Jackson Parish Hospital is providing the following charge information in compliance with the CMS FFY 2019 inpatient and long-term care hospital PPS rule, requiring hospitals “to make available a list of their standard charges via the internet in a machine-readable format and update this information at least annually.” It is important to note that hospital charges are based upon a number of factors and can vary widely, factors which can include the type of service, service location, and insurance provider, among others. The following definitions are provided to help patients understand this information:
What is a charge?
A hospital charge is a federally-required maximum list price for an item or service that does not reflect any negotiated discount. Federal reporting rules require hospitals to maintain a catalog of tens of thousands of procedure codes, code descriptions and list prices in a complex accounting tool, known as the hospital chargemaster. Although virtually no one pays full charges, federal regulations require hospitals to uniformly apply the full list price or charge to all patients who receive a specific item or service.
How are charges different from actual payments?
Medicare and Medicaid reimburse hospitals using complex formulas that often pay less than the actual cost of providing care. Private health insurance plans also negotiate significant discounts. Uninsured patients often qualify for hospital financial assistance policies, including free care. Media reports often confuse charges with actual or expected payments. These news stories also neglect to mention that hospitals’ uncompensated care costs – the difference between actual payments and the cost of providing care – reached $38.3 billion in 2016. (Source: www.aha.org/system/files/2018-01/2017-uncompensated-care-factsheet.pdf)
How can consumers receive a clearer customized estimate of their out-of-pocket costs?
When planning an elective procedure, insured individuals should contact Medicare or their commercial health plan for information on plan design, provider networks and out-of-pocket payment responsibilities, such as deductibles, coinsurance and out-of-pocket maximums. Patients should also contact a hospital financial counselor to request a customized total estimated price of services.
What other hospital comparison tools exist to improve transparency for consumers?
Since 2006, Louisiana hospitals have offered comparative pricing and quality information to consumers through a consumer-friendly website, Louisiana Hospital Inform at www.lahospitalinform.org. Medicare provides a similar comparison tool for consumers at www.medicare.gov/hospitalcompare/about/what-is-HOS.html. Both websites offer tools for consumers who want to compare value, including surveys of patients’ experiences and information on timely and effective care.
Elements that Impact Cost
There are four key drivers of cost that vary by region, community, and individual hospital:
1. Services provided for the patient’s individual care needs.
2. Care for people who are unable to pay.
3. Medicare and Medicaid underpayments. These government programs pay less than the cost of caring for patients.
4. 24/7 readiness to meet communities’ healthcare needs.
Every bill reflects the cost of all of these elements:
- Uncompensated care – care provided for which no payment is received – is figured into overall hospital costs.
- Charges also reflect the costs of being able to respond 24 hours a day, seven days a week, and these costs must be allocated across all consumers who receive hospital services.
- Hospital payments vary because they reflect the individual hospital’s mission, the patient population it serves and the subsidies necessary to provide essential public services.
- A hospital that provides vital, highly-specialized services as well as scarce or high-cost services such as trauma or burn units, has a different cost structure and pricing than one that does not. Hospitals
that train physicians and other healthcare professionals, conduct medical research or care for a large number of uninsured individuals also have higher costs.
The Challenge in Calculating Costs
According to a recent GAO report, consumer’s complete cost: “incorporates any negotiated discounts; is inclusive of all costs associated with a particular healthcare service, such as hospital, physician and lab
fees; and identifies consumers’ out-of-pocket costs.” The report lists barriers to estimating a consumer’s complete cost:
1. Patients have unique healthcare needs.
- It is difficult to predict in advance all the services that will be provided for an episode of care.
- Physicians often do not decide what services their patients will need until after examining them.
- Aspects associated with the delivery of a service may be difficult to predict in advance, such as the length of time a patient stays in a hospital.
2. Health plans have information on consumer cost sharing.
- Providers lack information on “the status of consumers’ cost sharing under their specific health benefit plan, such as how much consumers have spent in out-of-pocket costs or towards their
deductible at any given time. Without this information, physicians may have difficulty providing accurate out-of-pocket estimates for insured consumers.”
3. Legal barriers restrict information on negotiated rates.
- Contracts may prohibit the sharing of negotiated rates with the insurer’s members on their price transparency initiatives’ websites.
- There may be concerns about sharing negotiated rates because of the proprietary nature of the information and because of anti-trust law concerns.
4. Health plans narrow their provider networks and do not reveal the “allowable amounts” they set to reimburse out-of-network physicians.
- Consumers may have to contact multiple providers to obtain estimates of their complete costs.