Pennsylvania gets an 'F' when it comes to hospital fees

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Pennsylvania gets an "F" in requiring hospitals to disclose the cost of hospital procedures, according to a new report, and in some cases patients may not learn about add-on costs such as facility fees until the bill arrives in their mailbox.

"The U.S. health care industry is, by and large, completely opaque," concludes the analysis released Monday by nonprofits Health Care Incentives Improvement Institute in Newtown, Conn., and the Catalyst for Payment Reform in San Francisco, which represents large employers such as Verizon and Wal-Mart.

As a result, the report says, consumers and employers are often unaware of wide variations in pricing and quality when they decide where to get care.

And when it comes to billing, hospitals are sometimes blurring the lines between hospital care and a physician office visit.

Last March, a Medicare Payment Advisory Commission report to Congress noted Medicare pays 80 percent more for a 15-minute office visit in an outpatient department facility than to a freestanding physician office.

As a result, the commission said, hospitals have learned that if they buy those freestanding physician offices and re-label them outpatient facilities, the hospitals make more money even though it's the same facility, at the same location, treating the same patients.

There have been examples of that happening locally. In 2010, a Squirrel Hill man told the Pittsburgh Post-Gazette he was hit with a $705 "operating room service" charge, in addition to an $82 facility fee after undergoing a routine mole checkup and the removal and biopsy of a skin tag -- all because these services were provided in an exam room in the Falk Medical Building in Oakland.

And a Penn Hills woman said she had been charged $5,623 for a nerve block injection at her Monroeville doctor's office because the visit was billed through UPMC Presbyterian Shadyside.

"I think that is completely inappropriate," said Harold D. Miller, president of Future Strategies LLC management and policy consulting firm, Downtown.

UPMC spokeswoman Susan Manko said, "Facility fees are charged in hospital-based clinics according to established Medicare guidelines, and we follow those guidelines," but she could not provide specifics on the number or location of the clinics.

West Penn Allegheny spokesman Dan Laurent said Monday, "Over the past couple of years we have designated our Infusion Centers linked to West Penn Hospital as hospital-based services and therefore now charge a facility fee to cancer patients receiving care in those locations."

Patients are told ahead of time about the charge, he said. "To my knowledge, these are the only off campus clinics/offices that we've designated as hospital-based services and to which the facility fee is applied."

State hospital association spokesman Roger Baumgarten said Monday that the Health Care Incentives report "appears to be an assessment only of transparency laws, not of actual transparency actions or practices in a given state."

And Denis Lukes, vice president for payer relations and reimbursement for the Hospital Council of Western Pennsylvania, noted the Pennsylvania Health Care Cost Containment Council has been producing reports on the cost and quality of health care here for more than 20 years.

Providing cost estimates for individual patients, though, involves specifics about a person's health insurance policy, where the service is provided, fee schedules and a host of other factors, Mr. Lukes said. Rates are typically patterned after Medicare reimbursement rates. "It is a complicated way of paying hospitals, and that just carries over to everything you want to do in this regard."

The Health Care Incentives report comes at a time when hospital costs are coming under closer scrutiny.

Just this month, Time Magazine and The American Journal of Managed Care published articles about rising health care costs. The latter study, from researchers at America's Health Insurance Plans, concluded hospital prices increased 8.2 percent annually in 2008-10, with Pennsylvania showing the fourth-largest jump at 8.4 percent.

Historically, patients have been insulated from rising hospital costs by insurance policies that covered all expenses except for a modest deductible or co-payment. But as businesses and employees opt for plans with lower costs and higher deductibles, more of those costs are shifting to consumers.

Many times, consumers don't know about those additional costs until later.

Mr. Miller addressed hospitals' lack of transparency in a March 3 column in the Post-Gazette, noting that it masks wide cost variation. He urged hospitals to make prices for tests and procedures publicly available, as well as statistics on the quality of their care.

Transparency will be all the more important, he noted, if Pittsburgh health care companies Highmark and UPMC go their separate ways and more consumers are hit by out-of-network charges.

Mr. Miller did acknowledge that while institutions should be more open, "Hospitals do have a challenge in covering their costs, unlike a physician's office or ambulatory center that doesn't have to have standby capacity."

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Steve Twedt: or 412-263-1963.


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