Clinical laboratories and pathology groups may want to review the prices they charge insured patients versus uninsured patients

There is a certain irony in the fact that hospitals and other medical providers typically charge patients without health insurance as much as three times what they charge Medicare or an insured patient. This situation is getting increased media scrutiny, which is one reason why clinical laboratories and pathology groups may want to review their own policies for charging patients without health insurance.

One good study on prices charged to self-pay patients was conducted by Gerard Anderson, Ph.D.,  a health economist at the Johns Hopkins Bloomberg School of Public Health. His study was funded by the Henry J. Kaiser Family Foundation and published in the May-June 2007 journal Health Affairs.

Anderson analyzed 2004 hospital billing data. He concluded that the gap between rates charged self-pay and insured patients has grown substantially since the mid-1980s. “In the 1950s, the uninsured and poor were charged the lowest prices for medical services. Today they pay the highest prices…,” wrote Anderson, noting that self-pay charges often reflect the hospital’s “chargemaster” prices–the top prices used to negotiate discounts with insurers.

Gerard-Anderson-PHD

Gerard Anderson, Ph.D., a health economist at the Johns Hopkins Bloomberg School of Public Health, conducted a study of the difference between what hospitals charged insured and uninsured patients. He concluded that the most hospitals charge uninsured patients 2.5 times more than insured patients and three times as much as what Medicare considers the fair price. (Photo copyright Johns Hopkins University.)

In his study, Anderson calculated the ratio between the prices hospitals charged self-pay patients and Medicare-allowable costs, which is the amount Medicare has determined it costs to provide the care. The ratio in 2004, noted a Johns Hopkins press release, was 3.07, which means that the average hospital charged self-pay patients $307 for every $100 in Medicare-allowable costs.

He noted that hospitals in California, New Jersey and Pennsylvania had the highest mark-up rates for self-pay patients–often four times as much as Medicare allows. The lowest self-pay rates were in the states of Idaho, Maryland, Montana, Vermont and Wyoming.

HHS Reveals the Arbitrary Nature of Hospital Charges

In May, the U.S. Department of Human Services revealed the arbitrary nature of hospital charges by publishing a list of chargemaster rates for the 100 most common inpatient treatments at 3,000 hospitals nationwide. The cost data is available on the Centers for Medicare & Medicaid Services website and is hospital-specific.

It allowed the media and consumers to compare prices, which vary significantly from facility to facility–even in the same region or city. (See Dark Daily, “Hoping to Raise Consumer Awareness of Arbitrary Hospital Pricing, HHS has Published Cost Data for 3,000 Hospitals”, May 31, 2013).

Cost and Price Data Intended to Help Consumers Shop for Care

HHS cost data may be increasingly important to consumers, whose health plans may require greater out-of-pocket payments as the cost of health coverage increases. Health insurance is expected to increase by up to 20% with implementation of healthcare reform, noted an editorial by Ken Congdon, Editor-in-Chief of Healthcare Technology Online.

Congdon suggested that, as a result, providers may experience a significant increase in self-pay debt. Congdon explained that as premiums rise, businesses will make drastic changes to coverage they provide employees, resulting in a significant increase in high-deductible or consumer-driven healthcare plans. The by-product of this trend will be growth in new deductible debt.

This change would be a significant for medical laboratories.  Some annual family deductibles now are as high as $5,000. This means labs will increasingly need to collect the total payment for clinical laboratory tests directly from patients, preferably at the time of service. The days of  small copays for lab tests are likely to soon end.

For patients without health insurance, certain features of the Affordable Care Act are designed to reduce the wide difference in prices paid by the insured versus the uninsured. In Oregon, some health insurers are lowering prices. A recent article in The Lund Report noted that, anticipation of Obamacare’s health insurance exchanges is already spurring competition. Four states have publicly released a list of proposed health insurance rates for individuals and small groups, the latest of which was Oregon.

In its coverage of these developments, The Oregonian newspaper published a story and noted that two major insurers, Providence Health Plan and Family Care Health Plans, cut their proposed 2014 premiums after realizing their prices were not competitive with other Oregon insurers.

Uninsured Patients Advised to Shop Around for Best Value

Self-pay patients, however, are still on their own when it comes to finding the best value for outpatient services. A case in point was a personal story by Tom Olson, a 63-year-old, uninsured journalist who needed cataract surgery, which also was published in the The Lund Report.

Olson, who shopped around for the best value, noted that the self-pay price for cataract surgery in the greater Portland region varied from $2,500 to $8,000 per eye. He opted for the $2,500 procedure offered by an outpatient clinic in Salem, Oregon, which included five board-certified ophthalmologists. The total cost for both eyes was $5,300 cash and included the initial consultation and pre- and post-op eye drops.

Steep Cash-pay Discounts Now Offered by Some Providers 

But pricing may be shifting in favor of self-pay patients, as some providers now offer steep discounts for paying cash, noted Dike Drummond, M.D., in an article published on KevinMD.com.

He cited a story in Los Angeles Times, which reported that a medical center in Los Alamitos, California, offers an 89% discount for paying cash for a CT Scan of the abdomen. The discounted price is $250, compared to $2,400 for a patient insured by Blue Shield of California.

Some pathologists and clinical laboratory managers may consider the recommendation Drummond makes to be a bit ironic. Drummond suggested that when hospitals offer such deep discounts for paying cash, patients with high deductibles may be better off withholding their insurance information and paying the cash price.

—Patricia Kirk

Related Information:

Uninsured Charged Much More Depending on the Clinic

Hospitals Charge Uninsured and “Self-Pay” Patients More than Double What Insured Patients Pay

HHS Releases Hospital Data on Charge Variation to Promote Transparency

How Much Should You Pay for Medical Care?

Preparing For Patient Self-Pay Overload

Hide your health insurance status and pay cash instead

From ‘Soak The Rich’ To ‘Soak The Poor’: Recent Trends In Hospital Pricing

Two Oregon insurers rethink 2014 premiums as state posts first-ever rate comparison

Many hospitals, doctors offer cash discount for medical bills