BAYONNE, N.J. -- The most expensive hospital in the United States is not set amid Beverly Hills' swaying palm trees or the luxury townhouses of New York's Upper East Side. It is in a faded blue-collar town 11 miles from Midtown Manhattan.
Based on the bills it submits to Medicare, the Bayonne Medical Center charged the highest amounts in the nation for nearly one-quarter of the most common hospital treatments, according to a New York Times analysis of 2011 data, the most recent available. No other hospital was at the top of the price list more often.
Bayonne Medical typically charged $99,689 for treating each case of chronic lung disease, 5.5 times as much as other hospitals, and 17.5 times as much as Medicare paid in reimbursement. The hospital also charged, on average, $120,040 to treat transient ischemia, a type of small stroke that has no lasting effect. That was 5.6 times the national average, and 23.6 times what Medicare paid.
For those prices, the Bayonne Medical quality of care is no better -- or worse -- than that at most other New Jersey hospitals. In a 2011 state hospital quality report, Bayonne Medical scored only in the top 50 percent. But profits at the hospital, which was bankrupt in 2007, have soared in recent years, in part because it has found a way to turn some high billings into payments.
The increasingly contentious issue of hospital charges drew renewed attention last week, when the federal government released Medicare data showing that facilities nationwide submitted widely divergent bills for the same treatments.
The hospital industry is quick to say the charges are irrelevant, because virtually no one -- private insurers, Medicare or even the uninsured -- pays near those amounts. Medicare sets standard rates for treatments, and insurers negotiate with hospitals.
A close look at Bayonne Medical Center's finances sheds light on how hospital pricing at the extremes may financially benefit an institution. Bayonne Medical practices also highlight a new financial strategy used by a small number of hospitals to increase profits by "going out of network" -- severing ties, and hence contractual agreements that limit reimbursement rates, with large private insurers.
Neither Bayonne Medical officials nor owners responded to multiple calls and email requests for interviews. Because the company is privately held, it does not have to release financial data.
Bayonne Medical was losing nearly $1.5 million a month before its 2007 bankruptcy filing. By 2011, under new ownership and a new financial model, its patient revenue had nearly tripled, and its operating income had reached $9.3 million, according to the American Hospital Directory, a publication that compiles data from Medicare and other sources about health care facilities.
To make money from Bayonne Medical, the new buyers made big changes in its business strategy. First, they converted Bayonne Medical from a nonprofit to a for-profit. Next, they moved to sever existing contracts with large private insurers, making Bayonne Medical an out-of-network hospital for most insurance plans.
Under New Jersey law, patients treated in an emergency room outside their provider's network must pay out of pocket only what they'd pay it were in the network. But an out-of-network hospital can bill the insurer whatever rate it cares to set. While insurers can negotiate, they generally end up paying more than under a contractual agreement.