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

Read More

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

Read More

Hospital-Based Practice Versus Physician Private Practice

The other day, an astute patient of mine asked what the difference is between a physician who works for a hospital (hospital-based practice) versus a physician run private practice.

After all, a patient still sees a physician in either case...

Is there an actual difference from a patient's perspective???

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 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 for 2012, Congress is considering abolishing the outpatient prospective payment system for clinic visits only. Click here for more info.

Source:
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

Read More