Data show the wide range of hospital billings

Posted: May 10, 2013

Bills for knee replacements in the Philadelphia region in 2011 ranged from $30,386 at Chester County Hospital to $202,777 at Our Lady of Lourdes Medical Center in Camden, federal data released Wednesday showed.

But Medicare paid both hospitals just a fraction of those billed charges. When a patient receives his statement, it usually indicates the inflated billed charges as well as the lower figure actually paid by the insurer.

Medicare paid Lourdes an average of $15,681 for 31 knee replacements in 2011. The average payment to Chester County Hospital, in West Chester, was $12,520 for 141 surgeries.

The gap between the charges and the amount Medicare paid evaporated into the accounting ether. No one paid the difference.

What gives?

The U.S. Department of Health and Human Services, which administers Medicare, touted the data as an "unprecedented" boost to transparency in health care, but experts rejected the notion that disclosing "billed charges" - the $202,777 figure from Our Lady of Lourdes - was helpful to consumers.

What would be useful is "not what hospitals bill, but what they receive for under-65 people," said Mark Pauly, a professor of health management at the University of Pennsylvania's Wharton School.

But those prices, the ones for patients not eligible for Medicare, are negotiated and paid by Independence Blue Cross, Aetna, and other insurers - and are tightly guarded secrets.

Billed charges and Medicare payments were far apart for many procedures and diagnoses beyond knee replacements, including infections, heart catheterizations, and pneumonia.

Temple University Hospital had the highest overall charge in the region, for a certain respiratory condition with ventilator support for at least four days. Temple's average charges for that condition were $613,927. It was paid an average of $80,550. At the low end for that diagnosis was Roxborough Memorial Hospital, with a payment of $35,172 for $97,430 in charges.

Billed charges are an accounting fiction, inflated over many years by applying health-care rates of inflation to cost estimates, experts said.

Those inflation rates have had a "low end of 5 percent to the high end of the low double digits," said John Cacciamani, chief executive of Chestnut Hill Hospital. "Eventually, after 20 years, you end up here."

Until the Affordable Care Act required hospitals to charge the uninsured no more than they would receive from Medicare or commercial insurers, the dangerous side of billed charges was that the uninsured could face those bills in a lawsuit.

It's not clear how often patients actually paid those prices. "Billed charges are the max you could [get out of] a rich person" who came to a hospital without insurance, Pauly said.

There is no standard for the ratio of what hospitals actually receive from Medicare to their billed charges. In the Philadelphia region, that ratio ranged from 8.5 percent at Crozer-Chester Medical Center to 29.7 percent at Einstein Medical Center Philadelphia, formerly Albert Einstein Medical Center.

The range of payments for the most common procedure for seniors covered by Medicare - knee replacements - is substantial.

Pauly said extra payments for teaching hospitals, supplements for hospitals that have a heavy load of poor patients, and additional amounts for hospitals with high-cost cases account for most of the differences in payments.

Hahnemann University Hospital in Center City topped the list of payments for knee replacements, receiving an average of $24,587 for 25 total knee replacements, the data show. Hahnemann charged an average of $178,874 for the procedure.

At the other end of the spectrum, Bucks County Specialty Hospital, part of the Rothman Institute, was paid an average of $10,545 for the 29 joint replacements at the Bensalem facility.

The median payment - half received more and half received less - at 44 Philadelphia-area hospitals that performed knee replacements was $14,096.

A Hahnemann spokeswoman attributed the hospital's higher payments to compensation for medical education and payments for serving a high proportion of poor people.

Pauly, the Penn expert, said the data, covering the 100 most common inpatient procedures and treatments paid for by Medicare, say more about the quirks of Medicare than they do about hospitals.

"My hospital stay is used to achieve other social goals, which is a crazy way to pay for things," Pauly said. "It would be like, if when you buy groceries, extra money were added on to help the poor or improve the environment in California."


Contact Harold Brubaker at 215-854-4651 or hbrubaker@phillynews.com.

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