Now that the Centers for Medicare and Medicaid Services has released information on how much individual hospitals charge for their procedures, it is becoming clearer how much it could cost southwestern Pennsylvania residents if UPMC and Highmark really do end up parting ways.
And it looks expensive.
"People should care a lot," said Michael Fiaschetti, president of health markets for Highmark, "because if for some reason we can't get the powers that be -- the state Legislature or the governor -- to make sure that doesn't happen, people would be 'balance billed' to charges and that would be a significant hardship."
UPMC, the region's dominant health care provider, has vowed to end its contract with Highmark, the region's dominant health insurer, on Dec. 31, 2014, now that Highmark has acquired the West Penn Allegheny Health System and is building its own integrated delivery network, Allegheny Health Network, to compete with UPMC.
That would mean Highmark subscribers using UPMC facilities and seeing UPMC physicians would be "out of network" beginning in 2015 and face so-called balance billing costs. (The reverse is, and will be, true as well -- those with UPMC Health Plan insurance have historically not been able to use WPAHS hospitals at in-network rates.)
In balance billing, a hospital or physician bills for the difference between their charge and the insurance company's reimbursement. If the care is provided out of network, the bill goes directly to patients who may then be partially reimbursed by their insurer.
Consider the experience of two local residents who could have faced hefty and highly variable charges if they were out of network:
Bill Taymans of Edgewood recently underwent an MRI at UPMC's imaging center in Monroeville. His UPMC insurance covered most of the cost, but he noticed the charge was $4,048, "which seemed like a lot of money, even for an MRI."
Out of curiosity, he asked for prices for other nearby UPMC centers and was told the charge would have been $2,000 at UPMC East in Monroeville, $1,800 at UPMC Mercy in Uptown and $1,600 at UPMC Magee-Womens in Oakland.
"I'm not complaining about UPMC. I only paid $300. But the discrepancy in the price range -- and these places are within eight miles of each other -- is just kind of strange. They literally paid themselves $2,000 more than the cost at one of their own facilities."
When he asked why the imaging center in Monroeville charged so much more, he said he was told that the center "for accounting purposes is part of [UPMC] Shadyside, which is a teaching hospital."
Bill Westlake of Pleasant Hills has undergone two CAT scans the past two years at Jefferson Regional Medical Center in Jefferson Hills, which was acquired by Highmark last June.
His out-of-pocket expense was the same both times, about $600. But the hospital charge jumped from $1,152 in August 2011 to $3,381 in April 2013. Had he been out of network, he might have been responsible for most or all of the balance.
According to the most recent Pennsylvania Health Care Cost Containment Council report, heart bypass surgery carried an average charge of $221,800 at UPMC Presbyterian/Shadyside. Highmark officials say that if one of their members underwent bypass there on an out-of-network basis, the member might be responsible for as much as 70 percent of the charge amount, or $155,260.
Hospital charges, in many respects, are a relic of a time when people paid for health care on a point-of-service basis, "where your insurer paid 80 percent of your customary rate and that would be driven by what the prices being charged in the community were," said Melony Sorbero, a policy researcher at Rand Corp.'s Pittsburgh office.
"But as we've moved away from traditional indemnity to provider managed care, we now have negotiated rates for everything."
Today, she added, "I don't think anyone can tell you where those charges come from. They are not related to hospital costs, although they probably were once upon a time. They just never went away and they inflated with time."
Providers hold the stronger hand when a contract is being negotiated, Ms. Sorbero said.
"There is increasing consolidation among health care providers that give them more market power relative to insurers, so the discounts that insurers are able to negotiate might decline over time as there is more consolidation in the market.
"If you have certain providers who are viewed as 'must haves,' they hold more market power so they should be able to negotiate higher rates."
UPMC spokeswoman Susan Manko said the health system's hospitals are required by CMS "to charge all patients consistently, regardless of their insurance plans or coverage limits."
The health system will bill all available insurances first, she said. "Balances billed to the patient are determined by the contractual terms between the health insurer and their enrollee."
In a letter to the Pennsylvania House Democratic Policy Committee last month, W. Thomas McGough Jr., chief legal officer for UPMC, wrote that as of Jan. 1, 2015, Highmark subscribers will be able to access all UPMC services out-of-network and Highmark will have to determine how much it will reimburse its subscribers.
UPMC will make exceptions in remote areas such as Bedford, where it is the only provider.
As to what the local out-of-network charges might be, Ms. Manko said, "This is the discussion we need to have with Highmark, like we do with all of our other payers, and why we've been urging Highmark to work with us on a transition plan for when our contract expires at the end of 2014."
UPMC has already told patients who carry Highmark Community Blue coverage they have to find new doctors.
For decades, hospital charges meant little to local residents. Even now "a very small percentage" of hospital-insurer contracts are based on charges, said Denis Lukes of Hospital Council of Western Pennsylvania. "I would say 2 percent or less have anything to do with charges." Instead, contracts typically set specific rates that are based on previous contract numbers.
With two competing health systems, though, the prospect of out-of-network billing based on charges may take on new importance.
"I think one of the benefits of them making charge information public is that providers can see how they compared to other providers, because that's not something they really paid attention to in the past," Ms. Sorbero said.
"If they don't like how they stack up, they might take steps to change that."
Steve Twedt: firstname.lastname@example.org or 412-263-1963. First Published May 24, 2013 4:00 AM