Third in a six-part series
Delbert Cantrell, a 61-year-old diabetic, was flown by helicopter to John Peter Smith Hospital after he fell off a forklift. For a little pill that retails at 60 cents, Cantrell was charged $5. And for a blood-glucose test, he was charged $65 - enough for several boxes of strips had he bought them at a local pharmacy.
It stunned his wife to see the bill. "Believe me, honey, they're gonna charge a fortune," Dee Cantrell said.
Since 2001, JPS has aggressively pushed up its retail prices, outpacing the rate of increases at eight other Texas hospitals that the Star-Telegram examined. Seven years ago, the hospital's retail price was $1 for every 73 cents in costs, according to reports that JPS filed with the federal government. By 2006, JPS was charging $1 for about every 28 cents in costs - a markup of 257 percent.
JPS officials say most patients don't feel the sting of the price increases because they're covered by government or private insurance or the JPS discount program, Connection.
But the higher prices can sock a growing number of people: uninsured people who don't qualify for indigent programs, underinsured people and anyone who pays some undiscounted portion of his or her bill. That's troubling to many people because JPS, as a safety-net hospital, receives hundreds of millions of tax dollars to subsidize healthcare.
"It's predatory pricing," said Kim Ross, a former 16-year lobbyist for the Texas Medical Association.
If JPS doesn't collect its full charges for most patients, why spike the price? Because charges play a role in almost every computation of government reimbursement. The higher the charge, the more money a hospital may be able to collect.
JPS officials are frank about saying that the increases were driven by the opportunity to maximize Medicaid revenue, and they don't apologize for that. As JPS' burden of charity care has grown, and as the federal government has clamped down on rates Medicaid pays, administrators say they have had to strategize ways to draw more money from supplemental government funds.
Chief Financial Officer Gale Pileggi says that she is aware the higher charges hurt some people and that the hospital is trying to deal with the dilemma.
The JPS board, she says, understands that "it has to find a way to help the working poor who still cannot afford the hospital charges."
Pileggi also said that the hospital will make adjustments to bills if it receives a complaint that a charge "doesn't make any sense." But she says JPS is limited in what it can do because discounts can be given only based on patients' financial need. However, the federal government has told hospitals they can discount bills for anyone who might suffer a financial hardship.
(See the federal Office of Inspector General report as PDF.)JPS board Chairman Steve Montgomery said hospital officials have told him that few people charged at the full rate actually pay the entire bill.
"It's what truly helps me sleep at night," Montgomery said.
But at many hospitals, some patients do get slapped with the highly inflated retail rate, said Glenn Melnick, a hospital pricing expert at the University of Southern California in Los Angeles. About 5 to 10 percent of all hospital patients are asked to pay the full retail price, he said.
"One of the biggest implications of these rising charges is that while they were driven by hospitals trying to increase their revenue from Medicare and Medicaid, they have this very nasty effect of generating highly excessive prices for the uninsured," Melnick said.
In addition, the high charges undermine people's faith in hospitals and healthcare, he said.
"When you got billed for two nights in a hospital and it's $45,000 and then it says at the bottom [that your] insurance only paid $2,400, that makes people say, 'What's going on here?'
"People are going to say that this pricing is fraudulent," Melnick said.
Dramatic markupsCount federal officials among those who see such pricing as a trick. They say it's a way hospitals game the system to collect millions of additional federal dollars, sending taxpayer costs soaring.
One sign that the increases are just such a strategy at JPS: The gaps between the hospital's costs and its charges are greatest for services with high concentrations of the poor, such as in the maternity ward.
But the high charges in some service lines are masked because the government computes reimbursements using the overall hospital cost-to-charge ratio, which shows lower markups..
"That way it doesn't look like the overall charges are going up," Melnick said. "By raising them in certain places, they get more money."
By 2006, JPS had marked up its charges for having a baby more than the other hospitals the Star-Telegram examined using federal government reports compiled by Cost Report Data Resources. The comparison looked at three other public hospitals - Parkland in Dallas, Brackenridge in Austin and University Health System in San Antonio - and at five private facilities, both nonprofit and for-profit, in North Texas - Medical City Dallas, North Hills in North Richland Hills, Harris Methodist Fort Worth, Baylor All Saints in Fort Worth, and Arlington Memorial.
For every dollar that JPS charged for labor and delivery in 2006, its costs were 24 cents. In the nursery, the costs were about 22 cents.
In comparison, Parkland charged $1 for every 40 cents in labor and delivery, and for every 70 cents in the nursery. (Baylor All Saints did not report labor and delivery cost and charges, but its nursery markup was less than that at JPS.)
Experts say that hospitals may also benefit from higher prices in areas where people are least likely to be able to pay their bills, such as the emergency room, a last resort of healthcare for the uninsured.
In 2002, JPS did not mark up the cost of emergency room care. By 2006, it charged $1 for every 32 cents of emergency room costs, a markup of 213 percent.
Uninsured people who don't qualify for a discount program are charged the full price. So are those who have high deductibles on their insurance polices. If patients don't pay their bills, the hospital may include the debt in its charity care calculation.
Wide gaps between costs and charges are also found in radiology, lab work and anesthesiology, areas often used by emergency room patients as well as many other hospitalized patients. A consultant hired by JPS last year reported that the emergency department was ordering batteries of lab tests for more than 80 percent of patients, regardless of their symptoms. "Many of these lab tests are unnecessary," the InSight Advantage consultants wrote.
The markups give some patients no chance. In January, Maria Munoz legally came to visit the U.S. from Mexico. One month later, a hospital physician told the uninsured 52-year-old that she would have to pay $21,247 upfront to start chemotherapy for a rare cancer that had spread to her lungs. After that, Munoz would owe the hospital six monthly installments of $7,081, totaling $42,486. She died this month, a week before a family fundraiser to help start her treatment.
All the other hospitals that the Star-Telegram examined also marked up their services from 2001 to 2006. The review included a look at what's called the cost-to-charge ratio for 11 areas.
The two for-profit hospitals, Medical City and North Hills, had a greater overall markup for total costs and charges.
But the most dramatic spikes occurred at JPS, which also led the other hospitals in overall markup.
When the price hikes began years ago, JPS was charging so little that it lost money on some services, Pileggi said.
"So there was at that point an initiative to get charges above costs in order so that we could get the full reimbursement that we would be eligible for under Medicaid," she said.
Patients may now be charged more for some services at JPS than at private hospitals. Cantrell went to Arlington Memorial for an operation two months after his JPS stay and was charged almost $300 less per day for a semiprivate room. While JPS charged $65 for a blood-glucose test, Arlington Memorial charged $19.95.
J. William Thomas, an expert on hospital cost efficiency at the Institute for Health Policy at the University of Southern Maine, says it's common to see a wide gap between costs and charges. "It's sort of characteristic of a hospital, that the rate they charge for services has very little relationship to the cost of services," he said.
KB Forbes, a healthcare consumer rights activist who has studied hospital charging for almost a decade, has a different take on JPS' rates.
"These rates are astronomical," he said. "Their prices have gone through the roof.
"I'd call it a racket."
A call for transparencyBy February, some of JPS' charges for Delbert Cantrell's September care still hadn't arrived. But the bills already totaled $32,000, not including physicians' charges.
Cantrell was covered by workers' compensation, which will likely pay JPS $14,000 for his care, the bill said.
JPS could get as little as a few hundred dollars or as much as the full $32,000 for other patients hospitalized for similar services, depending on whether they had coverage and what kind.
Who pays the most? Uninsured people who don't qualify for either JPS Connection or a JPS discount program started in October. The programs are limited to legal Tarrant County residents who meet income guidelines.
Such differences in payments between insured and uninsured are troubling to policy analysts and some government officials in other states, particularly when such price differences occur at hospitals with a mission of serving the poor.
Lawsuits filed in several states, including Alabama, Washington, Oregon and Illinois, allege that such pricing is fraudulent or is price gouging.
But Pileggi points out that the federal government hasn't given hospitals guidelines for determining reasonable markups. "Nobody has really defined what that level is," she said.
"It might not be realistic to charge $5 for a Tylenol," she said, "but nothing says you can't."
And comparing the price at other hospitals isn't a valid way to determine whether the charge is too high, said Steven Scarborough, a Texas-based Medicaid and Medicare consultant for nonprofit hospitals, including JPS. Cost allocations and pricing methods may vary from one hospital to the next.
"You'd like to think you could compare them, but you've got to be real careful. It's not a very good system to use to explain things and how they work," he said.
Those arguments haven't held sway in some states, including Minnesota and Wisconsin, which have pressed hospitals to offer uninsured patients the kind of discounts given to insurance companies.
But Melnick wondered why hospitals would volunteer to do that.
"If you do that aggressively, you can cut your income," he said.
Another remedy being pushed is to make hospital pricing and discounts transparent.
President Bush took a step in that direction when he signed an executive order in 2006 requiring that hospitals and physicians disclose the price and quality of care provided to Medicare beneficiaries, federal employees, the military and veterans. But states have a patchwork of practices that aren't guided by any uniform system to measure and control costs.
JPS doesn't publicize its costs or charges. Its chargemaster, which lists prices for thousands of different services, is public information for anyone requesting it. But chargemasters are written in codes that are hard to understand. And it wouldn't provide a comparison of prices of another hospital.
What will improve the system, the University of Southern California's Melnick said, is for hospitals to publicize their discounts.
"Anyone should be able to call up and say, 'What are your discounts for the uninsured?' and the hospital ought to be able to tell you that number," he said.
"If that's not the case, then these rapidly increased charges are going to be causing problems, and it's only going to get worse."
Staff writer Anthony Spangler contributed to this report.
Online:
www.jpshealthnet.orgCharges soarJohn Peter Smith Hospital has aggressively raised charges since 2001, leading to a widening gap between what it costs the hospital to deliver a service and the sticker price on the bill.
| | 2001 | 2006 |
| Overall hospital | 37% markup | 257% markup |
| Labor and delivery room | 9% | 316% |
| Nursery | 6% | 355% |
| Laboratory | 300% | 900% |
| Radiology | 127% | 669% |
| Anesthesiology | 117% | 900% |
| ICU | 3% | 92% |
| Emergency room | 0% | 213% |
| Drugs charged to patients | 20% | 376% |
| General routine care | 0% | 100% |
Source: Medicare reports compiled by Cost Report Data Resources (
www.costreportdata.com)
A growing divide Average charges and costs for hospitalized Medicare patients.
| | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
| Chest pain | | | | | | |
| Average charge | $6,737 | $6,429 | $11,829 | $12,167 | $17,597 | $13,682 |
| Average cost | $3,893 | $3,952 | $4,749 | $4,070 | $5,212 | $4,021 |
| | | | | | | |
| Chronic obstructive pulmonary disease | | | | | | |
| Average charge | $10,123 | $11,276 | $14,494 | $17,265 | $19,881 | $21,961 |
| Average cost | $5,535 | $6,456 | $5,784 | $5,783 | $5,990 | $6,598 |
Average Medicare charges equal total gross charges divided by the number of patient discharges; average costs are calculated on the ratio of cost to charges for routine and ancillary services
Source: American Hospital Directory
