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Why such disparity? No one seems to know.
“It doesn’t make sense,” said Jonathan Blum, director of the government’s Center for Medicare, when asked about the wild fluctuations in hospital prices.
Unlike electricity, health care costs are not regulated, meaning that in our free market economy, hospitals can charge whatever price they want.
New York Times analysis of the recently released data found that Sharp Chula Vista on average charged more than double the national average, while UC San Diego Medical Center charged some of the lowest prices in San Diego, despite being a teaching hospital and treating a high number of uninsured patients. Kaiser Foundation Hospital in San Diego was also found to have the lowest prices in the surrounding area, according to the analysis.
It’s common for hospitals that treat a higher number of the uninsured to have higher prices, said Tom Gehring, executive director and CEO of the San Diego County Medical Society.
“If you’re close to the border, you may see more patients without any insurance and if you’re a hospital that’s required to take the uninsured, your total costs may be higher,” Gehring said. “So you may end up passing the costs onto the insured.”
Patients often wonder how the prices are determined. But it turns out there is almost no correlation between what a hospital charges and what something actually costs, said Dr. David Chang, director of outcomes research at the
Department of Surgery at the UC San Diego School of Medicine.
“One of the reasons hospitals have these unrealistic prices is they know people aren’t going to pay. They’re trying to catch the few that can, but they also end up catching the poor,” he said.
Chang is referring to the “working poor,” those who make too much to qualify for Medi-Cal, a state program that provides health insurance for low-income residents, are not old enough to get Medicare (which offers coverage for those 65 and older) and don’t have health coverage through work. They’re typically the ones who get stuck with the largest bills.
500,000 San Diego County residents lack insurance, according to a 2011 analysis of U.S. Census data by the left-leaning Center on Policy Initiatives. Others have PPO plans that require the patient to pay a percentage of the total bill.
Even those with employer-provided health plans who think they are completely covered are often shocked to find out they have a cap on how much their insurance pays when they land in the hospital or are transported by ambulance.
Medical expenses are the leading cause of bankruptcy in the United States, making up more than 60 percent of cases, according to a
2009 study by the American Journal of Medicine. When they don’t go bankrupt, American families are watching their life savings disappear following an accident, a stay at the hospital or a life-threatening illness.
That’s what happened to former San Diego resident Kristen Burris, who was forced to use most of her savings following two cesarean sections, one emergency and one scheduled, at Scripps Memorial Hospital in La Jolla.
Burris and her husband have their own acupuncture practice and were spending $1,100 a month on insurance for the family. But because the plan had a $7,500 yearly limit, the Burrises quickly maxed out the plan and racked up $30,000 in bills.
“The bills were astronomical
and they came at different times,” said Burris. “I would painstakingly call the insurance company and get a different
answer every time. But mostly, they would simply say that was not part of
my deductible. It was ridiculous.”
Burris also found charges for services she says were not performed, including resuscitation and the use of compression boots, often used to help blood circulate. She was eventually able to get the hospital to lower the bill by $8,000, but the experience left the family financially and emotionally drained, so much so that they decided to relocate to Idaho, where health care costs are significantly lower, according to data.
Today, Burris said her family pays around $480 a month for medical coverage for their family of four.
Scripps did not respond to a query about Burris’ claim that she was charged for services not performed, but spokesman Keith Darce said each patient’s bill is driven by the unique care they receive.
“No two cases are exactly the same in terms of medications, complications, amount and level of care required and countless other variables,” Darce said in an email.
He said the hospital works with uninsured patients to help determine whether they qualify for Medi-Cal, Medicare or other government assistance and offers financial aid and discounts of at least 20 percent to all uninsured patients.
“Many of them receive discounts far beyond 20 percent, and some end up paying nothing,” he said. Scripps spent about $41 million in 2012 on what it calls “charity care,” according to its community benefit report.
Scripps Health pulled in $278 million in profit in 2010, according to
the most recent publicly available tax returns. Scripps President and CEO Christopher Van Gorder received close to $1.5 million in salary and benefits; Vice President Richard Rothberger took home about $1 million that year.
The hospital also spent about $500,000 on lobbying efforts, according to those tax returns.
That’s similar to many other San Diego hospitals, including Sharp HealthCare, which paid President and CEO Michael Murphy
about $1.3 million in 2010. (It also paid a senior vice president about $626,000 that year.)
Could this be one reason health care is so expensive?
Perhaps. According to a
special report in Time magazine in March, hospitals routinely mark up both medicine and procedures and perform more services than needed.
That’s because under the current system, hospitals and doctors don’t have an incentive to save patients money by providing them the most efficient care at the lowest possible price, said Clay Johnston, a doctor who directs the
University of California, San Francisco’s Center for Healthcare Value, which studies how to reduce the price of health care in the U.S.
“We know there is waste in the way care is delivered, the extra lab that’s drawn, the extra X-ray, so we’re trying to come up with ways to reduce the costs,” Johnston said.
Some hospitals have implemented Accountable Care Organizations, essentially groups of doctors, hospitals and other providers who come together voluntarily to give coordinated high-quality care to patients, according to the Centers for Medicare and Medicaid Services. The idea is to treat patients before their conditions escalate and avoid redundant services.
“We as physicians need to explain to patients what the options are and care about the cost, and that hasn’t happened so far,” Johnston said. “Part of that is supported by a system in which patients have traditionally not paid, so physicians don’t feel like their decisions ought to be at all contingent on costs. But the reality is entirely different.”
But Dan Gross, executive vice president of Sharp HealthCare, attributed the prices to a service that he said is world-class.
“Health care in this country is extraordinary,” Gross said. “When you take a look at our ability to deal with very complex, high-acuity patients, utilizing some of the brightest medical professionals and the advanced technology utilized in our industry … all of that indeed costs money.”
Unlike restaurants or other service-oriented businesses, Gross said, hospitals treat everyone, even those who can’t afford to pay.
“Hospitals have a federal mandate to care for and treat for anyone regardless of their ability to pay,” Gross said. Sharp has a charity care program that offers substantial discounts to patients and last year provided $305.3 million in unreimbursed community benefits programs and services, he said. “So no matter who presents to a hospital, we are caring for and treating them.”
The Affordable Care Act, which will be implemented starting next year, will help increase access and eliminate caps on coverage. But it does nothing to address the cost of health care and will actually increase how much we pay because of the influx of new patients, said San Diego County Medical Society’s Gehring.
“The Affordable (Care) Act may make a significant dent in the number of people who go bankrupt due to health care costs, because they will no longer be forced to choose between food and medicine,” he said. “But it won’t drive the overall cost down and is not the final answer to our nation’s health care financing problems.”
An the end of the day, disparity in hospital prices may matter much less than how people can afford the care they get in the first place, say health care reform advocates. In 2008, Americans spent $8,000 a year on health care compared with $3,000 to $4,000 a year in many Western European countries,
according to data from the Organization for Economic Cooperation and Development.
Chang of UCSD emphasized one silver lining to high hospital bills: They’re not set in stone.
“Until we do fix the price side of things, patients at least need to know that hospitals are always willing to negotiate. The prices they set are just a starting point.”
Correction: An earlier version of this story mischaracterized Scripps President Christopher Van Gorder’s annual salary. He was compensated $1.5 million in salary and benefits in 2010, and had a total accumulated retirement package worth about $1.2 million. See the 990 form here.
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