When Bill Lorimer’s doctor diagnosed him with a kidney stone in May, the Minnesota retiree and part-time resident of Marathon in the Florida Keys went to his local hospital for diagnostic scans of his pelvis and abdomen.
A few weeks later, Lorimer received a bill in the mail from Fishermen’s Community Hospital, showing the charge for the CT scan: $9,165.21.
“I was kind of blindsided by this,’’ said Lorimer, 67. “I thought the charge was a mistake.’’
Lorimer didn’t have to pay Fishermen’s full charge, though. Because he’s on Medicare, Lorimer was responsible for only a portion of the bill, and his share came to $1,456.36, which the hospital recently recalculated to $1,817.55 after adding a physician’s fee.
“Had I been a better health care buyer,’’ Lorimer said from his other home in St. Paul, Minn., “I would have probably checked around. But I was in a lot of pain. So I went over to the hospital.’’
Lorimer, like many health care consumers, didn’t give much thought to the cost of his medical service before receiving it, nor was he inclined to research it while in pain.
But that may have to change. Increasingly, individual consumers with health insurance are feeling financial pressure to be more careful shoppers as employers and insurers pass along a greater burden of costs through higher deductibles, co-payments and co-insurance rates.
Placing more financial responsibility on patients for their health care also may change costly behaviors left over from the days when generous health insurance plans shielded consumers from the true cost of medical care, health care experts say.
“There’s more interest in what folks are paying,’’ said Bruce Rueben, president of the Florida Hospital Association, which has launched a committee to study healthcare price transparency and the ways hospitals can communicate costs to consumers.
“The very fact that people were insulated from the cost of care because it was the insurance company paying for it … gave people less incentive to be asking those questions,’’ Rueben said. “Now that they are, we’re certainly trying to respond.’’
Health care prices can be hard to find, though, and the contracted rates between insurers and hospitals or physicians are considered proprietary.
Yet the price a consumer pays for a medical procedure can vary significantly from one hospital or doctor to the next — often with little difference in quality. And those price differences can add up, especially for so-called “consumer-directed” plans with co-insurance, which requires consumers to pay a percentage of medical costs.
If a CT scan costs $9,000 at one medical facility but much less at another, a consumer could save on out-of-pocket costs by knowing which provider has the lower price.
Consumers trying to lower their healthcare costs do have some help in the marketplace — but most aren’t using the tools available.
Cigna, the health insurance company, offers an Internet-based transparency tool that shows plan members price information on the 200 most common procedures, which make up about 70 percent of the company’s medical claims, said Mark Slitt, a spokesman.
“People really like cost transparency,’’ Slitt said, “and having quality information as part of their choice.’’
But some studies show that only a very small percentage of consumers use these tools, which are offered by a number of insurance companies, when planning a medical service, said Joe Smith, a physician and engineer who chairs the board of West Health Policy Center, a Washington, D.C.-based nonprofit that studies healthcare reform.
“Maybe 98 percent of those who are covered have access to some sort of price transparency tool, which appear to be used about 2 percent of the time,’’ Smith said.
Power of Price: A glossary of healthcare terms
As if health care pricing wasn’t complex enough, try talking about it without running into some conversation-stopping jargon. Words that mean one thing to the rest of the English-speaking world can mean something completely different in health care — like a “charge” that isn’t the same as the price.
To help clarify, here’s a glossary of common terms in the world of health care finance:
- All-payer claims database: A state-run database that tracks what insurers and other payers actually shell out for health care services from different hospitals and providers. Florida’s Agency for Health Care Administration was denied a budget request of $5 million to develop a database last spring.
- Charge: The price a health care provider says it is owed for a service; not necessarily what it expects to receive. Insurance companies negotiate with providers for cheaper rates than the listed charge. People who are uninsured may be billed for the whole charge — but even then, the amount is frequently negotiable. Appears as the amount billed column on an explanation of benefits.
- Chargemaster: A hospital’s list of charges for common procedures. These lists are different from the list of rates negotiated by each insurer. Starting in October, the Affordable Care Act requires hospitals make charges available to the public. Many hospitals plan to satisfy this requirement with the chargemaster.
- Contracted rate: The price an insurer and provider have agreed upon for a particular service — usually lower than the charge. This is also known as the reimbursement or negotiated rate. On an explanation of benefits, it appears as the amount paid by the insurer.
- Copay: The standard price paid by an insured patient for a covered service or medication. This is in addition to what the insurance company will pay on behalf of the patient.
- Cost adjustment: The difference between the charge and the contracted rate. It’s sometimes presented to health insurance customers as savings.
- Deductible: The amount a patient must pay for covered health care before the insurance company picks up the rest of the tab.
- Explanation of benefits (EOB): A statement from an insurance provider detailing how it covered a patient’s health care. EOBs typically include details like a description of the service and its billing code, the amount the provider charged, the amount the insurer paid (the contracted rate), and what the patient owes. It looks so much like a bill that some insurance companies write, “this is not a bill,” on the statement.
- Premium: The monthly price you pay for health insurance. It is separate from the deductible and copay.
- Medicaid: Health insurance for people with disabilities and low-income individuals and families. It’s managed at a state level with federal oversight and it’s funded with federal and state money.
- Medicare: Federally run health insurance, mostly for people over 65.
- Self-Insured: When an employer takes on the risk of insuring its employees and pays their health care claims. Self-insured employers, like Miami-Dade County, frequently hire an insurance company to manage the claims process and negotiate rates with providers on the employer’s behalf.
Compiled by Sammy Mack
Cigna’s transparency tool allows plan members to search by medical service and provides them with a range of providers and an estimate of their prices. But Cigna does not reveal the underlying rates that the insurance company has negotiated with those providers, nor does the insurer’s tool show the rates that other insurers have negotiated with the same providers — the sort of insight that would empower consumers to comparison shop.
“They all want you to be informed,’’ Linda Quick, president of the South Florida Hospital and Healthcare Association, said about insurer transparency tools. “They just only want you to have their information.’’
Lorimer, the part-time resident of the Florida Keys, would not have had to look far for information that may have saved him more than $1,000 on his share of the CT scan from Fishermen’s.
He intends to pay the bill, “but I will pay it under protest,” Lorimer said. “The whole system is very opaque. There’s no question about that. But there are prices available.”
About a mile away from the hospital, an independent imaging center named Homestead Diagnostic Center advertises a CT scan starting at $275 and topping out at about $350 when a contrasting dye is included.
Tomas Gonzalez, the owner of Homestead Diagnostic, said he makes “a nice profit” with his rates. And he’s well aware that hospitals charge higher prices for the same services.
“Running a hospital is a lot more expensive than me running a diagnostic center,’’ he said.
But Gonzalez was taken aback by the charge from Fishermen’s — even after acknowledging that the hospital has the only CT scanner in Marathon. At his facility, patients who need x-rays, ultrasounds and digital mammograms are seen on site. Those who need CT scans and MRIs are bused for free to the company’s main facility in Homestead, an 80-mile trip that might not be worth it for someone in pain.
Still, Gonzalez said, “$9,000 for a CT scan? Come on. It’s outrageous. It really is. I’m in business to make money, but not like that.’’
Hal Leftwich, chief executive of Fishermen’s, said part of the reason for the hospital’s high charge is that the facility is certified by Medicare as a so-called “critical access hospital,’’ a designation typically assigned to rural hospitals that are far from other medical facilities.
The designation requires around-the-clock emergency care capability, and care for the uninsured, adding considerable costs for Fishermen’s, Leftwich said.
Medicare reimburses critical access hospitals on a cost basis, instead of a fixed rate like most urban hospitals receive. For Lorimer’s CT scan, Medicare paid $673.85, after adjusting the charge.
Leftwich declined to discuss Lorimer’s hospital visit or his bill, citing patient privacy laws. But he said he had “some knowledge” of the charge, and that the amount represented two CT scans — one performed with a contrast dye, and one without the dye.
“There’s basically two CTs being done there,’’ Leftwich said.
He explained that Fishermen’s compares its prices with other hospitals in South Florida for similar services, and that their prices “are very similar,” for the services involved.
“What we’ve tried to do,’’ Leftwich said, “is keep our pricing to be below the market leaders. But because we’re in such a rural-type area with low [patient] volumes, of course, we can’t be the lowest price, either.’’
Maintaining a CT scanner can be expensive. Leftwich said the hospital pays for a $90,000 annual service contract, among other costs.
“That $90,000 will get amortized over fewer studies here because there are fewer people,’’ Leftwich said.
Advocates for health care pricing reform call the practice of factoring operating costs into the price of a particular service “cross-subsidizing,’’ and some say it’s disingenuous of hospital administrators and unfair to the community that has to foot the bill.
Francois de Brantes, executive director of the Health Care Incentives Improvement Institute, a Connecticut-based nonprofit, said hospitals blend their costs precisely because healthcare prices are shrouded in secrecy.
“The reality is today people can do this because there is no price transparency,’’ he said. “So you have all this cross-subsidization that goes on at hospitals that leads to high prices. They say it’s high because of all these additional expenses that we have to cover. Yes you do, but those ought to be covered in an open forum about the explicit need to subsidize them.
“It’s either done by taxpayer money so everyone pays a price,’’ de Brantes said, “or you close it down. But that’s your community’s decision. It shouldn’t be up to the hospital administrator.’’
Leftwich said Fishermen’s has developed ways to reduce costs, particularly for those patients who are willing to pay their own way.
“We may not match $350,’’ he said, referring to Homestead Diagnostic, “but we’ll come pretty close if they’re willing to pull out the credit card and pay right there.’’
That’s how one Hollywood resident who asked the Herald not to use his name because of privacy concerns, paid for his hernia operation at Imperial Point Hospital in Fort Lauderdale this summer.
The 52-year old, self-employed man has not carried health insurance since about 2012, saying he got fed up with the confusion and complexity of the cost for his healthcare.
“I found dealing with insurance and the bills and trying to obtain a clear itemized bill from the guy who is sending us the bill was very difficult,’’ he said.
Prior to his surgery, the marine industry worker contacted friends who work as insurance claims adjusters, and they helped him to identify national averages for a hernia operation, and negotiated on his behalf with the physicians and hospital.
The negotiated prices for the outpatient surgery: $125 for the initial doctor’s visit, $1,000 for the surgeon, $1,000 for the anesthetist and $2,753 in hospital fees.
“I was expecting something in the region of $15,000 to $20,000,’’ he said.
Instead, he paid around $5,000 total for his surgery — in advance, on his credit card.
That’s about the same amount as his deductible when he had health insurance, he said, minus the paperwork and confusion.
“What’s the point of having insurance,’’ he said, “if at the end of the day I’m going to pay more? I would far prefer to accept my own risk and pay for it than to have insurance and have them turn everything around and turn it into a deductible.’’
There was a small drawback: The physician prescribed a narcotic pain killer that cost $245 without health insurance. He stuck with ibuprofen to relieve the pain.
Overall, Smith said, he was satisfied with the quality of care he received and the price tag.
“It’s been much easier,’’ he said, “because I knew what I was going to pay.’’