Hospital Association Insists Data about Hospital Inpatient Costs is Misleading

Andy Davidson, president and CEO of the Oregon Association of Hospitals and Health Systems, earned $1.2 million in 2012, considerably lower than his counterpart in Washington state.

An article published by Becker’s Hospital Review – in collaboration with Kaiser Family Foundation – which characterizes Oregon and Washington as having the highest inpatient costs around the country – is being denounced as “misleading” by hospital association officials.

At the same time, The Lund Report looked into the compensation paid to the highest ranking executives of these associations in the last three years

Andy Davidson, president and CEO of the Oregon Association of Hospitals and Health Systems, walked away with $1.2 million in 2012, a 39.27 percent increase from the previous year, including a $512,633 bonus and deferred compensation of $246,130 not included in his $1.2 million package.

In contrast, Scott Bond, CEO and president of the Washington Hospital Association, earned $606,837 in 2012, which represented a 23 percent increase.

Physician leaders, on the other hand, earned considerably less than their hospital counterparts. Joanne Bryson, CEO and executive vice president of the Oregon Medical Association, earned $200,501 that year, a 0.71 percent increase, while Thomas Curry, CEO and executive director of the Washington State Medical Association brought home $267,905, a 2.87 percent hike. The accompanying chart shows the compensation packages for other executives at these associations.

The total compensation of these executives included more than just their salaries, including medical and dental benefits, retirement and automobile allowance.

Hospital Inpatient Costs 

Meanwhile, the data reported by Becker’s – which considers itself the leading source of cutting-edge business and legal information for healthcare industry leaders -- showed that Oregon and Washington had the highest inpatient costs during 2011 among the 50 states in all three categories – state/local government hospitals averaged $1,667 per day; nonprofit hospitals, $2,088 and for-profit hospitals, $1,628.

In Oregon those costs were estimated at $2,580, $3,058 and $2,605 per day respectively, while in Washington the figures were similar, $2,597, $3,017 and $2,295.

But hospital officials in both states are disputing those figures, contending they were only estimates and not actual charges. To back up their claim, they pointed to data collected by Apprise Health Insights – a company run by the Oregon Association of Hospitals and Health Systems. Andy Van Pelt is the chief coordinating officer for both organizations.

According to Apprise, inpatient costs in Oregon totaled $27,768 annually in 2011 – while Washington had a much higher rate -- $37,083.

The average length of stay in Oregon hospitals was 4.17 days that same year compared to Washington which had a slightly higher rate of 4.40 days.

Van Pelt also told The Lund Report that hospital associations around the country including Oregon, have disagreed for many years with how the data is portrayed by Becker’s “because it is misleading to the end user and doesn’t reflect the way in which hospital services are actually paid for.”

Response to Kaiser Family Foundation  

He also pointed to the following disclaimer by Kaiser Family Foundation: The data includes all operating and non-operating expenses for registered U.S. community hospitals, defined as public, non-federal, short-term general and other special hospitals. Adjusted expenses per inpatient day include expenses for both inpatient and outpatient care; inpatient days are adjusted higher to reflect an estimate of the volume of outpatient services. These figures are only an estimate of expenses incurred by the hospital to provide a day of inpatient care and are not a substitute for either actual charges or reimbursement for care provided.

“It is critical to clarify that the data represented in the article only reflects an estimate of inpatient costs and NOT ACTUAL billed charges or reimbursement for hospital care,” Van Pelt told The Lund Report.  “Also, a more important point is this data is calculated on a per day basis, when in reality hospitals bill and are reimbursed on a per stay basis and not by the day.  This is important to note because per stay payments incorporate the patients length of stay and per day does not.

“As the data continues to show, Oregon hospitals, compared nationally, continue to provide cost-effective and efficient health care.  To this end, we took the same 2011 data as was used in this article and applied the actual billed charges (vs. estimated charges) and found that:

  • Oregon ranks 39 out of 50 states for actual billed charges per stay vs. per day.
    • This takes into consideration Oregon’s average length of stay
  • Our average billed inpatient charge per stay in 2011 was $27,768, while the national average was $36,790.
  • Oregon ranks 48 out of 50 states for average lowest length of stay, which in 2011 was 4.17 days.  We are a highly efficient delivery system in partnership with our physicians.
  • Medicare and Medicaid do not pay billed charges as you know.  So this report seems to reflect an antiquated past, not our current reality.

“With the ongoing transformation efforts in Oregon, hospitals continue to reduce costs and raise quality standards when delivering local community health care services,.”

“Information like this needs to be carefully communicated and understood, because it can ultimately produce misleading conclusions that could have adverse impacts on the entire health system,” he concluded.

Van Pelt’s counterpart -- Mary Kay Clunies-Ross with the Washington Hospital Association, also responded, saying the data does not reflect the average hospital costs.

“This data is for average inpatient cost per day, and what’s more, is at least partially based on estimates. It doesn’t accurately tell the story of what the average patient or resident pays for their health or their hospital care,” she told The Lund Report.

“Why? Because this data doesn’t show is how efficient the care is. Washington hospitals provide efficient health care: we have a very low admission rate, which means fewer people are being admitted; and we have low lengths of stay, which means people are going home sooner.

“Fewer, shorter hospital stays mean Washington state has lower average hospital expenditures per resident.

“To pick up the point again about Washington’s low admission rate: We provide higher proportions of services on an outpatient basis. As a result of the formula they are using, it means that states who have a lot of outpatient services will have a higher average amount per inpatient day.

“But think about the individual patients who are getting outpatient surgery instead of checking into a hospital: They are paying less.

“Also consider that the patients who are getting inpatient care instead of outpatient care may be doing so because their condition is more serious or complex. If they can’t access outpatient services, then the hospital is the right place for them to be because they have access to a wider range of health resources,” she concluded.

 Diane can be reached at [email protected].

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Kris Alman has it exactly right. Just show us the real numbers and this argument could be quickly settled. Note that is not what either hospital association respresentative offered to do. Wonder why? Perhaps the real question is why hospitals are so reluctant to show actual payment vs billed charges, and why they are only willing to release this info to a wholly-owned subsidiary?

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