How much will Medicare pay the hospital to repair you fractured leg?
The Centers for Medicare and Medicaid released the cost they pay for the top 100 hospital treatments for beneficiaries of Medicare across the country and the data presentation is virtually worthless to the average human being. The Charge master data set was successful in highlighting the complex and dysfunctional system we have in the U.S. for tracking and paying for health care.
Medicare acronyms add to confusion
Upon opening the Medicare cost file the average consumer will be flummoxed by the nomenclature. While I understand the need for an efficient medical billing system, the nomenclature used drapes a heavy shroud over the issue of transparency. What exactly is the DRG code 064 – Intracranial hemorrhage or cerebra infarction with or without MCC and CC. This is basically bleeding within the skull caused by head trauma such as a fall or stroke. Hospital and insurance companies love that the information is presented in medical speak which dissuades people from asking questions.
A short primer on Medicare medical billing codes
The Medicare inpatient codes are derived from the diagnosis, procedure, and the patient’s sex and age. They put that all together to create a Medical Severity – Diagnostic Related Groups or MS-DRG
Each groups represents a set of potential diagnosis (there can be many types of strokes) and the procedures used to treat the disease. Once a patient is diagnosed as having the DRG -064, intracranial hemorrhage, he or she will go through a set of procedures which are standard through out the U.S.
The DRG is further appended with nomenclature to denote the medical severity. Some strokes can have related physical complications greater than others. Comorbidity stands for another illness that needs to be treated.
- MCC = Major complications and comorbidity
- CC = Complications and Comorbidity
- W/O = With out
In the Medicare provider charge data there are three different types of Intracranial Hemorrhage or Cerebral Infarctions Diagnostic Related Groups
- 064 is with MCC
- 065 is with CC
- 066 is W/O CC or MCC
A DRG 066, becomes one of the line items on the invoice for reimbursement. That CMS has no explanation of the DRG code associated with the released data set only illustrates that they were compiling this data for industry people and not consumers in general.
Top 100 Medicare in-patient discharges
The data set consists of the top 100 DRGs, based on hospital discharges, which were billed to Medicare. Since Medicare deals primarily with seniors 65 years and older, there are no data for the cost of delivering a baby. Most of the DRGs revolve around strokes, heart attacks, respiratory illnesses, gastro-intestinal problems, urinary tracts issues plus hip and leg fractures. However, making it into the top 100 most frequent discharges for Medicare patients are also treatment for psychoses and drug and alcohol dependency or poisoning.
Huge gap between billing charges and reimbursments
The next hurdle in trying to find some relevance to the charge master data is the vast disparity between billing and reimbursements. This data is only for Original fee-for-service Medicare. It’s not suppose to include what private Medicare Advantage plans pay to the hospitals for the same treatment.
- It only includes in-patient hospital data that was reported in 2011
- Some hospitals receive an extra bump in reimbursement from Medicare because of: – indirect medical education (IME) or because they are a teaching hospital. – disproportionate share hospital (DSH) because they treat a higher percentage of low income patients
- California hospitals may not include the cost of physicians because they are prohibited from hiring doctors like other states. Consequently, it can be difficult to compare California to other states because the true costs of the DRG billing may not be known.
- Charges and Payments are averages and each discharge may have been more or less expensive.
Select Sacramento Medicare charges
The following spreadsheets are for hospitals in the Sacramento Valley which represent 13 different hospitals. I selected four DRG codes that were free of major complications or other illnesses for easier comparison:
293 – HEART FAILURE & SHOCK W/O CC/MCC; heart attack without complications
066 – INTRACRANIAL HEMORRHAGE OR CEREBRAL INFARCTION W/O CC/MCC; stroke or bleeding without complications
470 – MAJOR JOINT REPLACEMENT OR REATTACHMENT OF LOWER EXTREMITY W/O MCC; hip replacement without complications
481 – HIP & FEMUR PROCEDURES EXCEPT MAJOR JOINT W CC; broken leg or hip with complications. Only six hospitals reported discharging patients without any complications.
Why is Kaiser in the data set?
While it is my understanding that the data is for payments from Medicare to the hospitals for Original Medicare, Kaiser Permanente shows up in the reports. You can only receive services from Kaiser if you are in their Medicare Advantage plan, not Original Medicare (excluding Emergency Room admittance). Kaiser also has some of the highest reimbursement rates. But they might be from retail rates that are less inflated than other hospitals since their hospital and insurance work together. Kaiser only provides care to people who have Kaiser health insurance so there is less pressure to play games with the retail pricing of services.
Enloe and UC Davis take lowest and highest honors
Enloe Medical Center in Chico is consistently the least cost provider within the four DRGs and UC Davis was the most expensive. UC Davis gets an extra nudge in reimbursement because they are a teaching hospital and they serve a disproportionate share of the low income population. But I am not sure that entirely makes up for the difference in their higher costs.
Surprising consistency in Medicare payments
What is important for me is that Medicare is paying a relatively even amount to all hospitals for similar procedures. There is much more consistency in payment between hospitals for heat attacks and strokes than there are for hip replacements and leg or hip fractures. The variables that go into a hospital receiving higher payments aren’t readily apparent from either the documentation or location. Except for the least expensive Enloe having a more rural isolated population in Chico and the high price leader of UC Davis located in an urban core, there are no regional explanations for one hospital receiving a higher or lower reimbursement.
| 066 – INTRACRANIAL HEMORRHAGE OR CEREBRAL INFARCTION W/O CC/MCC | Total Patients | Average Covered Charges | Average Covered Payments | Average reimbursement Percentage |
| ENLOE MEDICAL CENTER | 36 | $32,656 | $5,582 | 17% |
| SUTTER ROSEVILLE MEDICAL CENTER | 43 | $29,719 | $5,934 | 20% |
| KAISER FOUNDATION HOSPITAL – SACRAMENTO | 17 | $32,343 | $6,085 | 19% |
| RIDEOUT MEMORIAL HOSPITAL | 42 | $32,764 | $6,211 | 19% |
| SHASTA REGIONAL MEDICAL CENTER | 14 | $37,417 | $6,320 | 17% |
| MERCY MEDICAL CENTER REDDING | 39 | $36,540 | $6,749 | 18% |
| MERCY SAN JUAN MEDICAL CENTER | 33 | $37,909 | $7,054 | 19% |
| SUTTER GENERAL HOSPITAL | 40 | $40,387 | $7,188 | 18% |
| ST JOSEPHS MED CENTER OF STOCKTON | 33 | $48,848 | $7,385 | 15% |
| MERCY GENERAL HOSPITAL | 18 | $42,147 | $8,469 | 20% |
| METHODIST HOSPITAL OF SACRAMENTO | 25 | $35,644 | $9,903 | 28% |
| UNIVERSITY OF CALIFORNIA DAVIS MEDICAL CENTER | 36 | $64,005 | $10,694 | 17% |
| Total | 376 | Average | $7,298 | 19% |
| Median | $6,902 |
| 293 – HEART FAILURE & SHOCK W/O CC/MCC | Total Patients | Average Covered Charges | Average Covered Payments | Average reimbursement Percentage |
| ENLOE MEDICAL CENTER | 12 | $34,167 | $4,586 | 13% |
| KAISER FOUNDATION HOSPITAL – SACRAMENTO | 19 | $14,833 | $4,877 | 33% |
| SUTTER ROSEVILLE MEDICAL CENTER | 35 | $25,995 | $5,023 | 19% |
| RIDEOUT MEMORIAL HOSPITAL | 38 | $23,545 | $5,212 | 22% |
| SHASTA REGIONAL MEDICAL CENTER | 13 | $24,761 | $5,283 | 21% |
| DAMERON HOSPITAL | 16 | $47,713 | $5,364 | 11% |
| MERCY SAN JUAN MEDICAL CENTER | 24 | $28,920 | $5,629 | 19% |
| MERCY MEDICAL CENTER REDDING | 21 | $29,400 | $5,652 | 19% |
| SUTTER GENERAL HOSPITAL | 24 | $32,891 | $6,050 | 18% |
| METHODIST HOSPITAL OF SACRAMENTO | 13 | $25,272 | $6,272 | 25% |
| ST JOSEPHS MED CENTER OF STOCKTON | 49 | $39,370 | $6,308 | 16% |
| MERCY GENERAL HOSPITAL | 17 | $30,518 | $6,487 | 21% |
| UNIVERSITY OF CALIFORNIA DAVIS MEDICAL CENTER | 31 | $45,865 | $8,592 | 19% |
| Total | 312 | Average | $5,795 | 20% |
| Median | $5,629 |
| 470 – MAJOR JOINT REPLACEMENT OR REATTACHMENT OF LOWER EXTREMITY W/O MCC | Total Patients | Average Covered Charges | Average Covered Payments | Average reimbursement Percentage |
| ENLOE MEDICAL CENTER | 208 | $64,382 | $14,050 | 22% |
| KAISER FOUNDATION HOSPITAL – SACRAMENTO | 71 | $48,761 | $14,997 | 31% |
| SUTTER ROSEVILLE MEDICAL CENTER | 273 | $77,772 | $15,287 | 20% |
| KAISER FOUNDATION HOSP SO SACRAMENTO | 21 | $57,730 | $15,516 | 27% |
| SHASTA REGIONAL MEDICAL CENTER | 134 | $158,240 | $16,192 | 10% |
| RIDEOUT MEMORIAL HOSPITAL | 45 | $56,150 | $16,241 | 29% |
| DAMERON HOSPITAL | 272 | $116,587 | $16,834 | 14% |
| MERCY MEDICAL CENTER REDDING | 388 | $69,367 | $17,282 | 25% |
| METHODIST HOSPITAL OF SACRAMENTO | 239 | $68,266 | $17,647 | 26% |
| ST JOSEPHS MED CENTER OF STOCKTON | 47 | $90,698 | $18,157 | 20% |
| SUTTER GENERAL HOSPITAL | 493 | $89,351 | $18,783 | 21% |
| MERCY SAN JUAN MEDICAL CENTER | 225 | $86,165 | $19,119 | 22% |
| MERCY GENERAL HOSPITAL | 151 | $85,236 | $21,452 | 25% |
| UNIVERSITY OF CALIFORNIA DAVIS MEDICAL CENTER | 121 | $185,506 | $26,054 | 14% |
| Total | 2688 | Average | $17,687 | 22% |
| Median | $17,058 |
| 481 – HIP & FEMUR PROCEDURES EXCEPT MAJOR JOINT W CC | Total Patients | Average Covered Charges | Average Covered Payments | Average reimbursement Percentage |
| ENLOE MEDICAL CENTER | 62 | $66,846 | $12,668 | 19% |
| KAISER FOUNDATION HOSPITAL – SACRAMENTO | 11 | $45,354 | $12,768 | 28% |
| SUTTER ROSEVILLE MEDICAL CENTER | 52 | $65,721 | $13,170 | 20% |
| SHASTA REGIONAL MEDICAL CENTER | 28 | $105,430 | $14,168 | 13% |
| RIDEOUT MEMORIAL HOSPITAL | 44 | $55,361 | $14,343 | 26% |
| MERCY MEDICAL CENTER REDDING | 77 | $60,017 | $14,582 | 24% |
| DAMERON HOSPITAL | 13 | $87,954 | $14,609 | 17% |
| MERCY SAN JUAN MEDICAL CENTER | 63 | $81,151 | $15,170 | 19% |
| ST JOSEPHS MED CENTER OF STOCKTON | 40 | $89,028 | $15,639 | 18% |
| SUTTER GENERAL HOSPITAL | 37 | $90,470 | $15,843 | 18% |
| METHODIST HOSPITAL OF SACRAMENTO | 24 | $76,382 | $16,902 | 22% |
| MERCY GENERAL HOSPITAL | 27 | $82,077 | $17,010 | 21% |
| UNIVERSITY OF CALIFORNIA DAVIS MEDICAL CENTER | 26 | $196,944 | $22,962 | 12% |
| Total | 504 | Average | $15,372 | 20% |
| Median | $14,609 |
Are hype-inflated charges common in private insurance?
Because so little in-patient and out-patient treatment costs are actually published and available to the public in a usable form, it is hard to say if the price disparity between hospital billing and reimbursement transfers over to the private health insurance side of the industry. From other studies of private insurance data, it is commonplace for hospitals to charge hyper-inflated prices only to be reimbursed less than half the amount from the insurance company. The nonprofit Catalyst For Payment Reform has been working to bring transparency to the health care cost pricing issue for years
Uninsured pay the price
The real losers have always been the uninsured patient that is charged full over-the-counter retail pricing. Part of the strategy for the high prices on the part of hospitals might be to recoup part of their loss from people who never pay for care and flexibility in negotiating payments terms with the uninsured.
Consumer driven health care is a myth
Regardless of the all the reasons for the exorbitant hospital charges, the pricing and reimbursement rates underscore the fantasy of “Consumer Driven” health insurance plans. Health insurance plans with a high deductible like a Health Savings Account are suppose to encourage people to shop for the best price to get the biggest bang for their buck.
Poor consumer information on costs
The rational is that if consumers make decisions based on price that will drive the cost of health care down. That only works with a transparent market place where the consumers have good information in which to compare the services. There is no good consumer information for pricing. Therefore, consumer driven health insurance plans can never affect the cost of health care. Many of these points were echoed in a webinar on the Medicare provider charge data hosted by AcademyHealth, New Hospital Pricing Data: What it Says, What it Means in Association with the Robert Wood Johnson Foundation.
Secret costs distort market place
The Medicare pricing and reimbursement data illustrates how screwed up the health care market place is in the U.S. Health insurance companies go so far as to have self-insured groups they contract with agree not to disclose the reimbursements the insurance company pays to the group for health care services. All these phony numbers and secret contracted rates only serve to make a complicated industry that much harder for either government regulators or consumers to make good decisions.