CRYSTAL LAKE – Hospitals serving McHenry County charge wildly different prices for the same treatment, according to figures released by the federal government for the first time.
The government data lists average charges for the 100 most common Medicare services from 2011. A review of the charges by the Northwest Herald for four local hospitals showed significant disparities among what those facilities charge.
Mercy Harvard Hospital isn’t included in the federal database because it’s a critical access hospital. These rural community hospitals receive cost-based reimbursements from Medicare instead of standard fixed reimbursements like other hospitals, according to the U.S. Department of Health and Human Services.
The figures shed light on the often frustratingly complex world of medical billing, but experts caution that the data doesn’t tell the whole story and has limited value for many consumers.
Of the 57 services for which charges were available for all four hospitals, Sherman Hospital had the highest average charges in 54 categories. Advocate Good Shepherd Hospital had the lowest in 33 categories, and the two Centegra hospitals had the lowest in the remaining categories.
Sherman, in Elgin, charged $62,957 on average to treat patients who had heart failure with multiple complications. The three other area hospitals charged nearly half as much for the same treatment.
Advocate Good Shepherd, in Barrington, charged $32,284 on average, while Centegra Hospital – McHenry and Centegra Hospital – Woodstock charged $34,137 and $33,644 on average, respectively.
Cost differences were even wider in some cases. Sherman Hospital charged $90,272 on average to treat patients with respiratory system diagnosis on ventilator support. The average cost for the same treatment at Centegra – McHenry was $69,453. At Centegra – Woodstock it was $58,030. Advocate Good Shepherd charged $53,826.
The nearly $40,000 difference in average charges could be the result of many factors, including treating patients who were sicker or had more complications, Sherman spokeswoman Tonya Lucchetti-Hudson said.
“A few highly acute patients with multiple complications who spent extended time in the hospital can significantly drive up the average,” she wrote in an email to the Northwest Herald. “[In these cases] our reimbursements were also higher than the other hospitals which indicates that there may have been a few outlier cases with higher than average reimbursements.”
More broadly, Sherman’s charges are higher because it serves a different population of patients than other area hospitals, Lucchetti-Hudson said.
“In general, Sherman attracts patients with higher acuity and more complications because we have the comprehensive programs to handle these patient populations,” she said.
Sherman’s charges won’t change as a result of its planned merger with Advocate Health System, Lucchetti-Hudson said.
Advocate Good Shepherd, part of the state’s largest health system, had the lowest average charges in many categories because of several different factors, including how many days patients spent in the hospital, said George Teufel, the hospital’s vice president of finance.
“Advocate Good Shepherd Hospital has historically had a very short overall length of stay, which has resulted in lower charges,” he said in an email.
Advocate Good Shepherd sets its charges based on the costs of providing the service, Teufel said.
However, hospital charges often factor in other expenses as well, including the cost of treating uninsured patients and providing money-losing services, such as burn wards, said Dr. Joel Shalowitz, director of health industry management at Northwestern University’s Kellogg School of Management in Evanston.
“In some ways it’s arbitrary, because some services cost more than they bring in,” he said. “They charge $5 for an aspirin because it’s part of their mission to provide a full range of services. You have to subsidize things like burn units.”
Centegra Hospital – McHenry had the lowest average charges in nine of the 57 categories and the highest in one. Centegra Hospital – Woodstock had the lowest charges in 15 categories.
Both hospitals, run by Crystal Lake-based Centegra Health System, were often in the middle of the pack in other areas.
Overall, data released by the Centers for Medicare and Medicaid Services “reaffirms Centegra’s commitment to value, especially when coupled with our numerous quality awards,” said Bob Green, Centegra’s executive vice president and CFO.
Data could be seen as ‘confusing’
Across the country, the recently released charge list has raised questions about how hospitals set prices. It also has renewed debate about health care costs as businesses and insurance companies shift more of the payment burden to individuals.
“Currently, consumers don’t know what a hospital is charging them or their insurance company for a given procedure, like a knee replacement, or how much of a price difference there is at different hospitals, even within the same city,” Health and Human Services Secretary Kathleen Sebelius said in a news release last week after the information was released. “This data and new data centers will help fill that gap.”
She told reporters “hospitals that charge two or three times the going rate will rightfully face scrutiny,” according to The Associated Press.
But the data isn’t as useful as it might seem. Illinois Hospital Association spokesman Danny Chun said it could prove more confusing than helpful.
That’s because the hospital-specific charge data bears little, if any, relation to what consumers pay for treatment, said Shalowitz, who also teaches at Northwestern University’s Feinberg School of Medicine and is president of the Medical Care Group, a practice with six suburban offices.
“What’s being published are made-up charges not related to cost or what people actually pay,” he said.
Hospitals set the charges, but Medicare and insurance companies don’t pay the full amount. Medicare reimburses hospitals based on set payments and insurance companies negotiate discounts to the list charges. Hospitals may artificially inflate charges knowing that insurers will seek steep discounts, Shalowitz said.
Even the uninsured don’t pay full price.
A state law requires free or discounted treatment for patients without health coverage. Individual hospitals may have specific billing policies for the uninsured.
“Anyone without health insurance coverage, and is considered a self-pay patient, automatically receives a 20 percent discount when using an Advocate hospital,” Teufel said.
The charges are akin to the sticker price listed by auto dealerships, Chun said.
The Centers for Medicare and Medicaid released the data as part of the Obama administration’s efforts to “make our health care system more affordable and accountable,” according to department’s website.
Families USA, a nonprofit health advocacy group, called it “an important step toward reining in health costs for America’s consumers.”
“We’re extremely concerned about the federal government putting out raw data on charges,” Chun said. “People might be confused by this. They need to understand this is not what the typical patient pays.”
More needs to be done to help consumers make health-care choices, said Rich Umbdenstock, president of the American Hospital Association.
“The complex and bewildering interplay among ‘charges,’ ‘rates,’ ‘bills’ and ‘payments’ across dozens of payers, public and private, does not serve any stakeholder well, including hospitals,” he said in a statement. “This is especially true when what is most important to a patient is knowing what his or her financial responsibility will be.”
Several experts noted that the charge information doesn’t account for other factors, such as treatment quality and outcomes.
“Charges for services are only one factor in the health care decision process,” Teufel said. “We encourage patients to also consider the facility’s quality of care and health outcomes. With that said, we support any new initiative that provides consumers additional information to help inform their health-care decisions.”
To that end, the federal government plans to make about $87 million available to states to improve hospital rate review programs and make health care pricing more transparent.