Stephen Stock and the NBC Bay Area Investigative Unit examine the health care payment system, how cost estimates vary among Bay Area hospitals and why experts say posted hospital prices don t really matter. This story aired on February 6, 2013.
The California state legislature is currently considering new ways to implement President Barack Obama’s healthcare overhaul. While the new law is meant to ensure healthcare for more people, the NBC Bay Area Investigative Unit found it likely won’t drive down health care costs. On top of that, The Unit discovered major flaws and fluctuations in the way costs in California are reported to consumers.
Under current California law, anyone can get a list of prices for hospital services, such as what it will cost for an emergency room visit. Hospitals are required to submit that information to the Office of Statewide Health Planning and Development (OSHPD). Hospitals can also publish an estimate of costs that a patient without health insurance would be required to pay for common procedures.
But The Unit discovered a wildly inaccurate and broken system that makes it extremely difficult for anyone—even patients with insurance—to know how much they will have to pay for a visit to the hospital.
Those answers are supposed to be easily found under a current California law called the Payers’ Bill of Rights. Passed in 2005, it requires hospitals and medical centers to report the costs of their procedures and services to OSHPD. The charge descriptions track everything from how much hospitals charge for gauze to medication to surgeries. According to OSHPD, the charge descriptions provide consumers with a metric that is similar to a retail price.
But health policy experts say these charges—the so-called sticker prices—are not representative of what patients, or their insurance providers, will end up paying.
“We all know that what is on that sticker is nowhere near to what we are actually paying,” said David Lansky, president and CEO of Pacific Business Group on Health, a San Francisco-based coalition that represents companies trying to work out the best health care plans for their employees.
Lansky says in a perfect world, finding and getting the best deal at the hospital should be like going to buy a car.
“What you end up paying is a bargaining thing between your skills as a consumer and the car dealer’s skill as a seller,” he said.
While the list of charges may give employees a rough idea of what one hospital tells the state it might charge for a procedure, experts say there is no way to know ahead of time what a patient will pay out of pocket. Patient payment data is not requested by the state or made public.
“You are sick, you are going to the hospital for something important, you don’t know what it costs or how to price it, so how are you going to end up working out the right price for you,” Lansky said. “In California the system does not work—flat out.”
San Jose resident Doris Schwarz works in the medical field as a clinical psychologist and knows firsthand the nightmare of trying to navigate California’s health care pricing system. Ten years ago, doctors diagnosed her with lymphedema, a disease that stems for Hodgkin’s Lymphoma that she fought three decades ago. Now she needs surgery—lymphatic liposuction—and she is trying to find the best value for her care.
“This has been quite an adventure first of all, trying to find a specialist who does the procedure, but then ascertaining the cost,” Schwarz said. “I would never buy a car without knowing, you know, what everything is costing up front.”
She said she wonders what will happen if there are complications or cost overruns, or if the procedure takes longer than expected. She said she is trying to obtain a quote from various medical centers about how much it will cost her to recover in the hospital post-operation.
“How will we be billed?” she asked. “No one is answering those questions.”
According to OSHPD, there is no requirement in California that patient payment information be reported to a public database. Upon request, hospitals must provide an uninsured patient with an estimate of what they will be asked to pay for care. Many hospitals across the state report a list of 25 common procedures and the associated costs patients without health insurance would have to pay.
Using this data from the OSHPD website, the Investigative Unit compiled a list of prices for common procedures at 44 different medical centers in the Bay Area, and the results showed a wide variation of estimates from hospital to hospital.
(Click here to see list of hospitals & cost estimates for 10 common procedures at those hospitals)
For example, according to data reported by hospitals, a two-view chest X-ray (CPT Code: 71020) is estimated to cost $1,908 at North Bay Medical Center in Fairfield. That is 19 times higher than the least expensive cost estimate of $98 at Santa Clara Valley Medical Center in San Jose.
A level 4 emergency room visit (CPT Code: 99284) is estimated to cost $7,328 at Stanford Medical Center in Palo Alto, which is $6,764 more expensive than the least expensive cost estimate on the list—$564 at Alameda County Medical Center in Oakland.
The estimated cost for diagnostic colonoscopy (CPT Code: 453787) at Marin General Hospital is $9,655. That is $4,966 higher than the average of the other 43 hospitals.
Several hospitals told NBC Bay Area that their cost estimates for these procedures may include different kinds of associated care, such as supplies and medications, and that could account for the variation in price for the same procedure. They also agreed that there is no real way for consumers to know how much they are paying for their care up front.
(Click here to read the statements)
“It does not mean that a high-priced hospital is providing better service,” said Dr. Renee Hsia, emergency room physician at San Francisco General Hospital and researcher at the UCSF School of Medicine.
Hsia authored a research paper in the Archives of Internal Medicine last year that found similar variations in the cost of an appendectomy among hospitals across California.
She looked at more than 19,000 cases of routine appendicitis at 289 hospitals and medicals centers throughout California and found a wide variation in what different hospitals charge. Those prices ranged from a low of around $1,500 to a high of $183,000. According to the report, the cost variation reveals a “broken system.”
(Click here to see UCSF’s summary of Dr. Hsia’s research)
“I think some people would be surprised to know that there isn’t regulation of what hospitals charge,” she said. “They are free to charge whatever they want based on what they feel their costs are.”
Maribeth Shannon, market and policy monitor director for the California Healthcare Foundation, says that it is “impossible to know as a consumer” how much a patient is expected to pay for a procedure ahead of time.
She says because insurance companies negotiate fees, prices published by hospitals rarely apply to a single consumer, making it nearly impossible to know how much someone will pay going into the hospital.
“I think it’s because it’s not been very transparent,” Shannon said. “There has not been a lot of visibility on what these different rates are, and here I mean negotiated rates—not just gross rates.”
Shannon says if patients really want to know what they will be expected to pay for a procedure, they should ask their insurance providers. She said she believes transparency is going to grow increasingly important as consumers without health insurance take on more responsibility for health care costs, and pay out of pocket.
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