Hospital Prices Are Arbitrary. Just Look at the Kingsburys' $100,000 Bill. - WSJ - 0 views
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The costs, which overwhelmed the Kingsburys and ruined their finances, didn’t have to be so large. A Wall Street Journal analysis of Ms. Kingsbury’s medical bills, insurance statements and newly public data on hospital prices shows how the nation’s seemingly arbitrary hospital pricing left the couple with charges that in some cases would have been far lower for other patients, through no fault of their own.
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Ms. Kingsbury had insurance, but that’s no guarantee of a competitive price. Hospitals and insurers negotiate prices to hit financial targets, and their bargaining benefits some patients and disadvantages others, according to the Journal’s analysis and interviews with medical billing professionals and researchers.
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A weak negotiator can get stuck with a lousy deal. Trade-offs can give one insurance plan the best deals for some hospital services, but not others. Hospitals often charge patients the highest rates of all when insurance doesn’t cover their medical care
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For many patients and their families, hospital fees are already complicated, opaque and stressful. The Kingsburys show just how little control consumers have.
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None of this has been clear to consumers—until this year. Hospitals and insurers have long set prices through confidential negotiations. Starting Jan. 1, hospitals were required to make their prices public under a Trump administration policy that sought to expose the sector’s pricing to greater market pressure.
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Compliance with the rule has been spotty, but the available data show that prices vary widely among the plans that negotiate contracts with hospitals. While the data remains difficult for consumers to use, knowing the full range of rates could ultimately help patients negotiate their bills.
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Healthcare economists note that prices in other sectors, such as airlines, can also vary for the same service, but hospitals’ steep prices mean the dollar difference between the highest and lowest rates can amount to tens of thousands of dollars. “The order of magnitude of healthcare costs is different,”
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Even within an insurance plan, prices aren’t consistently low or high. A plan’s prices for one service can be among the lowest a hospital negotiates, but among the highest for another,
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A person insured by Minnesota-based HealthPartners would have received the most favorable price for a hospital stay because of back problems, but the cost of an emergency room visit with the same insurance was among the highest, according to the Journal’s analysis of the data.
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When insurance didn’t cover some treatments, the Journal found, Avera McKennan Hospital set its own prices that ranked among the highest anywhere in the U.S. in the Journal’s analysis.
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The LifeShield price of about $780 amounted to a discount of 53% off the hospital’s charge. Ms. Kingsbury paid all of it because her plan’s benefits didn’t cover the rest of the bill. The insurance was exempt from some federal rules that protect healthcare consumers. LifeShield didn’t respond to requests for comment.
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Ms. Kingsbury earned roughly $17,700 last year, tax records reviewed by the Journal show. Her husband, who is retired, received about $22,800 in yearly income from Social Security. They bought insurance in 2019 from LifeShield National Insurance Co.
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The range of prices is the product of a complex interplay of multiple payers and hospitals, and a lack of competitive pressure to hold down costs, economists said. Rates have been determined by trade-offs at the bargaining table between hospitals and insurers—such as an offer of cheaper prices in return for more business—and by market power, with higher prices where hospitals dominate.
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Hospitals and insurers ultimately bargain for prices to meet financial targets for revenue and profit, said David Dillon, a healthcare actuary with the consulting firm Lewis & Ellis Inc. “It is kind of as simple as both sides of the table have their revenue requirements,” he said.
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“The market for healthcare just doesn’t look at all like the market for tomatoes because somebody else is literally negotiating and purchasing on your behalf,” Mr. Cooper said.
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The cost for the scan under LifeShield was $1,497, almost half the price charged under Avera. However, Ms. Kingsbury’s plan at LifeShield was exempt from Affordable Care Act rules to prevent gaps in coverage. LifeShield didn’t cover this scan. So Avera charged Ms. Kingsbury the price it sets for patients not covered by insurance, at $8,451, one of the highest prices in the Journal’s analysis of publicly available rates nationwide.
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“Healthcare is a service and it can be an expensive service, especially for a serious condition. That’s why health insurance exists,” said Avera spokeswoman Ms. Meyers. “It is important for consumers to understand what they are buying and the coverage it provides.”
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The Journal compared Avera McKennan’s 2019 PET CT price for Ms. Kingsbury with the price Medicare would pay, as calculated by price-comparison startup Turquoise Health Co. The hospital’s cash price for Ms. Kingsbury in 2019 was 5.7 times the Medicare rate, according to the Journal’s analysis using newly public data collected by Turquoise. That’s one of the highest multiples of any of the more than 1,200 U.S. hospitals in the analysis.