As Hospital Prices Soar, a Single Stitch Tops $500
The bill also included $1,167 for the facility fee, which was classified at Level 3 the middle of the scale, though Orla's treatment was one of the most simple emergency room interventions. At Lenox Hill in New York, Daniel Diaz's unusually detailed bill for his stitches included $1,828 for emergency room services, $628 for repairing the wound, $571.83 for "application of a finger splint," $97.10 for a tetanus shot, and $311 for someone to give the injection. At Sparrow Hospital in Lansing, Mich., 2-year-old Ben Bellar's bill for six stitches, more than $2,000, included $145.20 for "pharmacy" a spoonful of ibuprofen and local anesthetic, his mother said.
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Economists note that hospitals can bill for emergency room care with relative impunity, since injured patients generally rush to the nearest treatment facility. But worried about high prices, even the sick sometimes shop around. When Jamie Burke, 33, a graduate student in North Carolina, came to after she was knocked out during a soccer game in April, she started searching on her smartphone for an in-network hospital as a friend drove.
"It was crazy," she said, "but luckily I wasn't unconscious, so I could figure it out."
She is glad she did: Though the hospital billed $5,039, her insurer's in-network contracted rate was about $2,700. With copays and coinsurance, she owed $600 for the visit.
The uninsured are particularly vulnerable to high prices since they have no one to argue on their behalf. When Arch Roberts Jr. got his bill of more than $2,000 for stitches, he explained that he was uninsured and his business had failed during the housing crisis, so he could not afford the fee. The hospital offered him a "charity care discount" a price that was still out of range. "I don't have $800 to pay them any more than I have $2,000" for three stitches, he said, noting that the hospital has been "relentless" in its collection efforts.
Paths to profit
Once perennial money pits, emergency rooms have become big moneymakers for most hospitals in the last decade, experts say, as they raised their fees and "managed" their patient mix. California Pacific Medical Center has nearly doubled its emergency room fees since 2005, its charge master price lists show.
California Pacific's emergency room is not a trauma center; poor or uninsured trauma patients who require lengthy inpatient stays can strain a hospital budget. And insurers allow emergency rooms to bill more than urgent-care centers for simple procedures like stitches or X-raying a sprained ankle, making such procedures profitable. Indeed, the financial prospects are so appealing that doctors' groups in Texas are opening free-standing "emergency rooms" that are not connected to hospitals.
"Hospitals see where they're making money and try to do more of that," said Dr. David Gifford, a former health commissioner of Rhode Island, who has studied how labs price their tests. He said that laboratory tests and X-rays are priced high and are profitable, though there is no difference in quality from national commercial labs that charge far less. A blood count and blood electrolyte test ordered every day for most inpatients and often in the emergency room are priced at $259.06 and $293.25 on California Pacific Medical Center's charge master price list. Insurers often pay outside labs less than $10 for the services.
And, like any business, many hospitals try to do fewer services that are not well paid. In 2012, over loud patient protests, California Pacific Medical Center outsourced its kidney dialysis unit to DaVita Health Care Partners, a commercial company, citing decreasing reimbursement. More than five years ago, after Sutter acquired St. Luke's, a decrepit hospital in a poor neighborhood, it tried to shut the facility and convert it to an outpatient clinic, which often generate scans and other expensive tests. (The City of San Francisco rejected the plan.) It did close the hospital's acute psychiatric unit, a division that almost always loses money.
"You need a Ph.D. in health economics" to understand medical pricing, said Dr. Browner, who has acknowledged that California Pacific's charge master prices might appear high. But he added, "We have to recoup what it costs to keep open, what it costs to take care of the un- and underinsured and to rebuild."
He said that MediCal, California's Medicaid program, pays California Pacific Medical Center only 10 to 20 percent of its actual costs for care. Medicare pays about 70 percent, he said, generally with a predetermined flat fee for each admission based on the patient's diagnosis. In contrast, many private insurers still pay separately for services rendered, based on discounts from the charge master prices.
Dr. Browner also pointed to what health care executives call the "Saudi sheikh problem" at some hospitals.
"You don't really want to change your charges if you have a Saudi sheikh come in with a suitcase full of cash who's going to pay full charges," he said.
But how much actual charity care does a hospital like California Pacific Medical Center perform? And are insurers and patients paying hospitals for better quality? Or also for amenities like valet parking, useless medical gadgetry and inflated salaries?
Though hospitals' nonprofit status allows them to reap tens or hundreds of millions of dollars in tax benefits, California Pacific Medical Center's main campuses spent 1.27 percent of their more than $1.1 billion in net patient revenues in 2011 on free care for indigent or uninsured patients, lower than the state average of 2.07 percent, according to statistics compiled by the San Francisco Department of Public Health. The far smaller St. Luke's branch spent 5.32 percent that year.
Sutter, based in Sacramento, employs 28 officials who make more than $1 million a year, and four of them are among the top-paid hospital executives in the state. Sutter's chief executive officer makes more than $5 million. In 2011, Dr. Browner, 62, a distinguished physician who spent much of his career in academics, made more than $1.2 million, according to tax documents.
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California Pacific, Sutter's main campus, is in upscale Pacific Heights. It has just broken ground on a $2.7 billion renovation, which includes a new flagship hospital. Though the project was initiated to meet new state earthquake standards, the facility is designed as a sleek glass and marble structure with all private rooms, underground parking and roof gardens with flowers and bees "to enhance the quality of the healing environment," according to California Pacific Medical Center's website. Its Facebook page has called it "the coolest hospital in San Francisco, possibly the country and even the world."