Already-High Hospital Charges Rise But Medicare Payments Stay the Same

Andrew Kitchenman | June 4, 2014 | Health Care
Bayonne Medical Center has state’s highest fees, trades accusations with insurers over who’s responsible

New Jersey’s already-high charges for their services got even higher in 2012, but Medicare payments to hospitals stayed about the same compared to 2011.

In addition, recently released data from the federal Centers for Medicare & Medicaid Services (CMS) shows that Bayonne Medical Center’s charges remain about the highest in the state and nationwide.

Most patients never see the actual charges, but they affect the amount that some uninsured patients end up paying to hospitals, as well as the amount paid by insured patients served by hospitals that are outside their health insurance networks.

In other words, these are the charges that the hospitals set for specific procedures – but contracted rates with insurance companies generally supercede them.

The charges don’t affect how much CMS pays for Medicare patients, since these payments are calculated according to a formula that is based on several factors, including the region where the hospital is located, how many low-income patients it serves, and whether it’s a teaching hospital.

The gap between the charges and the amount paid by Medicare is large.

For the most common service – replacing knees and hips – the statewide average charge in 2012 was $68,668, a 3 percent increase over 2011, while Medicare paid an average of $13,235, a 0.2-percent drop from 2011. The charges for those procedures vary widely between hospitals, with Our Lady of Lourdes in Camden charging $203,525 and Chilton Hospital in Pompton Plains charging $45,701.

Patients whose hospitals are in their health insurer’s network aren’t affected by the charges, since their insurers have negotiated a much lower payment rate with hospitals.

In addition, most uninsured patients aren’t affected, since a state law limits the amount hospitals can charge patients with household incomes below 500 percent of the poverty line to 15 percent above the amount that Medicare pays hospitals. Currently, this covers single patients with incomes up to $58,350 and a four-person household up to $119,250.

But Linda Schwimmer, vice president of the New Jersey Health Care Quality Institute, said no patients should have to deal with such high charges. The nonprofit institute aims to improve healthcare quality, safety, accountability and cost-containment.

“If you get hit with a six-figure hospital bill even a five-figure or four-figure bill, there’s no way you can pay that,” Schwimmer said. “Why are you looking at a number that is not connected to a rational, reasonable fee schedule? Why should you be placed in that type of position?”

Bayonne leads the state in its charges for nine of the 10 most-used hospital services. In some cases, its lead is large – for example, its average charge for patients with kidney failure — $106,533 – is 78.8 percent higher than any other hospital in the state.

Bayonne spokesman Spencer Baretz said low reimbursement rates from insurers have driven hospitals like Bayonne to the brink of closure and caused the high charges. Baretz added that Hudson County has the highest rate of uninsured, underinsured and Medicaid patients in the state and one of the highest rates in the country. He added that the hospital doesn’t ask for payments for the more than 20 percent of its patients who lack adequate insurance.

Bayonne’s for-profit operator CarePoint has been accused of operating an “out-of-network” business model in which it relies on high charges by failing to reach in-network contracts with insurers. Baretz said Bayonne is currently in-network with many large insurers, including Horizon Blue Cross Blue Shield of New Jersey, the state’s largest insurer.

“We try to contract with as many health insurers as possible, but some refuse,” Baretz said.

Wardell Sanders, who leads the New Jersey Association of Health Plans, an industry trade group, said the charges are “a big deal” to out-of-network patients and some uninsured patients.

“You could face enormous exposure as a consumer,” Sanders said.

He said payments for out-of-network patients depend on a “fee profile” that are partly based on charges at nearby hospitals. Therefore, when Bayonne has nationally leading charges, it has a direct effect on those patients. This is particularly true for out-of-network emergency-room patients, since state law mandates that insurers pay their bills.

Sanders added that for the many public employees covered by the state health plan, it’s not the insurer “that’s getting the hit (when a patient receives out-of-network services), it’s the state taxpayer.”

Sanders said Bayonne is “charging astronomical amounts for most services.” He noted that hospitals’ awareness that CMS would be publicly reporting their charges apparently hasn’t had any effect during the first two years of public reporting of the charges.

“I think there was hope that transparency would shed light on charging practices and that they’re would be a shame factor, and at least for year two it apparently hasn’t happened, at least in terms of changing prices,” Sanders said.

Schwimmer expressed hope that the disputes over in-network and out-of-network payments between hospitals and insurers will be resolved.

“There’s got to be some reasonable, fair price that’s a fair out-of-network price,” she said. “We have to land on that — because these (charges) aren’t just meaningless numbers.”