OHSU Receives Higher Medicare Payments than other Oregon Hospitals

Uninsured patients are charged two to three times more for the same procedure at area hospitals


July 15, 2013 -- Sick Oregonians without health insurance regularly receive bills for two to three times what Medicare or private insurers are willing to pay to cover treatment, newly released medical billing data appears to indicate.

The data, from the Centers for Medicare & Medicaid Services, shows how much hospitals are paid for treating Medicare patients. The release includes average payments made for 99 medical conditions treated at 32 Oregon hospitals in 2011.

With an estimated 40 percent to 50 percent of health care charges originating at hospitals, the data is feeding a debate about U.S. medical costs – and fueling outrage about wide payment variations across hospitals.

“Billing procedures for American hospitals hold about as much logic and fiscal accountability as a lemonade stand,” said Patrick Riley, a senior industry analyst with market research firm Frost & Sullivan. Riley said the new financial data will provide a key role in showing just what health care costs – something that has been difficult, if not impossible, to dig up until now.

The data release shines a light on just how complicated medical billing is, as well. Medicare has shown how much hospitals bill for treatment, but those bills don’t determine how much each hospital is paid. Instead, Medicare uses a formula to determine how much hospitals are paid, based on condition, location of the hospital, and status of the hospital. Patients covered by Medicare or other forms of health insurance almost never pay the billed amount.

For example, hospitals across Oregon charged an average of $17,915 per patient with chronic obstructive pulmonary disease (or COPD), but when treating Medicare patients they were only paid $6,952. In some cases, the difference between hospitals’ official price tag and what they receive from Medicare is substantial:

  • Sky Lakes Medical Center has an average price tag of $27,919 when treating COPD patients who have complications, but the hospital is only paid $7,692 to treat them.

  • Rogue Valley Medical Center’s average price tag for treating heart failure is $44,708, but the hospital receives an average of $13,132 per Medicare patient.

There’s also huge variation in the official price tag that hospitals affix to procedures. Providence Newburg billed an average of $9,933 to each of 13 kidney failure patients, while Legacy Mount Hood Medical Center billed an average of $24,409 to each of 20 patients treated for the same condition there. (Despite the wide variation in billed amount, the two hospitals collected fairly similar payments after treating Medicare patients – for treating kidney failure in Medicare patients, Providence Newberg was paid $5,987 on average and Legacy Mount Hood was paid $6,864 on average.)

Though Medicare’s data release demonstrates that the government pays far less than the official price tag for providing medical care, people without health insurance are billed the full amount.

Hospital officials point out that uninsured patients typically get an automatic discount. Oregon hospitals then typically offer a no-insurance discount. Bay Area Hospital knocks 25 percent off the bill, for example, and Legacy’s hospitals offer a 35 percent bill reduction for the uninsured. People with low incomes may be eligible for even deeper discounts if they qualify for charity care.

And even with discounts, the uninsured often receive bills for more than Medicare would pay.

Sky Lakes Medical Center billed an average of $17,776 to treat kidney and urinary tract infections. After applying the 15 percent discount that Sky Lakes offers uninsured patients, someone without health coverage could expect a bill for $15,109. Yet Sky Lakes collected just $5,949 per Medicare patient with the same diagnosis.

“Hospitals, in essence, charge the least capable of paying the most,” said Riley, the healthcare analyst.

The gap between what hospitals bill the uninsured, and what they’re paid for treating Medicare patients, is clear across numerous conditions.

For example, after treating kidney failure:

  • Providence Newberg Medical Center was paid $5,987 to treat each of 13 Medicare patients, the lowest Oregon reimbursement rate for this procedure. Price tag without insurance: $5,987.

  • Providence St Vincent was paid an average of $6,882 to treat each of 45 Medicare patients. Price tag without insurance: $12,011.

  • Salem Hospital was paid an average of $6,905 to treat each of 52 Medicare patients. Price tag without insurance: $17,327.

  • Good Samaritan Hospital in Corvallis was paid an average of $6,618 to treat each of 42 Medicare patients. Price tag without insurance: $19,262.

  • Legacy Good Samaritan was paid an average of $8,108 to treat each of 19 Medicare patients. Price tag without insurance: $19,698.

  • OHSU was paid an average of $10,335 to treat each of 65 Medicare patients, the most any Oregon hospital was paid for this procedure. Price tag without insurance: $17,066.

(Click here for complete kidney failure cost information.) 

OHSU paid more than other hospitals

A Lund Report review of the Medicare data release found that OHSU was paid considerably more than average when treating 94 percent of reviewed health conditions.

When patients enter OHSU with kidney failure with complications, the total cost is likely to average $10,335 – more than at any other hospital in Oregon. The same condition cost an average of $5,987 to treat at Providence Newberg Medical Center. Treating heart failure with multiple complications averages $15,012 at OHSU – compared to $9,006 at McKenzie-Willamette Medical Center.

Government officials have warned that the Medicare data is far from comprehensive, and that wide variation in payments to hospitals may be justified. Some patients are sicker than others, for example.

One hospital can also receive more than others because of Medicare’s own rules, according to OHSU officials.

Base payments are the same for all hospitals in the Portland metro area, said OHSU Hospital Chief Financial Officer Diana Gernhart. But Medicare pays OHSU extra because it serves more low-income patients than is typical across the state – a condition that bumps payments to a number of hospitals in the state. Medicare then pays still more to OHSU because it is a teaching hospital.

Image for this story by WITechColleges (CC BY-NC-ND 2.0) via Flickr.

Courtney Sherwood can be reached at [email protected].

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Biased reporting here regarding OHSU's situation; there is not enough information to tell the reader whether OHSU's payments are appropriate and consistent with its patient case mix and regulations, or reflect an "unfair" payment level. This doesn't help us understand what's right. As to the general case, the charges to the uninsured who don't qualify for charitable free care remain a source of embarrassment to hospitals who call themselves nonprofit. When patients or surviving, indigent spouses are hounded for payment it becomes shame.

OHSU is making rapid progress towards its goal; shedding its outdated reputation for service to the community's poor. (I thought the state gifted them their valuable land and sprawling campus, in exchange for such service, in addition to other high-paying patients?) Recently our agency tried to help a family access services for a problem diagnosed by their child's pediatrician. Our staff surveyed five local private providers (we sent the same email to each) for their cost to assess and remediate the problem, being very careful to compare apples to apples, as they say. The quotes we got ranged from, $180-$250 for the initial evaluation, and an estimated 8-10 treatment sessions to resolve it, at $125-$175 each. This is beyond the family's budget, and their insurance wouldn't cover it. So we called the appropriate Doernbecher clinic. Their initial assessment, they had the same info the other providers had, was $432 for the initial assessment. They couldn't/wouldn't tell us how many sessions it usually takes their practitioners to treat the problem, or how much the treatment sessions cost. While trying to clarify the ongoing tx/cost info, a practitioner told me that he has been curious about how much OHSU charges his patients for his services, said he's asked, but he never has been able to find out. Apparently he is not allowed to know. Of course, the family can apply for financial aid from Doernbecher; spending several hours filling out forms, collecting supporting documents, taking the bus to a place with a copy shop, then to a place with a fax machine, but even if they got a 50% discount, they still would be paying more than the usual and customary community rate for the service! AND they would have to sign up blind--with no idea how much time or ongoing expense they were letting themselves in for! All the while Doernbecher would be patting itself on the back, trumpeting its charity care commitment, and making sure the family knows to be grateful for their "generosity"! Doernbecher is a moneymaking machine, how does that translate into services for the low income children in our community? Not well at all, apparently!

I agree with dthieman - CMS will pay additional reimbursement for cases that have a higher level of complexity. OHSU reports a CMI (case mix index) of at or above 2.0. This indicates that as an Academic Medical Center the hospital is treating more complex/sicker patients and should be reimbursed accordingly.

I recently received a bill from OHSU Richmond Clinic for a 25 min. meeting with a Nurse Practitioner that was $268.00 before the discount. The billing code indicates the need for diagnostic decision making. The only decision making is what I told the NP I think I needed. Now that I turned in my tax return for last year showing my whopping $21,000 annual income, I no longer qualify for any discount even though my current income is even lower than my tax return would indicate. I have to wait another three months to apply for the discount. In the mean time I need to rack up bills paying the full fee which is outrageous for the type of work being done. OHSU and other area hospitals are gouging the consumers who pay cash because the insurance industry allows them to charge more than most would pay out of pocket for their services. In contrast, the outpatient substance dependence treatment agency I am director of gives discounts up to 25% for people who can pay cash in advance for services. Many are willing to pay ahead to get the discount because our full price is already less than our competitors.