Hospital Pricing Seems Crazy, But It Actually Makes Sense
Arguably, our U.S. healthcare delivery system is the best (in terms of service quality) of all the nations on our planet. The problem is, most of it shuts down after 6 p.m. on weekdays and for the entire weekend. If you doubt what I say, try making an appointment during these off hours anywhere except for maybe an urgent care center, and most of those close at 10 or 11 p.m. I don’t know about you, but my children always seem to get sick or injured during these off times, so, like most parents, I resort to using hospital emergency rooms as a primary care provider for their acute care flair-ups or injuries. Because of my decades-long history of representing hospitals, I am neither a stranger to nor am I shocked by the hospital bills parents get for using ER’s for this purpose.
Recently, my college-attending son came home during a break from his studies with a rash that was spreading rapidly. Fearful that it might get to his lungs and cause problems with his breathing, I took him to the ER where he was fed intravenous steroids and sent home. The bill sent to my health insurance plan was for over $8,000 of which about $2,400 was paid. As outrageous as it seems, I get this. I really do. I understand why the bill was so high and why my health plan paid only a fraction of the charges. The problem is, few consumers understand this; in fact, most are outraged, especially if they have a deductible to meet, or worse, no insurance coverage at all.
Most everyone has a story like mine, and the media is always on the prowl for opportunities to stimulate public outrage and a call to action. They found that recently with a story making the rounds about the $2,659 bill 4-year-old Lucy Branson’s parents received for the 10 seconds it took an ER doctor to pluck a doll’s tiny shoe from her nostril. The National Public Radio headline started with a cute play on words about the incident and the hospital bill. “Nothing To Sneeze At” is how it started, followed by pictures of the very cute toddler holding the tiny pink doll shoes in the palm of her tiny hands. News media outlets seized the the moment with this story whose adorable protagonist and storyline could neither have been cast nor scripted any better by a Hollywood studio. The visuals alone gave this tired, old story new life. Would you blame Dignity Health, the parent company of the Nevada hospital where Lucy was seen, for refusing to comment? I don’t.
Like it or not, the $39 aspirin costs that much for a reason. The problem is, hospital leaders are not eager to explain the complexities involved in calculating the charges itemized in their charge description masters. They shouldn’t be, but they are. I get that too. No hospital leader wants to become “the poster child” for defending hospital pricing.
The fact of the matter is trauma centers and emergency rooms cost a lot to staff, equip and run 24/7/365. The metaphor that best describes this is the cost of maintaining our military for just being there in case we need it. Similarly, when one uses a hospital ER for a minor ailment, be prepared to pay a share of the cost to support it being there –fully loaded and ready to tackle anything that comes in the door-- when you need it. Hospital leaders need not be reluctant to just say that.
What is harder to explain to consumers, though, is how hospital charge calculations are influenced by the relationship hospitals have with health insurance plans. For out-of-network coverage, many health plans pay hospitals (in whole or in part) a percent of charges for the care provided. As a consequence, hospital prices are higher than costs for many services.
The bottom line is this: Consumers need access to ERs, and, moreover, communities want them. The hue and cry bellows from every quarter when hospital operators decide to close an ER. So, to steal a quip from President Trump’s current acting chief of staff, Mick Mulvaney, “get over it.” This is the way it works.
Jim Lott is former executive vice president of the Hospital Association of Southern California and a healthcare scholar. He is a regular contributor to the Payers & Providers editorial page. He may be reached at lott@sbcglobal.net.
