Hospital Charges vs Surgeon Charges

Some of the most bitter complaints I get from patients are their hospital bills. Apparently, this complaint is not unique to me given numerous media articles about perceived outrageous hospital charges for seemingly simple procedures (article #1 and article #2).

The healthcare system as it currently stands establishes 2 separate charges (surgeon and hospital) with any type of procedure performed in a hospital (even if not in an operating room). There is even a 3rd charge if anesthesia is provided.

The ONLY charge a surgeon has any control over is the surgeon's charge which often is the least expensive of the 3 charges. A common misconception is that the surgeon also has control over hospital and even anesthesia charges which is patently false.

Indeed, the surgeon is not even informed what the hospital or anesthesia charges are for any procedures performed. The surgeon also has no influence, say, or authority over what the hospital or anesthesia charges as well.

As such, if knowledge of total costs is desired with any type of procedure performed in the hospital, it is best to speak with a hospital representative of what the anticipated charges will be... not the surgeon because we actually do not know.

I should also mention that hospital charges are often 10 times or more greater than the surgeon's fees.

Read more about surgical fees.

Even for the SAME exact procedure, the charges vary greatly from one hospital to another.

In May 2013, the federal government released information on how a given hospital ranks in their charges for a given diagnosis or procedure (specifically Medicare, but all insurance base their charges on Medicare rates).

Check to see how your hospital ranks compared with other hospitals with respect to how high their charges are. The New York Times created a handy dandy map that illustrates hospitals which are "expensive" and those that are below average in terms of hospital charges.

I should mention that Fauquier Hospital where I have privileges charges at less than the US average.

Let's take an example to see how hospital charges can significantly influence how much you pay for the same exact procedure depending on which hospital you go.

Let's say you have health insurance with a 10% coinsurance and a $1000 deductible (meaning, before insurance pays for anything, you must pay at least $1000 and than an additional 10% of all remaining charges).

Let's say you decide to proceed with a tonsillectomy.

At hospital A, the surgeon's fee is $500, hospital charges are $5000, and anesthesia charges are $1000 for a grand total of $6500.

At hospital B, the surgeon's fee is $500, hospital charges are $10,000, and anesthesia charges are $5000 for a grand total of $15,500.

Clearly, whether you go to hospital A or B, you will pay $1000 deductible first.

So, at hospital A, the total charges (minus your deductible) billed to insurance will be $5,500 and at hospital B that cost will be $14,500.

Insurance pays 90% of these charges and you pay the remaining 10% (the 10% coinsurance as per the policy you have).

As such, having a tonsillectomy at hospital A will cost an additional $550 whereas at hospital B, you will have to pay an additional $1,450.

Now, it may seem the charge differences are extreme in the example, but sadly, hospital charges can truly be that dramatically different. Read this New York Times article for more information.

Of course, do keep in mind that the above example is over-simplified as reality does include things like fee schedules, allowable charges, etc.

Source:
Hospital Billing Varies Wildly, Government Data Shows. NYT 5/8/13

How Much Hospitals Charge For the Same Procedures. NYT 5/8/13

As Hospital Prices Soar, a Stitch Tops $500. NYT 12/2/13

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Fake Botox Being Sold to US Physicians: FDA Sends Warning

It is not just patients trying to save money when purchasing medications from online pharmacies located in Canada. It's doctors as well when it comes to expensive drugs like Botox made by Allergan which costs a physician practice $550 per vial (2012 price)... but if purchased from Canada, may cost hundreds less.

Unfortunately, just like prescription drugs purchased outside the US, foreign-purchased Botox may be a product that is potentially unapproved, counterfeit, unsafe, or ineffective. Indeed, medical practices that purchase and administer such illegally obtained and unapproved medications from foreign sources are placing patients at risk and potentially depriving them of proper treatment.

To address this dangerous practice, the FDA has alerted more than 350 medical practices that they may have received unapproved medications, including unapproved versions of Botox from foreign-based suppliers, especially from Canada.

Disclaimer! Our practice has ALWAYS purchased Botox directly from Allergan, the maker of Botox, and have never purchased Botox from a third party supplier, whether US-based or not, past and present.

The ones the FDA specifically listed on a watch-list of sorts under the umbrella of online Canada Drugs include:

• Quality Specialty Products (QSP)
• A+ Health Supplies
• QP Medical
• Bridewater Medical
• Clinical Care

Per the FDA, "many, if not all, of the products sold and distributed by these suppliers have not been approved by FDA. Therefore, FDA cannot confirm that the manufacture and handling of these products follow U.S. regulations or that these medications are safe and effective for their intended uses."

The FDA has also publicly released the names of physicians and physician groups who have purchased from these online sources... public humiliation in order to persuade a change?

However, it may not be just public humiliation, but even jail-time for one physician in a particularly egregious case (Botox not meant for human use was deliberately and knowingly injected).

It's not just doctors, but even medical institutions on the list (ie, University of SW Texas Medical Center).

Source:
Letters to Doctors about Risks of Purchasing Unapproved Versions of Botox and Other Medications from Foreign or Unlicensed Suppliers. FDA 12/19/12

FDA warns doctors of counterfeit Botox. Fox News 12/24/12

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After Surgery, Do Patients Have Out-of-Pocket Costs for Follow-Up Visits?

Assuming a patient has insurance, the answer is generally no for a certain period of time...

For a period of time after surgery, insurance specifies that a surgeon provides any and all routine post-operative care for "free" without any patient out-of-pocket charges.

This period after surgery is called "global period" and is based on the assumption that the insurance has already paid for not only the surgery, but all the post-operative care that goes along with the surgery.

BUT... there are certain situations where global period does not apply... such as if a problem arises that is separate from the surgery like seeing the surgeon for a sinus infection after having a skin wart removed.

The sinus infection is a separate problem from the skin wart removal procedure and out-of-pocket copays will apply.

Also, global period does not apply if you decide to see a different surgeon in a different office for any post-operative care. It only applies to the surgeon who actually performed the procedure.

The next question is how long the global period is for post-operative care?

For most surgical procedures, it is 90 days after which any subsequent care is NOT "free".

However, especially for ENT-type procedures, there are a significant number of procedures where the global period is substantially shorter... even zero days.

Here's a sampling of common ENT-type procedures and the global period number of days.

90 Days Global Period
Tonsillectomy +/- Adenoidectomy
Uvulopalatopharyngoplasty
Parotidectomy
Thyroidectomy
Septoplasty

10 Days Global Period
Ear Tube Placement
Coblation Turbinate Reduction
Closed Nasal Reduction for Nasal Fracture

0 Day Global Period
Sinus Surgery
Vocal Cord Surgery
Nosebleed Control

For procedures that have a short global period, depending on circumstances, the surgeon may elect to not charge if a patient is seen past the specified number of days.

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Same Doctor Visit, Double The Cost

On August 26, 2012, the Wall Street Journal published a story describing a situation whereby a patient who sees a physician employed by a hospital essentially pays double out-of-pocket what they would have paid for the same exact office visit with a physician NOT employed by the hospital.

I actually wrote about this situation in January 21, 2012.

Beyond what the Wall Street Journal reported, what's going on?

Assuming all things equal whereby a private practice physician and a hospital-based physician are equally competent and the supporting staff for each are both equally good (such assumptions are debatable in some circles, but will be ignored here), it all comes down to money.

When a patient sees a private practice physician, the government-established fee schedule only incorporates payments to the physician.

When a patient sees a hospital-based physician, the fee schedule not only incorporates physician payments, but also additional payments to the hospital.

Now, the patient doesn't pay what insurance covers in either scenario, but typically there is a copay or coinsurance payment that the patient is responsible for that typically is 20% of the total charges.

Here's an example using the Medicare fee schedule from 2002. I elected to provide "old" 2002 data as this information can be found easily and corroborated, but rest assured, the numbers are starkly different and perhaps more lopsided today. Medicare was selected as it is the bar to which all other insurance plans are typically based on.

In a physician run private practice, the only charges that are incurred is from the "Physician Fee Schedule". In a hospital-based practice, a patient incurs not only the physician fee schedule, but also additional charges based on the "Outpatient Prospective Payment System".

As you can see, the physician fees are slightly higher in the private practice setting compared to hospital-based practice... BUT, given the additional hospital charges involved with a hospital-based practice, the patient ends up being charged more per service for a simple clinic visit ($16.48) than if they had been seen in the private practice office ($10.06).

The cost differential for the patient is far worse with any procedures ($62.62 versus $342.47).

For the same exact procedure or service, a patient automatically ends up paying more to be seen in a hospital-based practice.

This payment system is the same whether you go to a tertiary care teaching hospital like Massachusetts General Hospital or a tiny 98-bed community hospital.

As an aside... for any physicians employed by a hospital, it behooves you to consider this differential payment in terms of how a hospital determines your salary and productivity. Do they consider ONLY the physician fee schedule or do they also take into account the outpatient prospective payment system?

I should also mention that Congress is considering abolishing the outpatient prospective payment system for clinic visits only. Click here for more info.

Source:
Same Doctor Visit, Double the Cost. WSJ 8/26/12

Hospital-Based Practice Versus Physician Private Practice. Fauquier ENT Blog 1/21/12.

Elimination of Differential in Medicare Payment for Clinic E&M Services Furnished in Hospital-Based Outpatient Departments Proposed. Martinedale 12/10/11

Medicare rules for hospital-based clinics. American College of Surgeons. Vol 87, No 4

Medicare Physician Payment Updates and the Sustainable Growth Rate (SGR) System. Congressional Research Service. 8/6/2010

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Healthcare Websites and Blogs Worth Anything?

I wrote in the past that healthcare blogging was in some ways a losing proposition when compared to entertainment news in terms of web traffic and search queries.

However, when it comes to ad revenue and how much a website is worth to potential buyers, healthcare topics (as well as sports) are king in monetary generation.

Flippa is a website that mediates the buying and selling of websites. They also produced a handy visual aid infographic based on their internal statistics.

As you can see, health websites are worth a premium. Furthermore, websites that generate revenue based on ads are also worth more.  Why? Because on average, health niches also get a pretty good cost-per-click (amount a website owner is paid every time someone clicks on an ad on their site).

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The Rationing of High Cost Healthcare

I would like to start this blog article with an extreme hypothetical situation...

Imagine a pharmaceutical company comes out with a pill... a WONDERFUL pill "Xyz" that is GUARANTEED to extend life by 1 month with no side-effects that works on kids as well as adults. For every 1 of the these pills that are taken, 1 month is added to your life expectancy guaranteed. Doesn't matter if you have cancer, in a coma, suffering from a horrible infection, stroke, or you are completely healthy. One month added to your life expectancy for every 1 pill you take.

Catch is, this pill is very expensive. For ONE person, it is $5,000 per pill or $150,0000 per month or $1.8 million per year.

In this hypothetical situation, should patients pay out-of-pocket for this treatment? Than only the rich will be able to afford such expensive treatment.

Should insurance pay for this treatment? Well, given the high cost, the insurance companies will raise premiums in order to afford to pay for this treatment... otherwise go into bankruptcy. With increase in premiums, more and more people as well as companies will not be able to afford health insurance.

In response, in order to make health insurance more affordable, insurance companies have increased deductibles as well as included riders that exclude the Xyz pill coverage.

• Increase in premiums
• Inability to pay for health insurance premiums
• Increase in deductibles
• Exclusion riders

All as a response to an increased cost of providing healthcare (via this wonderful "Xyz" pill).

Should the government pay for this treatment? The population in the United States is 312 million currently. The cost to government will be $562 million per year to provide treatment for every individual for one year. Given everybody theoretically could live forever while taking Xyz pill... nobody will die which means the population will increase. With population increase, the United States will eventually go into bankruptcy it it continues to provide treatment for everybody.

As such to prevent government bankruptcy, Congress passes a variety of laws that include cutting medicare/medicaid benefits, raising the United States debt ceiling, cutting back on education/military spending, increasing taxes, etc.

This story sound familiar?

That's because it is... though not because of the existence of the Xyz pill. But "expensive" healthcare exists due to new pills, new tests, new surgeries that keep coming out which are more expensive than prior healthcare interventions.

The insurance and government's responses are the same in real life as to the fictional response to the hypothetical Xyz pill.

So what's the answer???

I don't have one that will make everybody happy... Read more about the healthcare dilemma.

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Costs of Surgery... How Is This Calculated?

So I have blogged about this topic a few times in the past, but there still seems to be confusion regarding the costs of surgery.

As mentioned in the past, the cost of surgery is broken down into basically 3 separate charges:

• Surgeon's charge
• Anesthesia's charge
• Hospital's charge

So... after surgery, a patient typically will get 3 bills; one each from surgeon, anesthesia, and hospital.

At least in the United States, the three charges are completely separate from each other to the point that anesthesia will have no idea what the charges for the surgeon as well as hospital will be.

Same goes for the surgeon... the surgeon will know his charges, but will have no idea what the charges will be for anesthesia and the hospital.

Even if the surgeon demands to know what anesthesia and the hospital will charge for a surgical procedure (s)he will perform, a specific charge will not (can not) be provided in the United States typically.

Why is that?

If I am going to perform for example, a tonsillectomy, why can't anesthesia give even me the surgeon a specific dollar amount of what anesthesia will charge? Why can't the hospital administration provide me the hospital charges?

Here's why... or at least part of the reason why in the United States...

Surgeon's Charge

The surgeon's charge is set. For a given surgeon, his/her charge will remain the same regardless of time or difficulty of the surgery. It may be different between different surgeons... but for a given individual surgeon, it will always be the same for a given procedure.

For example, if the surgeon's tonsillectomy charge is $250. It will remain $250 whether it takes 15 minutes or 3 hours. It will remain $250 if the surgery was technically difficult or a piece of cake.

So, the surgeon's charge is easy. It is what it is.

The harder question to answer is what the anesthesia and hospital charges will be...

Anesthesia Charges

Anesthesia charges on a per time basis (in increments of 15 minutes) on top of a "base" charge that depends on the surgical procedure.

For example, let's say a given anesthesia group has a base charge of $500 for tonsillectomy.

Let's also assume this particular anesthesiology group charges $500 per 15 minutes of anesthesia.

SO... if the surgeon performs a tonsillectomy and it takes the surgeon 30 minutes to perform the procedure, the anesthesia charge will be $500 base charge PLUS $1000 for the time ($500 per 15 minutes) for a total anesthesia charge of $1500.

If it so happens that the surgery takes only 15 minutes... than the anesthesia charge will be $1000 ($500 base charge plus $500 for the 15 minutes surgical time).

In other words, for the SAME exact surgical procedure, the anesthesia charges may be different for different patients depending on how long the surgery takes.

Hospital Charges

Different hospitals calculate their charges differently... but in essence, the hospital will charge whatever it cost them to allow the surgery to happen in their facility plus a nebulous "profit" factor.

SO, a given hospital charge will include the:

• Salary of all the personnel used in the surgery (surgical tech, registered nurse, circulating nurse, anesthesia tech, secretary, etc)
• Equipment used during the surgery (IV lines, needles, anesthesia tubing, masks, endotracheal tube, surgical equipment, etc)
• Medications used during the surgery (gases, IV drugs, etc)
• Facility costs expended during the surgery (electricity, water, oxygen, medical waste disposal, etc)

To take the example of tonsillectomy, the hospital charges will include all the equipment, medications, personnel, and facility costs utilized during the tonsillectomy surgery.

In Summary, the Cost of Surgery is... It Depends

Given anesthesia charges vary based on the time duration of surgery regardless of WHAT the surgery is as well as hospital charges which may vary based on how much was "expended" during the surgery regardless of WHAT the surgery is, the anesthesia and hospital charges are moving targets which roughly correlate with how long the surgery takes.

The surgeon can certainly state what their charges will be up-front because this charge is fixed, but anesthesia and hospital charges are NOT fixed and depend on a certain time factor regardless of WHAT surgical procedure is being performed.

Because of this time dependence, that's why anesthesia and hospital charges can not typically be obtained prior to surgery in most places.

That's also why most places can't (won't) post the total cost of surgery up-front.

Of course, if a given surgeon is very consistent and always takes 15 minutes to perform surgery and always uses the same exact equipment, than anesthesia and the hospital may be able to provide an "averaged" charge up-front.

It is also not uncommon that additional "discounts" may be offered based on a patient's income.

Some places like the Surgery Center of Oklahoma somehow persuaded the anesthesiologist, surgeon, and facility administrators to sit around a table and force an agreement on a fixed TOTAL charge for different surgical procedures. Once an agreement is made on a fixed charge for each, an up-front cost can be publicized... but this can never happen as long as anesthesia and hospital refuses to agree to a fixed charge and rather stick with a time-based framework to determine their charges.

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Surgery Center Posts Prices of Procedures

Given the uproar over the lack of transparency of surgery prices, it was only a matter of time before an operating facility in the United States (oversea facilities have already done so) takes the step of posting the cost of surgery... a set cost that is exactly what a patient pays. Complete cost transparency.

The Surgery Center of Oklahoma is an AAAHC accredited facility since 1998 and has over 40 participating surgeons. And they are the first that I'm aware of that has taken the step of posting the cost of surgery on their website. The caveat being the cost shown ONLY applies to those who do not have health insurance.

On their website, they state:

"Transparent, direct, package pricing means the patient knows exactly what the cost of the service will be upfront. Fees for the surgeon, anesthesiologist and facility are all included in one low price. There are no hidden costs, charges or surprises."

Keep in mind that this cost is NOT just the surgeon's fee, but also includes the anesthesia charges as well as facility charges. Read more about such charges here.

So what are the charges? They have it all posted on their website!

But below is a list of charges for ENT procedures as of 6/3/12 (surgeon, anesthesia, and facility charges all bundled into a single charge). The webpage also includes prices for general surgery, orthopedics, urology, ophthalmology, etc.

I wonder if other facilities in the United States will start following suit???

Neck
Thyroidectomy		$ 6,160.00
Lymph Node Excision / Biopsy		$ 2,255.00
Ear
Myringoplasty		$ 2,400.00
Bilateral Myringotomy with tubes		$ 1,700.00
Tympanoplasty		$ 5,060.00
Tympanoplasty - Mastoidectomy		$ 7,050.00
Mastoidectomy		$ 6,640.00
Inner Ear - Stapedectomy		$ 5,390.00
Ossiculoplasty		$ 5,060.00
Cochlear Implant		$ 8,800.00
Foreign Body Removal		$ 1,500.00
Nose
Bilateral SMR Turb		$ 2,700.00
Sinus / Turbinates 1 side		$ 3,795.00
complex		$ 4,950.00
Sinus / Turbinates both sides		$ 4,510.00
complex		$ 5,885.00
Septoplasty		$ 3,550.00
Septoplasty and Sinus/Turbinates		$ 5,060.00
Nasal Fracture Simple Closed		$ 1,900.00
Nasal Frature Complex Open		$ 4,015.00
Throat
Tonsillectomy		$ 3,050.00
Adenoidectomy		$ 2,695.00
Tonsillectomy and Adenoidectomy		$ 3,695.00
Adenoidectomy and BMT		$ 3,300.00
Tonsillectomy and Adenoidectomy and BMT		$ 4,400.00
Frenulectomy		$ 1,600.00
Uvulopalatopharyngoplasty		$ 5,445.00
Diagnostic Laryngoscopy with biopsy		$ 2,970.00

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