Prices vary greatly at Charleston hospitals
CHARLESTON, W.Va. -- Charleston Area Medical Center charges an average of nearly $10,000 more for the most common medical conditions than St. Francis Hospital, a mere five blocks away in downtown Charleston, according to Medicare data released Wednesday.
To treat septicemia, a disease associated with bacteria or toxins in the blood, CAMC charges nearly $25,000 more than St. Francis. Thomas Memorial Hospital in South Charleston, which has the same ownership as St. Francis, charges $17,000 more than its sister hospital to treat septicemia.
To treat respiratory failure, CAMC charges about $30,000, while St. Francis charges about $10,000. Thomas Memorial charges $27,000 to treat respiratory failure.
Medicare, for the first time, released data on more than 3,000 hospitals across the country, showing wide variances in pricing, not only from region to region but also within states and cities. All the data are for fiscal year 2011.
Medicare released data for the 100 most-commonly billed inpatient conditions.
St. Francis, a much smaller hospital than CAMC, performed 23 different inpatient procedures enough times in 2011 to be included in the Medicare data. St. Francis charged less than CAMC for 22 of those 23 procedures.
CAMC, St. Francis and Thomas Memorial all tend to charge less than the national average.
The prices that hospitals charge for procedures are somewhat akin to the sticker price on a car -- almost nobody pays the list price. However, people are even less likely to be charged the hospital sticker price than they are for a car.
"You have these list prices and no one ever pays those," said Uwe Reinhardt, an economist at Princeton University and a health policy expert. "My definition of charges is what a completely drunken Mideastern potentate would pay for a procedure if his wife was not around to control the charges."
However, the charges, which every hospital compiles on a list called a chargemaster, are useful as a starting point in negotiations. Every hospital has its own chargemaster -- and they were largely hidden from the public until the release of this data.
Medicare does not negotiate with hospitals but pays prices based on what it judges a procedure to cost the hospital. For the 23 procedures that they had in common, CAMC charged nearly three times what Medicare judged its costs to be, while St. Francis charged just more than double.
For instance, for respiratory failure, for which CAMC charges more than $30,000, Medicare pays CAMC about $8,500 per procedure. Medicare pays St. Francis $6,800 for the same procedure, much closer to St. Francis' charge of $10,000.
It seems intuitive that larger hospitals like CAMC would charge lower prices than smaller ones for the same economies-of-scale reasons that mean Home Depot can charge less than the local hardware store. Hospital executives, though, said that's not always the case.
Joe Letnaunchyn, president of the West Virginia Hospitals Association, said each hospital sets its prices based on its cost structure, the services it provides and the population it serves.
"If you have a hospital that has a trauma center or a burn unit," Letnaunchyn said, "you have to provide all those services or specialties either at the hospital or on call, and all that has a cost with it."
Larry Hudson, the chief financial officer at CAMC, said CAMC is a teaching hospital, has a trauma center and does research, all factors that contribute to its higher prices. Hudson also said, because CAMC is larger, it draws the most severe and the most expensive cases from the Charleston area.
"We're the hospital of last resort," Hudson said. "We get the cases that are the most complex."
Hudson said the hospital has to charge more for things like respiratory failure because its patients often have much longer hospital stays than at other hospitals.
Paige Johnson, a spokeswoman for St. Francis, said she didn't know why that hospital's prices are lower but said the price difference has no bearing on quality.
Nancy Chockley, president of the National Institute for Health Care Management, a non-profit dedicated to improving American health care, said multiple studies have backed up that point.
"Is there any rhyme or reason?" Chockley asked rhetorically. "One thing we know, higher prices do not reflect higher quality."
Indeed, despite its higher prices, CAMC scored lower than St. Francis on all 10 questions of a survey given to Medicare patients at both hospitals.
Private insurers negotiate with hospitals individually, usually asking for a discount from the chargemaster price. Hospitals and insurers sign nondisclosure agreements, so there is no complete list showing what private insurers pay for these procedures.
Reinhardt gave an example of how the negotiation can go and how the chargemaster numbers are important, even if almost nobody pays them.
"Private insurers go usually with the chargemaster and ask for a 60-percent discount, and then the hospital says we need 65 and they settle on 62," Reinhardt said. "If I have a wildly inflated chargemaster and then give you a 60-percent discount, that looks like a lot."
Chockley said larger hospitals can command higher prices because they have more clout with insurers.
"If you are in a market and you have a very high market share, you can tend to charge more because the insurer needs you more," Chockley said.
Fred Earley, the president of Highmark Blue Cross Blue Shield West Virginia, said many factors go into their negotiations with hospitals, but that a hospital's size within its community matters.
"The more significant presence they have in a market, the more negotiating prowess they have," he said.
Chockley, though, disputed the oft-repeated claim that no one pays the chargemaster prices.
"Hospitals are quick to say, 'We don't really charge many people these prices,'" she said. "The people who pay that price are the uninsured. The people who are least able to afford it are paying the highest prices."
Many of those people receive free or discounted charity care. Hudson said CAMC had $135 million in uncollectible accounts last year -- a combination of charity care and unpaid debt.
CAMC offers charity care to the uninsured who fall below certain income guidelines and do not qualify for government programs such as Medicare and Medicaid.
For a family of four, the income threshold is $44,700 per year.
However, if someone does not apply for charity care or is above the income threshold, they can be presented with a bill with chargemaster prices.
"You fall off your chair when you see those charges. Some patients will go to the hospital and plead, and the hospital might, case by case, give a discount," Reinhardt said. "If you can't pay them, they figure out a payment plan. If you miss payments they turn it over to a collection agency."
Staff writer Lori Kersey contributed to this report.
Reach David Gutman at firstname.lastname@example.org or 304-348-5119.