San Diego Business Journal

Recent data from Medicare shows that hospital costs differ significantly across the country — and that health care billing in San Diego happens to be on the higher end.

The data showed pricing differentials within the country’s top 100 most common inpatient procedures. For example, the average covered charges for hip and femur procedures ranged from about $41,000 to $118,000 in San Diego. The same procedures ranged from $13,000 to $57,000 in Akron, Ohio.

“We want to shine a much brighter light on practices that don’t seem to make sense to us,” Jonathan Blum, deputy administrator for the Centers for Medicare and Medicaid Services, told the Los Angeles Times. “We do not see any business reason for why there is so much variation in the data.”

The data has excited the already contentious health care debate as the country casts a keen eye over medical billing practices, said Steven Escoboza, president of the Hospital Association of San Diego and Imperial Counties. This has come to a head in particular because of the upcoming implementation of the Affordable Care Act, he said.

“No question, it’s a dysfunctional system in how the public sees it, and unfortunately the public sees the bills as they stand because it’s required by law, but they don’t really tell the story of what a health plan may actually be paying for those services,” Escoboza said.

Numbers Are not Reflective

But Escoboza said that the numbers in the data aren’t really reflective of what patients, or their insurance carriers, actually pay for these procedures.

For California, costs like retrofitting buildings for seismic compliance are accounted for in the ultimate billing numbers, though they generally are not reflected back on the patients, Escoboza said. Cost of living and, by extension, salaries, have also driven up hospital billing rates in San Diego and across the state.

And both Medicare and private insurers only pay a small portion of the charges that show up on the actual bills, said Tom Gehring executive director and CEO of the San Diego County Medical Society. Medicare doles out a predetermined figure for each procedure, regardless of where it takes place across the country. Insurers, in turn, arbitrate with providers to come up with lower pay rates, he said.

“It’s incredible — the number of variables that go into cost inflation,” Gehring said. “But what matters is what the insurance contract reads, and what the Medicare contract reads.”

He did say, however, that there are “some hospitals that are incredibly cost effective and high quality, and some that aren’t.”

But the numbers reflected in the data are part of the reason that health care administrators and related trade associations are working quickly to develop a new system to make health care billing practices more transparent.

Statewide Task Force

“As a result of the backlash that has occurred, I know that the American Hospital Association is definitely looking at developing a new system,” Escoboza said. “The California Hospital Association is working very hard to put together a proposal that would be agreeable to all hospitals to have a bill and pricing that is real and reflects the more current and modern way of providing care and getting payment for it.”

Escoboza said that the CHA has formulated a statewide taskforce made up primarily of chief financial officers of hospitals who are trying to find ways to restructure billing practices.

“The group has been meeting for over a year, and have come up with a final recommendation that will go to the California Hospital Association board of directors in July,” he said.

Indeed, health policy experts have said the release of the figures from more than 3,000 U.S. hospitals will likely catalyze health insurers and hospitals to be more transparent with their billing practices. They say this could allow employers and consumers to have a better understanding over why their insurance prices continue to skyrocket.

“I’m not sure there’s a real world impact from that data being published, other than making people gasp,” Gehring said. “But until people appreciate that there are some pretty significant differentials in health care billing, they just assume the tooth fairy is taking care of it — a.k.a. the insurance company.”