How Hospitals Mark Up the Cost of Over-the-Counter Supplies Like Aspirin and Q-tips as Much as 1000%

by on March 17, 2013 · 18 comments

in Business, Editor's Picks, Health

Chargemaster: Hospitals’ Killer App for Sucking Your Financial Blood Dry – Part 3

blood-240x240Hospitals charge their customers … er, patients, through the nose for simple products which anyone can purchase at WalMart for a fraction of the amount. In Part 1 and Part 2 we detailed the ridiculous prices hospitals routinely charge their patients – like several thousand dollars a day – just for a room. In this installment we will go over the markups on products that are added on to patients’ bills.

Suffice it to say that for anything consumable, there will be a Chargemaster billing item. The Chargemaster is the giant computer file that lists the charge for every possible medical service and supply that a hospital provides. Nothing is “included.” Everything is billed out separately, ala carte. The following outlandish charges are referenced in a Time article, Bitter Pill: Why Medical Bills Are Killing Us, by Steven Brill.

Like, for example, gauze pads. Following a patient’s diagnosis of lung cancer, he was charged $308.00 for four boxes of sterile gauze pads each containing twenty-four 4 inch by 4 inch dressings, which can be bought over the counter at Walgreen’s for $3.99 a box. These were tacked onto his $348,000.00 bill.

Another patient was charged $18.00 each for Accu-Chek diabetes test strips. Amazon sells boxes of 50 for about $27.00 or 55 cents each. For the price of one Lipitor pill in the US you can buy three in Argentina. One hospital charged $1.50 for one 325-mg acetaminophen tablet. You can buy 100 tablets on Amazon for $1.49. That’s a 10,000% markup.

dewey et alOne Nexium pill in the US costs the same as eight of them in France. No wonder the pharmaceutical industry has millions of dollars to spend on TV advertising to try to convince you to talk your doctor into prescribing them for you. Then as soon as you see the ad to get you to buy Plavix, there follows an ad for some legal firm saying in effect “If you’ve ever been harmed by Plavix, call the Dewey, Cheatham and Howe law firm.”

For instance, the lawyers at Saiontz & Kirk, P.A. are trolling for Plavix users throughout the United States who have suffered serious and potentially fatal injuries as a result of the medication. Their website states: “Research has linked side effects of Plavix to an increased risk of certain health problems, which the manufacturer failed to adequately warn about.”

Steven H’s bill contained an item – MARKER SKIN REG TIP RULER – for $3.00. That’s the reusable marking pen that marked the place on Steven H’s back where the incision would go. Then there was the STRAP OR TABLE 8X27 IN for $31.00 That’s the strap used to hold Steven H onto the operating table. Hey, do you suppose they could use that again for some other patient?

Right after that charge was one for $32.00 for a BLNKT WARM UPPER BDY 42268. That’s a blanket whose purpose is to keep surgery patients warm. It is of course reusable and is available on eBay for $13.00 They even billed poor old Steven H for the gown the surgeon wore! That came to $39.00 You can buy thirty of them online for $180.00

On one patient’s bill was a charge of $108.00 for Bacitracin, a common antibiotic ointment, which can be purchased over the counter at Walgreen’s for $5.99. But a charge on Sean Recchi’s bill takes the cake. We detailed Sean Recchi’s case in Part 2. As part of his $83,900.00 bill (that he was ordered to pay in advance of any treatment and in cash) was a charge of $7.00 each for an ALCOHOL PREP PAD. This is a little square of cotton used to apply alcohol to an injection. A box of 200 can be bought online for $1.91.

These kinds of charges show just how picayune the charges dictated by the Chargemaster can be. And remember these are non-profit hospitals, non-profits that make huge profits, more than most for-profits because – guess why – they don’t pay any taxes.

Soon after his diagnosis of lung cancer, Steven D and his wife knew that they were just in the business of buying time. And because of that the Chargemaster money demanded by the health care system went into overdrive. It reached a whole different and exalted plateau. By the time Steven D died 11 months later in his Daly City, California home, his bills totaled $902,452.00.

alcohol prep padIt was left for his surviving wife, who made about $40K a year running a child-care center, to pay it off. The first bill from Seton Medical Center for $348,000.00 was full of Chargemaster profit grabs. For instance, there was a charge of $24.00 each for 19 niacin pills that are sold in drugstores for about a nickel apiece.

Steven D and his wife maxed out on a UnitedHealthcare policy for $50,000. that he had bought through a community college where Steven was briefly enrolled. We detailed the destructive effects of these mini-med, limited benefit policies in Part 2. That left them with over $850,000.00 for which they themselves were responsible.

Luckily, they found a billing advocate who negotiated their bill down to what amounted to an 85% discount. When Steven Brill contacted Seton Medical center to ask why there were all these ridiculous charges that they were subsequently willing to negotiate down if the patient’s family was lucky enough to find a billing advocate, there was no comment. There was no comment either to the question of why they sent patients’ families bills that they didn’t expect to collect at a particularly sensitive and upsetting time in their lives.

When all was said and done, Steven D’s wife said: “I’m never going to remarry. I can’t risk the liability.”

When Brill queried Texas Southwestern Medical Center about a patient’s charge of $132,303.00 for LABORATORY, which included hundreds of blood and urine tests that ranged from $30.00 to $333.00 each, he was told that no one was available to discuss billing practices. A hospital spokesman informed him, “The law does not allow us to talk about how we bill.”

Really? It’s against the law to discuss the bill? Who knew?

If, however, this unfortunate family had been on Medicare, Medicare would have paid Texas Southwestern either nothing or $7.00 to $30.00 for these tests because Medicare negotiates prices with hospitals based on the real cost of the service or item, not on some out-of-touch-with-reality fantasy cost like those dictated by Chargemaster.

Most hospitals overorder lab tests especially for those patients staying multiple days. Every day new tests are ordered even though they’re not necessary. They become a cash cow for the hospital. And it’s a cash cow for the many doctors who stroll around poking their heads into various patients’ rooms. It gives them something to talk about and an excuse for charging big sums for every poke.

One ingenuous doctor told Brill, “I bet 60% of the labs are unnecessary.” Doctors cruise the halls and pop in their heads wherever while collecting handsome fees.

STOCK Health operation Generic Health picsHow do hospitals get away with it? Lobbying is the answer, pure and simple. For every member of Congress, there are more than seven lobbyists working for various parts of the health care industry. The health care industry, what I call the medical-industrial complex, has spent $5.36 billion since 1998 lobbying in Washington.

That is even larger than the $1.53 billion spent by the defense and aerospace industries and the $1.3 billion spent by the oil and gas corporations over the same period. The medical-industrial complex spends three times more than the military-industrial complex lobbying Congress which consists of politicians who are supposed to be representing We the People but in fact are representing the health care industry.

Next time. Part 4. Why are the cost of prescription drugs so high?

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John Lawrence

John Lawrence graduated from Georgia Tech, Stanford and University of California at San Diego. While at UCSD, he was one of the original writer/workers on the San Diego Free Press in the late 1960s. He founded the San Diego Jazz Society in 1984 which had grants from the San Diego Commission for Arts and Culture and presented both local and nationally known jazz artists. His website is Social Choice and Beyond which exemplifies his interest in Economic Democracy. His book is East West Synthesis. He also blogs at Will Blog For Food. He can be reached at j.c.lawrence@cox.net.
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{ 18 comments… read them below or add one }

avatar Dorothy Lee March 17, 2013 at 8:38 am

Every patient who receives an itemized medical bill statement should examine the Chargemaster record for the specific hospital. For California, find your hospital Chargemaster here:
http://www.oshpd.ca.gov/chargemaster/

The next thing to learn is the Current Procedural Terminology (CPT) code applied to each item or service. The Internet is very helpful. You can find most codes by Googling.

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avatar John Lawrence March 18, 2013 at 9:07 am

Very Interesting, Dorothy Lee. Thank you so much for this link. I didn’t know Chargemaster was a public document.

Here are some Chargemaster prices for Scripps Memorial Hospital in La Jolla:

ICU (General, Surgical and Medical) $11,200. per day
ICU Trauma $21,168. per day
Semi-private room $3808. per day
Accusize device $14,128.
Circumcision (a bargain) $288.
Herceptin 440 mg vial $13,699.
Activase 100 mg vial $19,569.
Sandostatin 30 mg injection $15,440.

All in all there are 54,366 items on the Chargemaster and counting!

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avatar cahlo March 17, 2013 at 9:21 am

1 word: obamacare…..

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avatar Doug Porter March 17, 2013 at 9:31 am

horse poop.
this has been going on for decades now. unless you think obama has a time machine. and why, by the way, did the GOP block the provision of obamacare allowing negotiating for prices over drugs? the VA can do it, but not medicare.

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avatar JEC March 17, 2013 at 11:01 am

Double horse poop – I fought for months with Loma Linda over my father’s jacked up medical bills. That was 28 years ago. It was even worse with my mother 17 years ago when the Medical Social Worker for Secure Horizons lied to my face, denied my mother care at a critical moment only to be forced to pay up after she died and after a letter from an Attorney. Now it’s me, and my bills. What I can testify to Cahlo is that 28 years ago it was bad – and has since gotten worse, much worse, in every single way. The GOP gutted Obamacare to the point it will not fix the situation.

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avatar bob dorn March 18, 2013 at 8:56 am

Triple horse poop. Nine years ago, before Obama was elected to the Senate and four years before he was elected to the Presidency, I spent six months struggling against that deadly triad of insurance, hospital and secondary insurer who simply pointed fingers at each other as I tried to ask why I was being overbilled. In the end, I got a call from a rep of the secondary provider, which had finally coughed up the money without any explanation of what mistakes it had made. He said, “god bless you,” at the end of the phone call. God had nothing to do with what they were doing to me.

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avatar SHRED March 17, 2013 at 11:25 am

Absolute nonsense.

Here… educate yourself:

The Health Exchange site “Covered California

California State site

California Health Benefit Advisers (lots of good info here)

Answers to your questions and concerns about the Covered California exchange (updated almost daily)
http://www.cahba.com/advice/

An informative press conference video
http://cal-span.org/cgi-bin/archive.php?owner=HBEX&date=2013-02-13

Affordable Care Act (Federal – “Obamacare”)
http://www.healthcare.gov/index.html

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avatar JEC March 17, 2013 at 2:53 pm

Absolute nonsense? Clear as mud? Come on down off your hubristic pedestel and talk like a real person. Might first ask, “The ‘situation, what do you mean?” Put in the simplist of tweeter terms – we pay the most and get the least. 17% of GPD for a marginal health rate – and that’s the folks who have been covered. Obamacare institutionalizes the place of “insurance”, and the interplay of customer (patient) – vendor (medical institutions) and insurance in a triad of inflationary inefficiency. Nearly 40% of the folks who make a living in health care are not health care providers – they are overhead. Obamacare (I use not in a negative why) is not designed to change this situation. Truth be told, the Health insurance corporations were on the ropes in 2009 and Obama went to their rescue.

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avatar SHRED March 17, 2013 at 3:26 pm

I was replying “cahlo” and the premise that those costs mentioned are due to the ACA. Your response to me is another issue with which I do not necessarily disagree. I am thoroughly disappointed with allowing private health insurance corporations to be apart of the equation however I am realistic enough to now engage on policy details rather than political rhetoric since it is the law of the land.

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avatar JEC March 17, 2013 at 8:05 pm

Ah – the nature of our cryptic language. Sorry – what I might say in Cahlo’s defense is have we not become a sound bite society – trying to communicate complex ideas by way of tweeter sized critiques?

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avatar John Lawrence March 17, 2013 at 5:36 pm

For all the money we spend on health care (twice as much as compared to any other advanced country), what we get in return is pretty paltry. We are number 50 in life expectancy after countries like the Virgin Islands and Portugal. Of course that’s an average. The upper 1% is probably number 1 in life expectancy and the bottom 10% is probably even further down the list. The increasing economic inequality is reflected in health care outcomes which results in the scenario: the rich will live and the poor will die.

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avatar Frank Thomas March 19, 2013 at 2:24 pm

John,

Have enjoyed your writings on this subject very much , John, as always.

On top of monopolistic hospital Chargemaster price gourging, there’s the fractionated “profits first,” “customer second” US insurer industry with over 1,500 companies spread over 50 states — offering a myriad of health care insurance plans with high deductibles and premiums for less than 100% coverage basic health care coverage. One might call this “Shareholder care coverage.” A disciplined system exchange on best and worst practices isn’t working.

The hundreds of smaller insurer firms do not have a balanced base, i.e., a sufficiently broad group of people for a proper risk pool of relatively healthy vs. more unhealthy enrollees … thereby driving up deductibles and premiums and focus on the less sick, financially stronger groups. The larger firms don’t use their leverage to lower provider costs and improve provider quality. They too focus instead on the better income and insured groups and either purge or overprice/underinsure the sick-prone and lower income groups.

This all leads to multiple, manipulative insurer-provider contractual interpretations of what constitutes qualified care coverage … in turn contributing to the extraordinary SCALE of cost inefficiency, price gourging, and lack of uniform quality care flooding the system. This is exemplified in a routine Appendix operation which has many different prices in any one state and certainly a huge price variation over 50 states.

The US robber-baron heaping of health care costs onto consumers is compounded from two major directions:

– HOSPITALS that charge monopolistic, almost extortionist if not outright illegal, Chargemaster prices, even for unnecessary medical procedures, as you illustrate and document so well, John.

– INSURERS that force the uninsured to pay more and more out-of-pocket every time medicare is needed. This occurs for thousands of plans that are typically non-transparent, non-uniform about how much consumers are covered and/or must pay for medical services. Insurers dice the game against the customers by a few well-known self-enriching practices that are NON-EXISTENT under the Dutch required basic health care system for all. These deeply entrenched sock-it-to-the-customer US insurer practices include:

1. EXTREMELY HIGH DEDUCTIBLES: i.e., lower deductibles with higher premiums and higher deductibles with lower premiums. For example, in a recent study of 6,000 plans by US News, an average coverage plan showed a mean deductible of $2,700 for an individual and $6,000 for a family. Individual plans with a monthly premium above $284 had a medical deductible of $2,000. Those with a monthly premium below $284 had a deductible of $5,000. Of course, the higher the deductible that must be paid out-of-pocket, the more vulnerable is your income and savings.

Under the Dutch basic health care package for 100% benefits coverage, annual deductibles and monthly premiums are the SAME for everyone at rates of $450 and $150, respectively.

2. COINSURANCE: Even after reaching the deductible, more than a third of individual plans require patients to pay coinsurance of 20%-30% of the bill, for example, for diagnostic tests, emergency room visits, medical images, hospital care, out-patient surgery, etc. Medical data from the Dartmouth Atlas of Healthcare illustrates this cascading out-of-pocket expense game for heart-bypass surgery:

(a)…… A hospital charges $35,000 or more — excluding diagnostics, testing, imaging, rehabilitation.
(b)…… Coinsurance must pay 20% or $7,000 — excluding surgeon costs and other physician fees.
(c)…… Over 50% of plans require patient to pay 20% to 30% of doctors’ charges.

If a hospital’s physicians (e.g., anesthesiologists, emergency doctors, hospitalists, occupational therapy services, etc.) aren’t members of a health plan’s network, the out-of-pocket costs can escalate further. Of course, as you point out John, if a particular plan doesn’t cover or covers little of the cost of certain drugs, a major illness or traumatic injury, this can be disastrous as the patient must pay a large share out-of-pocket — often at Chargemaster sharply inflated prices that some providers say cannot be legally revealed in advance. Since when is it illegal to know upfront what you are being charged for and how much by an anonymous billing machine called “Chargemaster”?

3. COPAYS: More than 30% of plans charge copays for emergency room visits, 45% charge copays for prescription drugs, and 18% require copays for preferred prescription drugs even after the deductible is paid.

CONCLUSIONS:
Hospitals and Insurers are gourging patients and customers in many directions as competitive forces are practically non-existent. One sees massive state-to-state premium/coverage differences which local residents of one state cannot take advantage of due to home state prohibitions.

None of these out-of-pocket insurer profit maximizing gimmicks are present under the required Dutch basic health plan which also offers competitively priced 4 star optional upgrades. Access to health insurance for low-income people is facilitated by a publically-funded means-tested subsidy. By a system of “risk equalization”insurers are also additionally government compensated for the more high risk or chronically ill patients.

Most importantly, the Dutch insurer actuarial risk balance is excellent given that 6 insurers cover about 90% of the market which means on average there are well over 2 million insured per insurer giving powerful purchasing and administrative cost leverage — similar to Medicare. This plus standard medical codes, transparent pricing for all medical procedures, the same basic premium, deductible, 100% benefit coverage for everyone, and a sharp focus on preventive medicine yields considerable system cost efficiencies and benefits at all levels … Patient, Provider and Insurer.

In contrast, our US health care system is a structural MESS qua price and quality for the average American. Almost all of our hospitals — profit and non-profit — are in the PROFIT business in a BIG way. They are doing less and less for the relatively poorly Uninsured and Underinsured.

The only path out of this inherently extortionate health care cost/benefit coverage chaos is a PUBLIC MEDICARE PLAN OPTION — ideally a decentralized Single-Payer system similar to what Canada has. The insurers can compete for the more expensive upgrades to the basic Public Plan.

Does Obama have the public support and personal stamina to achieve this real fundamental reform?

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avatar John Lawrence March 19, 2013 at 8:20 pm

Frank, Thank you for your informative and cogent comment. The Dutch system which is predicated on private health insurance providers is rational and makes much sense (unlike the American system) because it provides a basic level of health care coverage for everyone at a reasonable cost. THEN for those who have more money or who want to pay more, there are upgrades to the basic medical coverage which they can purchase – things like private rooms etc. The health insurance companies can then compete for profits over these upgrades. This is so rational that it will never fly in the US where irrationality is the norm.

Obamacare does practically nothing to prevent health insurance companies from raising their rates at will. It does practically nothing to rein in costs. This is the problem with it. Although it has some nice features, it does nothing about the main problem – the cost of health care.

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avatar John Lawrence March 19, 2013 at 8:30 pm

I received a nice email from Stephanie Recchi whose family’s plight was detailed in Bitter Pill: Why Medical Bills Are Killin Us by Steven Brill in Time magazine and in Part 2 of my series on Hospital Chargemaster prices in the SDFP.

Following is the email:

—–Original Message—– From: Stephanie Recchi
> Sent: Monday, March 18, 2013 5:09 PM
> To: j.c.lawrence2@gmail.com
> Subject: Bitter pill
>
> Read your blog. Thanks for posting. There is a lot more to our story. Mr. Brill is considering a book. Thanks for pointing out we bought insurance, not fully understanding it covers little to nothing. I told Mr. Brill if we ever get the opportunity to purchase with a new health insurance company, given our pre- existing strange 4 cancer condition, we will run it by an attorney to make sure we never get put through that kind of hell ever again.
>
> Best Regards,
>
> Stephanie Recchi

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avatar Frank Thomas March 21, 2013 at 7:01 am

To illustrate concretely the incredible differences in US health care plans, below is a reality comparison between Massachusetts’ and Minnesota’s average coverage plan based on US News & World 2012 study of 67 MA plans and 285 MIN plans.

It starkly reveals the Underpriced (low premium) AND Undercovered (low benefits) inequitably and financially destructive profit maximization game going on throughout the US health care system.

…………………………………………………Massachusetts………………Minnesota

Median Premium…………………………….$528…………………………..$198

Median Deductible……………………….$1,000……………………….$5,000

% of Plans Covering 100%………………..45%……………………………19% Hospitalization, Hospital Physicians’ Services, Imaging (After Paying the Deductible)

Number of Plans……………………………..67……………………………….285

At first glance, one might pick Minnesota’s plan. BUT that state’s deductible is 5 time higher than Massachusetts’ for much less coverage! In addition, MA subsidizes individual and family of four plans with incomes below $33,516 and $69,156, respectively and MIN does NOT. People in MA with cancer can buy insurance. NOT so in MIN although this will stop when the Affordable Health Care Act becomes effective in 2014.

CONCLUSION: The average plan insured in Minnesota with a 2.5 times lower premium is at a far greater financial risk that the averaged insured in Massachusetts . MA’s coverage is much broader covering emergency care, hospitalization, maternity/new born, cancer threapy, prescription drugs, substance abuse, etc.

It would be interesting to examine the actuarial-risk balance — i.e., the number of healthy insured vs. relatively unhealthy insured per insurer in MA vs. MIN. Massachusetts appears to have a far better balance (e.g., 67 plans vs. Minnesota’s 285 plans with latter’s far lower population base. That may be facilitating MA’s cost efficiencies to offer broader coverage for an average health care plan.

I could also show a state-to state-comparison of an Overpriced/Undercovered average plans, but that’s a bit too depressing!

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avatar Mina Sirovy, PhD April 1, 2013 at 11:53 pm

Dear John,

Thank you for your well-researched article, passionately well balanced. It helps me
understand the complexity which is becoming part of the behavioral health field now
that the psychiatric community has changed numerous codes. After 25 years as
a psychotherapist, I spend several hours of paperwork a day in spite of having a secretary and a book-keeper. Many of us are taking clients without insurance at
reduced rates since they simplify the whole process. Some of my clients have
spent their whole inheritance on medical bills, and I personally have suffered several
traumas in military hospitals.

I look forward to more of your clear explanations of American medical care.

Thank you.

Mina Sirovy, PhD , MFT

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avatar John Lawrence April 2, 2013 at 11:58 am

Mina,

Thanks for commenting. There will be another article soon on how Big Pharma is charging ridiculous prices for prescription drugs.

Take care.
John

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avatar The Big Hat May 23, 2014 at 7:04 am

What about the elephant in the room here? WHY are they charging so much? Why are they allowed to get away with it? Instead of trying to figure out how to pay these ridiculous bills at the current asking price who is being charged with getting the price to an appropriate figure? It looks like there is a LOT of investigating and questions regarding that alone. We really might as well be told air is 500 dollars an hour to breathe! It sounds silly but at this rate are we not headed in that direction! In the mean time for me an ounce of prevention is worth a ton of cure. I am just trying to stay healthy and avoid the medical monster as best I can but God forbid an unexpected event should arise for the chargemaster’s crucifiction surely awaits!

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