A newspaper in San Francisco featured a story about the patient’s complaint about being overcharged thousands of dollars by the hospital for medical laboratory tests

Here’s how a community hospital that charges inpatient prices for clinical laboratory testing to a walk-up customer find itself at the center of a media news storm. In California, a newspaper trumpeted the story of an unhappy consumer stuck with a $4,316.55 bill for a panel of medical lab tests that a national lab would have performed for just $464, about 90% cheaper!

Cautionary Tale for Medical Laboratories and Pathology Groups

Price transparency is a major trend in healthcare and consumers are catching on quickly. This raises the stakes for any hospital, medical laboratory, and anatomic pathology group that is slow to respond to the growing number of consumers who now price-shop whenever they need clinical laboratory tests.

The experience of Kathy Meinhardt, a graphic designer in Napa Valley, California, has many lessons to teach the clinical lab testing industry. She was billed $4,316.55 for blood work done in April 2012 at Queen of the Valley Medical Center in Napa Valley, according to an article in the San Francisco Business Times. Meinhardt knew this amount was too much because a few months earlier she was charged $464.81for almost the same panel of tests by the nearby clinical laboratory operated by Quest Diagnostics Incorporated (NYSE: DGX), the newspaper reported.

Founded in 1958, Queen of the Valley Medical Center is a 191-bed Catholic nonprofit hospital that is part of St. Joseph Health, a 14-hospital system with facilities in California, Texas and New Mexico.

Patient Sent Email to the Local Newspaper about High Lab Test Prices

In an email she sent to the newspaper, Meinhardt wrote, “The [clinical laboratory] tests have the exact (same) CPT codes! There is no reasonable or logical explanation for the difference. It’s just greed. Why should I have to take out a small loan to have blood work done?”

Pictured above is Queen of the Valley Medical Center in Napa, California. It made news recently when a patient who was charged more than $4,316.55 for clinical laboratory tests. Just a few months earlier, the same patient had paid only $464.81 to Quest Diagnostics for a similar panel of medical laboratory tests. (Photo copyright Sisters of St. Joseph.)

Above is Queen of the Valley Medical Center in Napa, California. It made news recently when a patient who was charged more than $4,316.55 for clinical laboratory tests. Just a few months earlier, the same patient had paid only $464.81 to Quest Diagnostics for a similar panel of medical laboratory tests. (Photo copyright Sisters of St. Joseph.)

The San Francisco Business Times cited the following example: QVMC charged $315 for a Cortisol test, compared to $32.16 for the same test at the Quest Diagnostics laboratory.

After Meinhardt complained to QVMC, the medical center reduced her bill to $3,012.77 and then to $1,766, the newspaper reported.

Meinhardt says her trouble started when she used a hospital laboratory and not an independent laboratory company when she wanted to switch from Quest Diagnostics. In making the switch, she followed the recommendation of her insurer, Aetna, Inc (NYSE: AET), and selected an in-network provider, which was Queen of the Valley Medical Center.

In addition to complaining to QVMC, Meinhardt also complained to Aetna. But Aetna told Meinhardt that it had no control over what its in-network providers charge for services like medical laboratory tests. Aetna officials advised her to call the California Department of Insurance (DOI). In response to Meinhardt’s inquiry, the DOI said it had no control over insurers’ contracts with providers.

Hospital Spokesman Says Hospital Prices Are Higher Than Quest

A hospital spokesperson explained the problem to the newspaper, saying that comparing Quest Diagnostics to a hospital laboratory is not like comparing “apples to apples.” Karen Anderson, QVMC’s Director of Patient Access and Patient Financial Services also sent Meinhardt a letter, the newspaper reported. The letter said, “Queen of the Valley Medical Center strives to provide the best quality care and remain competitive with other hospital facilities,” Anderson wrote. “In doing so, we need to meet our costs, which are greater than Quest, an independent laboratory.”

Readers of Dark Daily will recognize the issues involved in this case. As QVMC noted, hospital laboratories have higher costs than independent medical laboratory companies. But there’s another issue, as Dark Daily reported last year when we covered a similar case of a California woman seeking the best price for a diagnostic CT scan. (See Dark Daily, “L.A. Times Reports That California Patients Who Pay Cash Get Rock-Bottom Price Discounts from Hospitals and Physicians“.)

In the case involving the CT scan, the patient, Jo Ann Snyder, sued her insurer, Blue Shield of California, in Orange County Superior Court. Snyder filed a class-action lawsuit that accused the insurer of unfair business practices, breach of good faith, and misrepresentation over her medical bills.

In 2009, Snyder had a CT scan at an outpatient center and was charged $660. One year later she had another CT scan, this time at a hospital in Long Beach. The hospital bill was $3,497, and the insurer’s negotiated rate was $2,336, which was four times higher than what Snyder paid one year earlier!

LA Times Reported on the Snyder Lawsuit against Blue Shield of California

Reporting on the case, The Los Angeles Times wrote, “The lowest price is usually available only if patients don’t use their health insurance. In one case, blood tests that cost an insured patient $415 would have been $95 in cash.”

In an interview with Dark Daily, a lab consultant who asked not to be named said, “Hospitals have what might be called the ‘patient bill/list price. This is typically listed on the hospital’s chargemaster, and the hospital uses this price list when it charges uninsured patients. That’s the highest rate. In my view, this is the ‘cost of uninsured care’ shell game in which a hospital will write off 95% of that charge and show it as uninsured and uncompensated care it provides the community, but will seek to collect from the patient over many years.

“Then, for same procedure, the hospital has a negotiated rate that it charges certain insurers,” continued the consultant. “This rate is lower than the patient bill/list price, but may still be quite high. Also, this is the rate that insurers list on their explanations of benefits (EOBs) that they send to patients. But the lowest rate is the rate a hospital will charge a cash-paying customer,” explained the consultant.

Hospitals Charge Different Prices to Different ‘Classes of Patients’

These facts about the different prices a hospital will charge different “classes” of patients are what made the lawsuit between Snyder and Blue Shield of California noteworthy. In her lawsuit, Snyder claims that, in its marketing literature and its premium agreement with her, Blue Shield of California advertised that it negotiated the “lowest prices” for healthcare services. Thus, the fact that Snyder did not get the lowest price the hospital offered to cash-paying customers was a breach of her contract with Blue Shield of California.

Dark Daily Is Watching How Patients Now Shop for Lowest Lab Prices

When Dark Daily reported on the Snyder lawsuit last year, we emphasized that clinical laboratories and pathology groups should not ignore the trend of patients seeking lowest prices. The recent example of how Queen of the Valley Hospital charged Kathy Meinhardt for her outpatient/outreach medical laboratory tests shows how excessive prices charged to a patient can quickly become the subject of newspaper stories and unfavorable publicity for the provider—in this case, QVMC.

Given the Meinhardt and Snyder cases, it would seem to be a smart strategy for every clinical laboratory and pathology group to put policies in place to serve the patient who is seeking a discounted price and will pay cash before time of service. This is particularly true of clinical laboratories owned by hospitals and health systems.


Related Information:

“Outrageous” blood work bill from Queen of the Valley hospital gives small biz owner pain in neck

LA Times Reports That California Patients Who Pay Cash Get Rock-Bottom Price Discounts from Hospitals and Physicians

Healthcare’s High Cost: Many hospitals, doctors offer cash discount for medical bills

Bitter Pill: Why Medical Bills Are Killing Us

Medicare Officials Post Prices of 3,000 Hospitals in Effort to Raise Consumer Awareness of Arbitrary Hospital Pricing