Bob's Blog: Time Magazine’s “Bitter Pill”

Author’s note: To read the Time magazine article referenced in this blog post, click on this link:

By Steven Brill, TIME Magazine

If you ever had the need to go into a hospital for a costly procedure, assuming you were covered by Medicare plus a secondary insurer, or by a fully comprehensive insurance plan, it’s probable that you never considered the cost. If however, you had a medical insurance policy with limited coverage, high co-pays, or even worse, no insurance, you might have considered shopping around to find the least costly option. Well, good luck with that.

An article in the February edition of the Journal of the American Medical Association Internal Medicine describes a research project conducted by a team of researchers from Washington University and the University of Iowa. Unlike the Time magazine Bitter Pill article, this report received very little press or broadcast coverage, yet it is acts as a perfect corollary to the Time article by corroborating its conclusions regarding irrational and egregious hospital pricing.

The team contacted over 120 hospitals that perform orthopedic surgery including the 20 top ranked in total hip replacement surgery. Using a standardized script, requests were made for the lowest complete “bundled price” (hospital plus physician fees) for an elective hip replacement operation. It was explained that what was sought was the lowest complete price for the procedure. The patient was described as a 62-year old grandmother who supposedly had no insurance but did have the means to pay out of pocket.

Indicative of the difficulty the average patient would confront when asking for that information, less than two thirds of both groups could or would respond. Of even greater concern however, are the astounding differences in the cost estimates that were derived. The somewhat narrower range of estimates was $12,500 - $105,000 from the top ranked orthopedic centers. If that wide range of prices isn’t astronomical enough, then consider the range from the non-top-ranked hospitals – $11,100 - $125,798. (Peculiarly, on average it might have been cheaper to have the surgery performed at the highest ranked hospitals than the lower ranked.)

As a clear indication of inexcusable, even unconscionable overcharging by many of these hospitals, the study authors noted that Medicare and other large insurers frequently pay between $10,000 and $25,000 for hip replacement surgery. This substantial differential in price correlates perfectly with the description of hospitals’ ubiquitous usage of their individually compiled “Chargemaster” list as revealed in Steven Brills exposé in his Time magazine article, and was partially covered here in last month’s issue.

Take My Advice

I have read dozens of efforts to synthesize the original facts related in Steven Brill’s article, but all, including mine, fail completely to capture the human face, and the appalling personal devastation that could result from the artificial, nonsensical costs imposed on those who can least afford it. (How about this number? 62% of all bankruptcies are related to illness and medical bills.)

As a result, I am proposing what will undoubtedly appear to be a strange self-defeating suggestion –– DO NOT READ THE REST OF THIS ARTICLE –– other than the next few paragraphs. I’ll tell you when to stop reading below. You will be doing yourself a disservice if you don’t read the entire original Bitter Pill piece. Despite its length it’s easy to read, but will certainly provoke significant anger and frustration. To access the article online would normally require a Time magazine subscription and is thus difficult to find on the Internet. However, the editor of my blog, who is a computer engineer, and also happens to be my son-in-law, tracked down a link to the full Time magazine article.

So you now have no excuse for not reading what I, and others think will be a National Magazine Award winner (I had forgotten that Pulitzers are only for newspaper stories.) I think you will find if you just start reading the article, you won’t stop until you finish it. If you do read it, I would enjoy an email from you reporting if the experience was worthwhile. STOP READING HERE and click the link to the article at the top of this page.

Those of you who choose not to read the article will find the following descriptions of the fantasy world of the Chargemaster and its pricing policies equally exasperating. Mr. Brill’s format follows seven hospital patients with insufficient insurance, describing their illnesses, facts about the hospitals they visit, and the pricing treatment they receive in various hospitals. Here are a couple of examples, but all are similar.

A $21,000 False Alarm

Janice, a 64-year-old woman, felt chest pains and was taken by ambulance to non-profit Stamford Hospital by ambulance. After some three hours of testing and a brief encounter with a doctor she was told she had indigestion and sent home. That was the good news. The bad news was the bill: $995 for the ambulance ride, $3,000 for the doctors and $17,000 for the hospital –– in sum, $21,000 for a false alarm. Out of work for a year, Janice had no insurance.

Among the hospital's charges were three blood tests for $199.50 each, tests that measure the levels of certain proteins in the blood whose release from the heart is a strong indicator of a heart attack. The price was initiated based on the “Chargemaster” listings. Had Janice been just one year older, Medicare would have paid the hospital $13.94 for each test.

She was also charged $157 for a “complete blood count” test for which Medicare pays $11.02.

While in the hospital, Janice was given a nuclear stress test (with which some of you may unfortunately be familiar). That was billed at $7998, while Medicare would have paid $554 for the test. Conferring with the former CEO of the American College of Cardiology, Brill determined that in most cases like this, a standard (non-nuclear) stress test (a cardiograph) would be tried first, with the nuclear used only if indicated. That would have initiated a Chargemaster bill of only $1200 for which Medicare would have paid $96.

The validity of Brill’s observations regarding Medicare rates for the services that Janice received are confirmed by an annual expense report that Stamford Hospital is required to file with the federal Department of Health and Human Services. According to the hospital's latest filing (covering 2010), its total expenses for laboratory work (like Janice's blood tests) in the 12 months covered by the report were $27.5 million. Its total charges were $293.2 million. That means it charged about 11 times its costs.

Shocked by her bill from Stamford hospital and unable to pay it, Janice S. found a local woman on the Internet who is part of a growing cottage industry of people who call themselves medical-billing advocates. They help people read and understand their bills and try to reduce them. As a result, Stamford Hospital cut its bill in half. Most of the doctors did about the same, reducing Janice's overall tab from $21,000 to about $11,000.

A Very Lucky Patient

The first case detailed by Brill deals with a cancer patient named Sean Recchi. With a limited insurance policy covering just $2,000 per day of any hospital costs, the Reccis applied for admittance to the world famous MD Anderson Hospital in Houston. They were advised that the total cost, in advance, for Sean to get his treatment plan and initial doses of chemotherapy was $83,900.

Brill describes how some of those actual charges on their bill were reached: “The first of the 344 lines printed out across eight pages of his hospital bill –– filled with indecipherable numerical codes and acronyms –– seemed innocuous. But it set the tone for all that followed. It read, "1 ACETAMINOPHE TABS 325 MG." The charge was only $1.50, but it was for a generic version of a Tylenol pill. You can buy 100 of them on Amazon for $1.49 even without a hospital's purchasing power. Dozens of mid-priced items were embedded with similarly aggressive markups, like $283 for a "CHEST, PA AND LAT 71020." That's a simple chest X-ray, for which MD Anderson is routinely paid $20.44 when it treats a patient on Medicare, the government health care program for the elderly.

Brill continues, “Every time a nurse drew blood, a "ROUTINE VENIPUNCTURE" charge of $36.00 appeared, accompanied by charges of $23 to $78 for each of a dozen or more lab analyses performed on the blood sample. In all, the charges for blood and other lab tests done on Recchi amounted to more than $15,000. Had Recchi been old enough for Medicare, MD Anderson would have been paid a few hundred dollars for all those tests. By law, Medicare's payments approximate a hospital's cost of providing a service, including overhead, equipment and salaries.”

Brill then discovers that, “On the second page of the bill, the markups got bolder. Recchi was charged $13,702 for "1 RITUXIMAB INJ 660 MG." That's an injection of 660 mg of a cancer wonder drug called Rituxan. The average price paid by all hospitals for this dose is about $4,000, but MD Anderson probably gets a volume discount that would make its cost $3,000 to $3,500. That means the nonprofit cancer center's paid-in-advance markup on Recchi's lifesaving shot would be about 400%.” If you want another charge to make your blood boil, MD Anderson's billing of $7 each for "ALCOHOL PREP PAD." This is a 1” square of cotton used to apply alcohol to an injection. A box of 200 can be bought online for $1.91.

Despite the flagrant Chargemaster billing prices that M.D. Anderson tried to get away with, apparently Sean Recchi has fared well as a patient, and is now in remission.

Yet there is much more to the story than the Chargemaster monster. That will be covered in next month’s issue.