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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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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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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