The first time Jeff Shellan got a cardiac stress test for his troubled heart, the retail price was $2,166. His insurance company agreed to a discounted price of $885, of which Shellan paid $364.
When his doctor suggested a retest a year later, the charge was $8,078, the discounted rate was $3,755, and Shellan’s share was $968.
Same test. The only difference? Boulder Community Hospital bought the practice of Shellan’s cardiologist and added a hefty “facility fee.”
Such fees are legal and are becoming more common nationwide as hospitals buy up doctor practices. The extra charges are contributing to inflated hospital prices for common services that bewilder patients and frustrate policy experts.
More than 50 percent of doctors are now employed by hospitals, and fast-consolidating hospital chains often add large fees to procedures and tests that are frequently carried out in the same office as before.
“Same piece of equipment, same location, same technician, same doctors, but it costs you three, four, five times what it used to cost you,” said Bill Mantia, the recently retired CEO of a cardiology practice in Colorado Springs. “The problem is that the system is broken.”
A Medicare cost advisory commission estimates that if consolidation and facility fees grow without congressional action, the federal health plan will spend $1.1 billion more a year just for two kinds of common heart tests.
When a hospital does the billing, it can charge hospital rates even when the doctor’s office or day surgery center is miles from the main facility.
The high fees may also discourage proper health care. Shellan refused the second test, a decision Mantia and others said they see more often as insurance plans move to high deductibles and co-pays of $2,500, $5,000 or more.
“I don’t feel very good about it at all,” said Shellan, a retired physicist who knows he shouldn’t skip a recommended health test.
Hospitals, including Boulder Community, acknowledge patients are seeing higher charges for similar services, but say the extra money reflects the cost of all the benefits hospitals provide to communities.
“Comparing a hospital’s charges to what an independent physician clinic charges is apples to oranges,” said Boulder hospital marketing director Rich Sheehan.
Some hospitals cite their emergency rooms, always open to the public; high-powered specialty services; and millions of dollars in direct charity care or forgiven bills. Boulder Community said acquiring physician practices guarantees public access.
“Some private physicians don’t accept Medicare or Medicaid,” Sheehan said. “All the doctors directly employed by us are required to accept those patients. We want to make sure those patients are cared for, and there’s a cost associated with that.”
The larger for-profits and nonprofits — which in Colorado include UCHealth, Centura, Exempla and HealthONE — report consistently high income as they buy rivals and swallow doctor practices.
Insurance companies, which share the higher costs with patients, often decline to criticize hospitals on the record. They cite the need to continue negotiating with consolidated, powerful systems.
Critics say insurers would have more power to deny “facility fees” if federal Medicare officials stopped paying them, as Medicare controls up to half of hospital revenue in some markets.
And Medicare — at least the officially sanctioned advisory arm that studies Medicare costs and recommends changes to Congress — has tried. MedPAC has detailed how Medicare allows hospitals to charge it two times or more what doctor’s offices bill for common procedures.
Making the payment “site neutral” on a basket of basic office evaluations and procedures would save $900 million a year, MedPAC said. Meanwhile, the percentage of cardiologists employed directly by hospitals has gone from 11 percent in 2007 to 35 percent in 2012, the commission said.
Medicare’s recommendation was gone from federal budget negotiations earlier this year, after what observers called intense lobbying by the American Hospital Association and others interested in the status quo.
In Colorado Springs, the two main hospitals — Memorial and Penrose-St. Francis — are at the heart of growing competition for patients by two large health systems.
UCHealth, anchored by University of Colorado Hospital in Aurora, took over management of city-owned Memorial, while the Centura group oversees Penrose-St. Francis. Both systems are allying with physician groups and opening satellite health centers.
UCHealth said it is not charging facility fees in its new acquisitions in the Colorado Springs area. But the nonprofit group, which encompasses University, Memorial in Colorado Springs, the former Poudre Valley system and others, said in a statement that it sometimes charges the extra fees to cover higher costs. Extra training, depth of service and charity care can drive higher bills, UCHealth said.
Asked why UCHealth would avoid facility fees in one geographic area but still charge them in others, a spokesman said the system eliminates the fees “whenever possible.”
Centura said it tries to “minimize” the number of its clinics that charge the extra fees after bringing physicians in-house, and that “only a handful of more than 100” Centura clinics charge them. Closer relationships with doctors over time will bring cost controls and quality improvements, Centura added.
Exempla, overseeing three metro hospitals as part of the SCL Health system, said it is usually not adding the fees in Denver when it hires doctors in-house. The hospitals made a “conscious” decision “to keep our prices competitive in the market,” said Dr. Richard Lopes, senior vice president of health networks.
SCL Health charges higher fees in Denver for some cancer-drug treatments when those are moved from an oncologist’s office to a hospital-owned building.
“We felt that was a legitimate circumstance because we actually changed the location of service,” Lopes said.
Medicare on one hand is pushing doctors and hospitals to take on risk and win bonuses for improving patient care while saving overall costs, said Dr. Kevin Kavanagh, who advocates for reform with Health Watch USA in Kentucky. Yet by paying extra facility fees, Medicare is having the opposite effect.
The growing hospital-doctor partnerships threaten to become “an oligopoly that’s just too strong,” Kavanagh said. “If they can’t fix this one, how do they expect to save money anywhere else in health care reform?”
Examples of the fees abound, from patients, independent doctors and insurance companies.
An insurance company operating in Colorado said the acquisition of just one small oncology physician group by one hospital inflated the total costs of its patients there by $1.3 million. The company did not want to be named because it negotiates with the hospitals.
The differences in fees range from hundreds of dollars for common procedures such as echocardiograms, to thousands of dollars for more exotic cancer-drug administration or targeted radiation treatments.
Hospital retail fees for a week-long radiation-therapy regimen are about $140,000, according to an executive at a free-standing radiation center in Denver’s suburbs. The executive requested anonymity because of ongoing negotiations and competitive pressures from hospitals and insurance companies.
Medicare pays about $20,000 to hospitals for that procedure, he said. A free-standing center will get less from Medicare, about $16,000.
For the same treatment, a private insurer negotiates a fee of about $70,000 with the hospital, while the insurer pays a free-standing center $34,000 or less.
The Colorado Hospital Association said its members offer a safety net. “Free-standing physician practices do not operate 24 hours a day, seven days a week — hospitals do,” the association said.
Teh Denver Post
May 15th, 2013