The 85-year-old Orinda resident couldn't believe the size of her bill from John Muir Health. For an emergency room visit that spanned three hours, charges on her statement came to $11,596.27.
It wasn't as if she had a lung transplant. She'd suffered severe stomach pains and overheating after exercising. She was examined, an X-ray was taken, tests were done, and then she was sent on her way. Only after the bill -- and Medicare's notification of payment -- arrived did she learn how costly the treatment had been.
She didn't want her name in the paper, but she wanted to know how this could happen.
It turns out it happens all the time, only not the way she thought. Medicare paid a tiny fraction of the bill ($834.42). Supplemental insurance paid even less ($297.32). The remaining amount -- more than $10,000 -- was "amount absorbed by hospital," as if it didn't exist. This is the wacky way health care functions in the U.S.
"It's a completely crazy system," said Jan Emerson-Shea of the California Hospital Association. "It doesn't make any sense. It's a system that's evolved over the last 4½ decades."
The itemized charges of $4,242.25 for "ER-Level 004 emergency department visit" and $1,230.09 for a "complete metabolic panel" didn't need to be so precise. They didn't represent the actual payment expected.
When Medicare began in 1965, Emerson-Shea explained, all hospitals were required to create a "chargemaster" that detailed fees for every procedure. Two decades later, when the government sought to reduce costs, it changed the rules. Payments were negotiated by diagnosis rate groups -- more for a heart attack, less for a broken bone -- without regard for cost of services. Chargemaster fees reflect acuity of service, and they are adjusted annually to "market rates," but the actual dollar figures are meaningless.
"The government no longer pays its fair share," she said. "We're in this situation where the chargemaster makes no sense, but we're stuck with federal regulations that require us to keep it. So you get a bill from the hospital, but it has nothing to do with what Medicare pays us. But we're required to send it."
In the instance of our Orinda patient, John Muir actually received about $1,140 for charges totaling more than $11,000. Is that the way this always works out?
"It's within the range of the typical," said John Muir CFO Michael Moody. He said payment schedules are even lower for treatment of Medi-Cal patients. The fallout from this practice affects everyone with an insurance plan, because commercial providers are charged more for the same services to make up for the shortfall in government payments.
Even then there are inequities. Fees that Blue Cross and Blue Shield negotiate for an EKG won't necessarily be the same, depending on the rates they negotiate -- which can be affected by factors such as the number of patients they represent. Only one thing is the same for everybody: The charges listed in a hospital billing statement are not what the hospital expects to be paid.
If there is good news in this arcane mess -- "That's a good word, 'arcane,'" Emerson-Shea said -- it's that California hospitals hope to simplify billing procedures.
"Our association is exploring ideas to make the system more sensible," she said. "As it is, it's confusing. It makes people frustrated and causes all kinds of questions."
There's at least one woman in Orinda who agrees.
Contact Tom Barnidge at email@example.com.