OHSU Receives Higher Medicare Payments than other Oregon Hospitals

Uninsured patients are charged two to three times more for the same procedure at area hospitals

By: 

 Courtney Sherwood

July 15, 2013 -- Sick Oregonians without health insurance regularly receive bills for two to three times what Medicare or private insurers are willing to pay to cover treatment, newly released medical billing data appears to indicate.

The data, from the Centers for Medicare & Medicaid Services, shows how much hospitals are paid for treating Medicare patients. The release includes average payments made for 99 medical conditions treated at 32 Oregon hospitals in 2011.

With an estimated 40 percent to 50 percent of health care charges originating at hospitals, the data is feeding a debate about U.S. medical costs – and fueling outrage about wide payment variations across hospitals.

“Billing procedures for American hospitals hold about as much logic and fiscal accountability as a lemonade stand,” said Patrick Riley, a senior industry analyst with market research firm Frost & Sullivan. Riley said the new financial data will provide a key role in showing just what health care costs – something that has been difficult, if not impossible, to dig up until now.

The data release shines a light on just how complicated medical billing is, as well. Medicare has shown how much hospitals bill for treatment, but those bills don’t determine how much each hospital is paid. Instead, Medicare uses a formula to determine how much hospitals are paid, based on condition, location of the hospital, and status of the hospital. Patients covered by Medicare or other forms of health insurance almost never pay the billed amount.

For example, hospitals across Oregon charged an average of $17,915 per patient with chronic obstructive pulmonary disease (or COPD), but when treating Medicare patients they were only paid $6,952. In some cases, the difference between hospitals’ official price tag and what they receive from Medicare is substantial:

• Sky Lakes Medical Center has an average price tag of $27,919 when treating COPD patients who have complications, but the hospital is only paid $7,692 to treat them.
• Rogue Valley Medical Center’s average price tag for treating heart failure is $44,708, but the hospital receives an average of $13,132 per Medicare patient.

There’s also huge variation in the official price tag that hospitals affix to procedures. Providence Newburg billed an average of $9,933 to each of 13 kidney failure patients, while Legacy Mount Hood Medical Center billed an average of $24,409 to each of 20 patients treated for the same condition there. (Despite the wide variation in billed amount, the two hospitals collected fairly similar payments after treating Medicare patients – for treating kidney failure in Medicare patients, Providence Newberg was paid $5,987 on average and Legacy Mount Hood was paid $6,864 on average.)

Though Medicare’s data release demonstrates that the government pays far less than the official price tag for providing medical care, people without health insurance are billed the full amount.

Hospital officials point out that uninsured patients typically get an automatic discount. Oregon hospitals then typically offer a no-insurance discount. Bay Area Hospital knocks 25 percent off the bill, for example, and Legacy’s hospitals offer a 35 percent bill reduction for the uninsured. People with low incomes may be eligible for even deeper discounts if they qualify for charity care.

And even with discounts, the uninsured often receive bills for more than Medicare would pay.

Sky Lakes Medical Center billed an average of $17,776 to treat kidney and urinary tract infections. After applying the 15 percent discount that Sky Lakes offers uninsured patients, someone without health coverage could expect a bill for $15,109. Yet Sky Lakes collected just $5,949 per Medicare patient with the same diagnosis.

“Hospitals, in essence, charge the least capable of paying the most,” said Riley, the healthcare analyst.

The gap between what hospitals bill the uninsured, and what they’re paid for treating Medicare patients, is clear across numerous conditions.

For example, after treating kidney failure:

• Providence Newberg Medical Center was paid $5,987 to treat each of 13 Medicare patients, the lowest Oregon reimbursement rate for this procedure. Price tag without insurance: $5,987.
• Providence St Vincent was paid an average of $6,882 to treat each of 45 Medicare patients. Price tag without insurance: $12,011.
• Salem Hospital was paid an average of $6,905 to treat each of 52 Medicare patients. Price tag without insurance: $17,327.
• Good Samaritan Hospital in Corvallis was paid an average of $6,618 to treat each of 42 Medicare patients. Price tag without insurance: $19,262.
• Legacy Good Samaritan was paid an average of $8,108 to treat each of 19 Medicare patients. Price tag without insurance: $19,698.
• OHSU was paid an average of $10,335 to treat each of 65 Medicare patients, the most any Oregon hospital was paid for this procedure. Price tag without insurance: $17,066.

(Click here for complete kidney failure cost information.) 

OHSU paid more than other hospitals

A Lund Report review of the Medicare data release found that OHSU was paid considerably more than average when treating 94 percent of reviewed health conditions.

When patients enter OHSU with kidney failure with complications, the total cost is likely to average $10,335 – more than at any other hospital in Oregon. The same condition cost an average of $5,987 to treat at Providence Newberg Medical Center. Treating heart failure with multiple complications averages $15,012 at OHSU – compared to $9,006 at McKenzie-Willamette Medical Center.

Government officials have warned that the Medicare data is far from comprehensive, and that wide variation in payments to hospitals may be justified. Some patients are sicker than others, for example.

One hospital can also receive more than others because of Medicare’s own rules, according to OHSU officials.

Base payments are the same for all hospitals in the Portland metro area, said OHSU Hospital Chief Financial Officer Diana Gernhart. But Medicare pays OHSU extra because it serves more low-income patients than is typical across the state – a condition that bumps payments to a number of hospitals in the state. Medicare then pays still more to OHSU because it is a teaching hospital.

http://www.thelundreport.org/resource/ohsu_receives_higher_medicare_payments_than_other_oregon_hospitals

Panel Tells Congress Medicare Is Unfairly Penalizing Hospitals Serving The Poor - Kaiser Health News

Panel Tells Congress Medicare Is Unfairly Penalizing Hospitals Serving The Poor - Kaiser Health News

Panel Tells Congress Medicare Is Unfairly Penalizing Hospitals Serving The Poor

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TOPICS: MEDICARE, AGING, HOSPITALS, HEALTH REFORM, HEALTH DISPARITIES

By Jordan Rau

KHN Staff Writer

JUN 14, 2013

This KHN story was produced in collaboration with 

The financial penalties that Medicare imposes on hospitals with high rates of patient readmissions are too harsh for hospitals serving the poor and should be changed, according to a congressional advisory agency.

Since last fall, Medicare has been reducing its payments to 2,213 hospitals under a provision in the health care law that aims to improve quality at the nation's hospitals. The penalties kick in when patients with heart failure, heart attack or pneumonia are readmitted at higher than expected rates within 30 days.

While the Medicare policy seems to be having an effect - facilities are scurrying to keep better tabs on their high-risk patients after discharge - some hospital officials and other experts say the penalties are unfair because hospitals that treat the poorest patients are getting hit harder than others.

"The idea is right, but the implementation has been greatly flawed by penalizing hospitals that take care of the most vulnerable patients," said Dr. Atul Grover, chief public policy officer at the Association of American Medical Colleges.

Low-income patients, doctors and researchers say, are more likely to have trouble following hospital instructions for taking care of themselves after discharge. They don't always have easy access to doctors to monitor their recuperations and sometimes can't afford needed medications.

The maximum penalties, now set at 1 percent of Medicare payments, are scheduled to double to 2 percent starting in October and 3 percent in the fall of 2014.

In the District of Columbia, Howard University Hospital, which treats the largest share of low-income patients, is being penalized the most of any area hospital; since last October, its Medicare payments have been reduced by 0.95 percent. Sibley Memorial Hospital, which treats the smallest share of poor patients, was the only District hospital to avoid a penalty, data show.

In Virginia, Mary Washington Hospital in Fredericksburg and Culpeper Regional Hospital were penalized 1 percent. Maryland hospitals are exempted from the federal program because the state has a unique reimbursement system.

Medicare has disagreed that the readmissions penalty program needs revisions. But thereport to Congress from the Medicare Payment Advisory Commission, or MedPAC, agreed with critics that there are "shortcomings" that "can work at cross purposes to the policy's intent." The criticisms carry extra weight because MedPAC helped devise the readmission penalties, calling for them back in 2008.

MedPAC found that hospitals where fewer than 3 percent of Medicare patients were low income received an average penalty of 0.21 percent. Hospitals where more than 18 percent of Medicare patients were low income had an average penalty more than twice that, 0.45 percent.

"Income is still an important … variable in explaining variation in readmissions," the commission said. It recommended that in future years, when determining penalties, Medicare compare a hospital's readmission rates to those of hospitals with comparable numbers of poor patients. Penalties can be a drain on safety net hospitals, many of which operate on slim profits or at a loss.

The Centers for Medicare & Medicaid Services did not comment on the MedPAC recommendations. In the past, officials have noted that after years of holding steady, the national hospital readmission rate last year dipped below 18 percent.

But MedPAC warned that if the penalty formula remains unchanged many hospitals will continue to get penalized in future years even if they reduce readmissions because they will be judged on how they compare to the entire industry. MedPAC proposed that Medicare set target readmission rates for hospitals each year and exempt from penalties those that succeed.

"These are all steps in the right direction," said Dr. Ashish Jha, a Harvard School of Public Health researcher who first documented the unevenness of the penalties. “MedPAC is thinking smartly about this and they're looking at the evidence coming and making changes to the metrics."

Changing the program, however, might not be easy. Medicare officials have said that many details were spelled out in the 2010 law, making them difficult to change in light of deep partisan divisions in Congress.

This article was produced by Kaiser Health News with support from The SCAN Foundation.

http://www.kaiserhealthnews.org/Stories/2013/June/14/medpac-hospital-readmissions-poor-congress.aspx