What Mass. Hospitals Charge Vs. What They Get Paid

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Some people play fantasy football, some knit. We here at CommonHealth sometimes like to play with health care data — most recently, a trove of Medicare numbers released last week on how much hospitals officially charge for common procedures and how much Medicare actually pays for them.

WBUR’s Alex Kingsbury first took a look at the wide range in Massachusetts hospitals’ charges for a single category, treatment of chronic lung disease, here. His map illustrated a strikingly broad range from $8,918 to $52,729. Now, in the map above, he rejiggers his Google Fusion Table to explore a broader question I put to him: How do the hospitals shake out in terms of the percentage of their official charges that they get from Medicare?

And here’s a fun little factoid that emerges from the map: That range goes from procedures for which the Medicare payment amounts to less than 18 percent of the charges billed to well over 100 percent of the charges billed. I’d thought this recalculation of the data might yield some interesting insights — Who most overcharges? Or who might feel most shafted by government payments? — but it runs such a crazy gamut that perhaps it serves mainly as yet another indicator of just how distorted and Byzantine and broken the American health care market is. (Didn’t need any further proof of that? Fine. Just enjoy playing with the map.)

Last week’s release of the Medicare data brought a media splash — particularly among data-visualization fans like the Washington Post — but also a backlash.

Health care economist Uwe Reinhardt pointed out that the official hospital charges are famously irrelevant to the reimbursement that health insurers actually pay, to the point that he called last week’s fuss about the Medicare data laughable. He wrote in The New York Times:

Even funnier are the protestations by hospital executives that hardly anyone ever pays these fictional prices, which prompted me to offer the following technical definition: “ ‘Charges’ are the prices that a totally inebriated foreign billionaire would pay a U.S. hospital if his wife were not around to control the bloke.”

Former Beth Israel Deaconess Medical Center chief Paul Levy also blasted the Medicare data as “useless noise”:

This is a case where the release of bad data is worse than having no data at all.

A hospital’s chargemaster is an archaic fiction, a way previously used to allocate the joint and common costs of the hospital to particular services. It does not serve as the basis for how much a hospital is paid by Medicare. It does not serve as the basis for how much a hospital is paid by Medicaid. It does not serve as the basis for how much a hospital is paid by private insurers.

Further because of federal and state prohibitions against balance billing of patients (i.e., the difference between the amount paid by an insurer and the amount of the charge), it also provides no basis to consumers that means anything at all.

We might add, particularly here in Massachusetts, where almost everyone is insured and thus unlikely to pay full bills out of pocket. Ah, well — fun to see the maps, anyway, and every reminder of just how dysfunctional our market is may act as a prod toward improvement. Readers, is there anything you’d most like to see mined out of these data? Do you agree with the critics, or do you see any use in Medicare’s release?

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