Emergency Room Overcharges: A Tale of Two Hospitals

New York, NYCritics of the health care system in America—and the soaring costs that go along with it—will point to the observations of one mother of two whose teenage son was treated in an emergency room for a similar condition at two different hospitals, two weeks apart.

It makes for an interesting comparison.

Beverly Weintraub, who shared the Pulitzer Prize for editorial writing in 2007, writes in the New York Daily News (01/08/12) about a harrowing brush with crisis when her son choked on a piece of food. The boy was first treated at Good Samaritan Hospital in Suffern, while treatment for the second episode two weeks later was carried out by Somerset Hospital in Pennsylvania.

The treatment in the two ER facilities was virtually identical. The charges were not.

Weintraub writes that Good Samaritan billed her insurance company, Aetna, $22,214.92 for treatment in the ER that lasted four hours. Among the procedures performed were a physical exam, sedation, endoscopy and extraction of the villain food that caused the crisis in the first place.

How can four hours of treatment wind up being so expensive?

Part of the answer lay in the itemized charges—which in this case, can be compared amongst two hospitals.

Example: For the administration of the anti-nausea medication Ondansetron HCI, Good Samaritan charged $439.90.

Somerset charged $6.52

Another cost-comparison: Good Samaritan billed Weintraub's insurance provider $901.16 for administering Glucagon HCI, a drug intended to boost levels of blood sugar and help relax the esophagus. Somerset charged $216 for the same thing.

In both cases, Weintraub's insurer wound up paying less than the hospitals billed, and in Good Samaritan's case, far less: of the $22,214.92 reflected on the original invoice, insurer Aetna agreed to pay 13 percent of that amount, or $2,885.67. The hospital agreed.

The debacle led Weintraub to wonder about the disconnect between the inflated invoices laid at the doorsteps of insurers and HMOs, and the actual costs associated with health care.

In consulting with her insurance provider, Weintraub learned that rates to insurance companies are inflated to make up for the money hospitals lose treating the uninsured. The latter comprises the majority. To compensate, patients who have health insurance are overcharged by way of a practice, Weintraub writes, known as cost-shifting.

Weintraub states further that about half of patients seen by a typical hospital are covered by public health insurance—Medicaid and Medicare—that doesn't pay the full freight. For example, of the $6.52 charged by Somerset hospital for Ondansetron HCI (much less than the $439.90 charged by Good Samaritan), Aetna paid about half, or $3.26. Medicare, in comparison, pays 17 cents for that same dose, Weintraub reports.

Another 10 to 15 percent of patients don't have insurance at all. The remaining 40 percent or so of patients that do have private insurance wind up bearing the brunt of costs for treatment.

Insurance providers are keenly aware of the actual costs of service and know the game hospitals are playing. Coverage rates and contracts with hospitals are based on actual costs, leaving the service provider and the insurance company to constantly dance around billed costs and fees that, according to Weintraub, often do not reflect reality.

As it is, regardless of the charge, private insurers usually negotiate and end up paying out a percentage of the invoice.

Weintraub consulted with Medical Billing Advocates of America (MBAA), who told her those un-insured patients who may have the ability to pay are gouged. Hospitals know that in most cases uninsured patients will either balk at the amount or will not be in a position to pay the full amount, and a negotiated reduction will almost always happen. Still, according to MBAA, which is based in Virginia, were the uninsured patient to agree to even a fraction of the total amount, in all likelihood that amount will still exceed the actual costs of treatment.

Rather than painting any hospital in particular as the bad guy, Weintraub writes that it really comes down to the way hospitals and the US government do business with one another.

Is it good for the patient? That's up for debate. However, the bottom line remains this: if you have paid out of pocket for ER charges or have seen your insurance rates increase due to inflated charges from hospitals, you may be paying too much.

And you may want to talk to a legal professional about your options, in the face of potential emergency room overcharges.