without formal permission to charge more than the agreed upper price limit (something really bad for the organization, I imagine). The Swiss system has been pretty effective, though I imagine it would need some carve out from US anti-trust law for it to work here.
The only state I know of that has a system to prevent this kind of price gouging is Maryland, but I haven’t kept up with how that system has been working for the last five years or so.
Howard Beale IV
It’s bad enough when you have a company-funded Health Insurance – it does little if you are in an area (like I am) where the majority of providers are “out-of-network”. When I had my cataract surgery, the Nurse anesthetist dutifully did her job of pushing fentanyl and midazolam, only to see that they are out-of-network, which stiffed me with an 800+ bill. And since my area is a one-hospital town, I’ve been clipped so many times it’s now to the point where I’m stuck having to determine if the practitioner is in-Network or Out – and good luck to you for mental health services since the inpatient wing of the local hospital (and doctors) is out-of-network.
Another Scott
@japa21: His $109,000 heart attack bill is now $332 after NPR told his story.
Maybe the secret is public disclosure followed by national outrage. :-/
I just found mention of a 2016 report on medical procedure costs. Guroo seems to be a webified version of that. It looks interesting, but the interface is a little slow and you have to know what you’re looking for.
Cheers,
Scott.