Are You Paying Too Much for Hospital Care?

The Charge Master

Every hospital is responsible for setting their retail prices for the products and services they offer. Medical goods and services are priced and coded in an internal hospital database called a Charge Master. Since hospitals do not function as free-market competitors, hospital Charge Masters are veiled in secrecy in all but 13 states^* where state law requires disclosure of Charge Master prices upon patient request. Although Indiana hospitals are not required to make their Charge Master public, the Indiana Hospital Association publishes an enlightening website that discloses certain hospital data provided to Centers for Medicare & Medicaid Services (CMS) and the Indiana State Department of Health including measures of care provided in each hospital, patient satisfaction, readmissions, infections, deaths, birthing outcomes and some basic hospital procedure charges. The Indiana Hospital Association’s website is a respectable first step toward public disclosure. But in light of a staggering disparity in hospital Charge Master rates and the perception that the deepest discounts are granted to the largest third-party payers, forces are pushing for greater transparency.

For example, Indiana’s Hospital Lien Act provides hospitals may file a lien for hospital charges against an action or claim brought by a patient against the parties responsible for their injuries. In Parkview Hospital v. Thomas E. Frost, Frost’s attorneys alleged Parkview Hospital’s charges were unreasonable and requested Parkview Hospital provide information about discounts given to other patients with private health insurance and government healthcare reimbursement programs. A recent opinion from the Indiana Court of Appeals stated:

“… evidence of discounts provided to patients who either have private health insurance or are covered by government healthcare reimbursement programs is relevant to the determination of reasonable charges under the [Indiana Hospital Lien] Act…”

Hospital costs and reimbursements

The Charge Master balances hospital costs, including inventory, staff, facility, insurance and permits with the less predictable estimate of account receivables from patients and third-party payers who reimburse hospital providers at diverse rates.

A hospital’s Charge Master for a procedure or product may be as little as 150% or as much as 1000% over Medicare, which reimburses only a small fraction of the Charge Master rate. Private and group health insurance providers contract separately with hospitals to discount the Charge Master rate by negotiating a Fee Schedule, a percentage of charges or by agreement of ‘usual, customary & reasonable fees’. Insurers generally reimburse at an amount greater than Medicare but substantially less than Charge Master. In an article written by Steven I. Weissman for the Florida Bar Journal, it is estimated that average Charge Master pricing at Florida’s hospitals would be 300% - 400% over the amount negotiated with major health insurance providers. Although Indiana hospital procedure rates may vary somewhat from Florida, the national trend toward deep discounts for government and contracting insurers remains the same.

Compensating for reimbursement deficit
Automobile Insurers frequently pay hospital expenses resulting from an accident up to the policy limits of their clients’ Medical Payment automobile insurance coverage. Because Medical Payment insurance is considered primary to health insurance, hospitals bill auto insurance carriers the full Charge Master rate before balance-billing the patient’s health insurance—offsetting the deficit incurred from discounted health insurance and fractional Medicare reimbursements.

Workman’s Compensation Insurance, out-of-network patients and uninsured patients are also billed Charge Master although out-of-network patients often pay a percentage of the Charge Master. Uninsured patients may qualify for free or reduced fee medical care.

Is there a better way?

In the last decade, we have seen some striking changes to the medical industry. But it can't be overlooked that third-party payers have successfully exerted their influence to sustain the status quo. In a healthcare system that categorizes patients—favoring some, penalizing others—it’s of no surprise that the current structure of “reasonable charges” and "acceptable reimbursements" imposed on patient classes, is coming under scrutiny by a citizenry increasingly burdened by the high cost of health care, public servants, members of the legal community and medical professionals that would like to see a transparent and equitable hospital marketplace—one that implements predictability, consistency and fairness in hospital billing and discounts applied—all while maintaining quality hospital services indispensable to our communities and the well-being of our families.

Experienced personal injury attorneys and wrongful death lawyers

Our experienced personal injury attorneys and wrongful death lawyers use their knowledge of the law, legislation and judicial opinions to employ strategies that maximize our clients' financial recovery after they have experienced a life-altering accident or event caused by another person or entity. If you or someone you know has been involved in an accident, injured by the negligence of a medical professional, or the victim of nursing home neglect or wrongful death, call personal injury attorney, Charlie Ward, of Ward & Ward Law Firm, at (317) 639-9501 for a free consultation today.

Website recommendation: My Care Insight.

*Figure obtained as of this writing, June, 2016