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CMS Data on Charges

October 21, 2013

It is Mother’s Day and I find myself in a wonderful position to have some all too infrequent one-on-one time with my oldest daughter. As we sit having a cup of tea together she says “Mom, can I talk to you about something important?” My spidey senses tingle and my imagination runs wild as only a mother’s imagination can run. “Sure”, I say, “you can talk to me about anything!” She says “It’s about something I downloaded from the internet.” Was this a virus, a worm, a picture, something I did not touch upon in those mother-daughter talks in middle school and high school? “Where was this going?” I asked myself with trepidation. She walks over to the computer and opens an Excel spreadsheet that contains more than 65,000 rows from CMS and asks, “Why is there so much variation from hospital to hospital in their total charges for the same service?” I breathe easier. This is not your typical mother-daughter chat. This I can handle. You see, my daughter is a data analyst for a large healthcare organization and has recently started a HealthCare MBA program. She is full of this type of question lately.

Last week CMS released a FY2011 data on Medicare Provider Charge data. This data was released as an attempt at transparency and to offer consumers some comparative buying information.  Unfortunately the data came without explanation, background or healthcare finance 101. The release of data was picked up by newspapers across the nation as they tried to call higher priced hospitals on the carpet.   However, this is a much more complicated issue that just consumer comparison shopping and dramatically different charges. How much a hospital charges for its services rarely has any basis in reality when considering how much a hospital (or health center) will be paid for those services. A hospital has contracts with payers by which the hospital is paid far less than the charge amount. Uninsured patients are rarely expected to pay the full amount of charges either.

Yes, health care costs are high. But we are surely the only industry to never ever expect to be paid anywhere near what we charge. The US reimbursement rules are aberrant from all other consumer product lines. What CMS did not mention is that there is a very high variability from hospital to hospital and payer to payer in what they are paid for those same services.  Commercial payer contract negotiations are intense and the outcomes are confidential. In contrast, Medicare and Medicaid payments rates are formulaic and not subject to negotiation. Sliding fee scales offer uninsured and underinsured patients discounts often deeper than the payers. It is a rare uninsured patient who is expected to pay the “list” price.

As health centers we need to keep our charges at a reasonable rate. That cannot be done in a vacuum. It must be done with the full knowledge of our payer contracts and our costs. We must keep our charges standard for all parties but we also must keep charges above our highest paying payer to maximize the reimbursement from them based on our contracted rates. Fiscally, health centers must understand that charges having little bearing on the expected payments. Consumers would be wise to be more aware of their insurance contract and the subscriber liability than at the hospital rates. The payer is really the one driving their financial burden.

A quick look at our own personal explanation of benefits from recent medical visits helped me bring this into focus for my daughter. Maybe next time we can have a meaningful dialogue about love, life and the pursuit of personal happiness but for now, I will settle for a meaningful talk about CMS charge data. A mother can dream can’t she?

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