Remember when I said that non-profit hospitals didn’t become greedy SOB’s when they converted to for-profit status.    And, that their care was pretty good- despite their change in motivation.  I also said that most dialysis centers seemed to be of the same mental state.

But, as I am sure you expected, that does not cover all the hospital systems out there.   There are at a plethora of facilities that time patient release to maximize their revenue.  You see, hospitals are paid different rates for short-term intensive care versus longer term care (in the case of this study, for ventilator treatments) under Medicare rules.  (This study used Medicare data; most insurance companies use similar payment schema for hospital reimbursement.  We can expect similar results for non-Medicare patients.  But, the data- since that would be via private company reimbursement- would be more difficult to obtain.)

So, the 400 long-term hospitals have worked hard to insure that their patients stay at least 29 days- which is when the (higher) long term rates kick in (and, of course, these rates are retroactive).  Dr. Y Kim (Kaiser Permanente now, but was at UCLA at the time of the research), along with Drs. E Kleerup, P Ganz, N Ponce, J. Needleman (all from UCLA), and K. Lorenz (VA of LA) published this study about patient release and claims reimbursement in Health Affairs.  These results are similar to the results the Wall Street Journal had found earlier.

Way back before these new Medicare rules applied (in 2002), length of stay was pretty standard- with no spiked results for various lengths of stay.  But, by 2010, patient stays were extended until the “day after” the patient threshold was attained.  This additional money is not chicken feed- it amounts to some $ 30 million ($165 over 5 years) just for the ventilator therapy studied here.

This practice- timing patient release for maximum payment- is not really much different than determining which “ailment” (read as CPT, ICD-9, or HCPCS coding) is the most profitable to declare to the insurance or Medicare authorities.  Choosing the “right code’ (aka, gaming the system)  can change reimbursement rates dramatically.

But, these sorts of practice are minor when compared to the fact that there are some FIFTY (50) hospitals (out of about 5000 hospitals across the US) that charge TEN (10) times the actual cost of care to their patients.  49 of them are for profit units and 20 of them operate in Florida.  Oh- and they are not in the hoi polloi sections of the US at all.

Let’s consider the top overcharger.  It can handle 110 patients (that’s the number of beds in the facility) at a clip.  North Okaloosa Medical Center in Crestview, Florida, is just north of Eglin AFB (which is growing in size thanks to base relocation efforts).  It’s part of the Destin-Fort Walton Beach SMSA (standard metropolitan statistical area).  And, it charges patients who lack insurance some 12.6 times the cost of patient care.

(Which brings up another thing I keep repeating.  You MUST have health insurance.  Why?  Read the paragraph above again- and again- until it sinks in.  You see, having health insurance basically puts you in a buying club- one that guarantees certain pricing levels.  It gets you lower charges from docs and hospitals.  After all, the insurance company won’t stand to be gouged- and gets the best price it can for as many practitioners and clinics it can.  Now, back to the main theme. )

It’s not just North Okaloosa.  How about the Hospital Corporation of America- with almost 30% (14) of the overchargers and Community Health Systems that has ½ (25) of the overcharging units.  [Community claims it provided $3.3 billion in charity and uncompensated care.  That’s supposed to explain the overcharges, I guess.]

And, you know those state laws that stipulate that hospitals can only charge the uninsured a small premium compared to their costs.  Yeah.  You guessed it.  For example, New Jersey rules stipulate the charging rate can’t exceed 115% of costs.  But Carepoint Health (aka, Bayonne Medical Center) racks up a full 12.6 multiple.   Obviously, New Jersey doesn’t consider it important to protect the poor or the uninsured.  The problem is that New Jersey is not alone in its lassitude.

This second study, also published in Health Affairs, authored by Drs. Ge Bai (Washington & Lee) and Gerald Anderson (Johns Hopkins),  examined all Medicare certified hospitals and their rates for a 12 month period (May 2012-April 2013).   The results were not surprising to me.   After all,  the major cause of these overcharges is the failure of our states and the federal government to truly regulate hospitals, as they purport to their citizenry they do.  (Only West Virginia and Maryland actually SET the rates hospitals can charge.)

There also is another reason there are patient overcharges, one that could make it more difficult to enforce an overcharging rule.  Sometimes, there is no competition within the local region the hospital operates.  But, the regulators should be smart enough to use the measurement protocol adopted by Bai and Anderson, at a minimum.

The “overcharging”, as determined by Bai and Anderson, was determined by using the total costs Medicare agreed to pay for a given episode- that was defined as the true patient cost.  (And, consider that Medicare does provide for a markup to the facility.  So, the “true cost of care” as defined herein is certainly less – which makes the amount of ‘overcharging’ greater.) The total charges divided by this “true patient cost” discerned the “mark-up”.

Keep in mind that NO hospital charges “just” the cost of care.  The average multiple is about 3.4X  the cost that Medicare reimburses.

Another reason some of us are disappointed that Obamacare (PPACA) didn’t close the loop and opt for single payer.  We could have doubled the Medicare reimbursement to make it more than reasonable- using the funds saved by these higher multiples (let alone the 10X overchargers).

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