"Funny Money" Hospital Charges vs. Costs
The costs of medical care, specifically hospital costs are no laughing
matter. But hospital bills and their relationship to charges and actual
collections are becoming so ridiculous that I have begun referring to
them as "funny money." At least once a month I have an upset
and concerned patient bring in their hospital bill and ask me how come
they were charged $5.00 for a Tylenol or $10.00 for a Band-Aid?
The reason for their agitation is twofold: one, there is no way these
items can cost this much, and two, they are concerned that they or their
insurance company or Medicare will have to pay these ridiculous charges.
Well, these patients have every right to be upset and concerned, but after
I explain how and why the hospital came up with these dollar amounts,
they usually agree that it is "funny money" and are no longer
too concerned about it.
I guess it all started with the Medicare "DRG" (Diagnostic Related
Group) Act in 1987. Prior to that, hospital bills were more reasonable.
A modest profit was built into the charges to offset unreimbursed care
(i.e. charity cases, the uninsured, etc.) but the ratio of charges to
actual costs was relatively small (perhaps 1.2 to 1 or even 1.5 to 1).
The typical hospital bill for a total hip was $15,000. In 1987 when Medicare
introduced its concept of fixed payments to hospitals for groups of diagnoses
(DRG's), the game changed. Now, whether you had an appendectomy or a total
hip, the hospital might get the same flat payment, regardless if you were
out in one or two days or stayed a week or more. The idea was that Medicare
could cap the payments at a fixed amount, and on average the hospital
would make the same amount of money. Hospitals now had to control costs
to make money. They began to worry about how long you stayed in the hospital
and they could no longer bill the actual costs plus markup to Medicare
to offset the costs of unreimbursed care.
In most hospitals Medicare patients account for 50% or more of all the
patients. So what could the hospital do? They raised their charges on
all patients, but accepted Medicare and-secondary insurances paid them
as full payment for Medicare patients. In effect, the non Medicare patients
and their insurance companies began to pay for the shortfall in dollars
created by the fixed payment received from Medicare. So the hospital bills
rose significantly!
It didn't take long for the large insurance companies to learn from Medicare.
They came to the hospitals and made them offers they could not refuse.
If you want to continue to treat our patients, you will accept a fixed
cost reimbursement contract. Many of them used the same DRG approach,
but others used a flat per diem charge regardless of diagnosis. Soon 60%
then 70%, then 80% and now 90% of all patients are covered by some type
of fixed payment system. In order to offset the losses engendered by these
contracts, and to continue to provide the un-reimbursed care to charity
cases and the uninsured, the hospital has repeatedly raised their charges,
but has had to accept what Medicare and these other insurers agreed to
pay them as full payment. In effect they "wrote-off" or "adjusted
off" any difference between the amount billed and the amount collected.
It doesn't take a math whiz to figure out that if 10% of patients are
paying for losses created by the other 90%, the hospital charges had to
sky rocket Now the typical hospital bill is $50-70,000 for a total hip,
but the hospital collects only approximately $12,000 from Medicare for
example.
The charges are astronomical, but actual amount paid by the third payor
is much lower. That is why I call it "funny money"-in most cases
no one actually pays that money. The bill bears little relationship to
the actual costs. $5 Tylenol's and $10 Band-Aids are ridiculous, but they
are a reflection of a reimbursement system gone haywire.
What the future holds for this system is unknown. A lot depends on Washington,
but in the meantime our existing system of third party reimbursement will
continue. The latest wrinkle is "capitulated" payments to hospitals.
In this case a hospital signs a contract with a third party payor (i.e.
an insurance company) to accept a flat payment each month for each member
covered by the insurance company-whether they receive hospital care or
not.
This concept has been used to control doctors fees by some third parties,
especially Health Maintenance Organizations (HMO's), for several years.
In effect the doctor or hospital accepts the risk of how much care will
be needed. The "capitation" form of payment is new for hospitals
and most certainly will affect how they do business. But, as long as some
patients still pay the bills that are covered by insurance companies that
reimburse actual per patient charges, the hospital bills will continue
to appear ridiculously large.
Occasionally I operate on a patient who has no insurance or third party
coverage of any kind. This is rare, but it can happen. I'll give you an
example of Mrs. Jones.
She has severe rheumatoid arthritis which she contracted in her 20's.
She is married to Mr. Jones, a local farmer with a small amount of land,
Because of her rheumatoid arthritis, she was unable to get insurance coverage.
It was always excluded as a "pre-existing" condition. Eventually
her hips deteriorated to the point she required bilateral total hips.
With no insurance she usually would qualify for Medi-Cal, but because
of the value of the modest amount of land she and her husband owned she
did not qualify. Mrs. Jones negotiated a rate with the hospital but the
hospital bill was still over $100,000. They had to mortgage the farm to
pay the bill. Certainly to them it wasn't "funny money". Fortunately
these cases are rare and for the rest of you, don't get too concerned
with your hospital bills. They are usually "funny money" and
no one is actually paying those charges.
Toll-Free Line Established for HMO Complaints
The Department of Corporations, the regulatory agency governing HMO's
licensed in California, has recently established a toll-free 800 number
for consumers to lodge complaints against HMO's. Complaints are expected
to include: denial of care, difficulty being referred to appropriate specialists,
delays in authorization for treatment, etc. Have all your information
ready when you call: (800) 400-0815. Hours of operation are 8 am to 5
p.m. Monday through Friday.
Explaining the use of the Harris Hip Questionnaire
By Thomas J. Blumenfeld, MD.
The old adage, there is no such thing as a stupid question, may at times
be sorely tested. I have wondered about this as I have come to the end of
asking many of you about how your hip is doing, just prior to the physical
exam. Those of you who have had your hip replaced know that, at each follow-up
visit, a standard set of questions is asked. You are asked questions such
as if you have any hip pain, how far you can walk whether you can put on
your own shoes and socks, even if you can use public transportation. To
date, no one has asked why we ask these questions, or what their relevance
is.
The answers to these questions form the basis for the Harris Hlp Score (HHS1~
Developed by Dr. William Harris, a prominent orthopaedist in Massachusetts,
the HHS is a tool for the evaluation of how a patient is doing after their
hip is replaced. Based on a total of 100 points possible, each question
is awarded a certain number of points based on how it is answered. Questions
are further grouped into categories. The first category is pain. For example,
if you
have no pain in your hip you get 44 points, slight pain 40 points, down
to 0 points for disabling pain. The second category is function. If you
have no limp, do not use a walking aid, and can walk more than six blocks,
you get 33 points; less if you were to use a cane, or walk only two blocks,
etc. The third category, functional activities, consists of questions about
how you climb stairs, put on shoes, length of time you can sit in a chair,
and if you can use public
transportation. Finally, the physical exam results are tabulated, and based
on your range of motion, up to 9 points awarded.
The score is reported as 90-100 for excellent results, 80-90 being good,
70-79 fair, 60-69 poor, and below 60 a failed result. Using the HHS, results
of hip replacements can be compared across the country in an objective fashion.
In the clinic, the HHS allows us to rapidly get a feel for how you are doing
after surgery.
The HHS, being an objective tool, has one shortcoming. The score does not
allow for individual differences based on age, health, or other personal
issues that may affect the total score. How might this occur?
Let us imagine that one of you finds the idea of walking six blocks as appealing
as root canal surgery, or you can only walk two blocks because of asthma,
not because of your hip. You would only get five out of a possible eleven
points. Then let's say that you use a cane for balance when you walk. You
would get seven out of a possible eleven points. If you use a railing to
go up stairs (and I expect that many of you do for safety alone), you only
get two out of the possible 4 points. This would mean that the best HHS
you could get would be an 88, which is a good result. You however may feel
that because you have no pain and can do what you wish, that you have an
excellent result from you hip replacement. We here would agree.
The above example highlights a key point, that while the HHS is an objective
tool, it must be interpreted by a subjective individual, namely your doctor.
While we take some comfort when you have a high score, and tend to be concerned
when the score is low, there are many variables that affect the total score.
The HHS, without the clinical acumen to use it appropriately, is only a
number.
In summary, the HHS is a tool that allows us to find out how you are doing
after your hip replacement. We keep all of your scores enabling us to follow
you along as you and your hip pass the years together. We hope to have many
chances to ask questions of you that may at times seem stupid, but are quite
important to you and your hip's health and good function.
Dear Doctor...
Q. Can I get a flu shot if I am scheduled for surgery?
A. It is best to get your flu shot at least two weeks before surgery. Some
people develop minor flu symptoms after taking the vaccine and you would
want to be completely over the symptoms before surgery.
Q. After surgery when I return home, what should I and/or my family expect?
A. You Will feel fatigued for the first three weeks. Your energy level will
be low, so don't plan any outings during this time.
You will need someone around 24 hours a day for the first two weeks to assist
you. The smallest task like getting a drink of water becomes more difficult
when you are using a walker or crutches.
When you are discharged from the hospital your surgeon will order needed
equipment, physical therapy and nursing services. If you have not been contacted
by these services 24 hours after you are discharged home you should contact
the office. If you are discharged home on the weekend you must allow a full
working day for the agency involved to make these arrangements.
Hospital
Charges