Anatomy Of A Hospital Bill

For too many people in the United States, the scariest part of a hospital visit can have more to do with anxiety about the potential bill than with their precipitating health problem. Will my insurance pay? How much will this cost? Can I even afford to be here? Will I need Chapter 11 because I am uninsured?

Fortunately for me, at age 72 I’ve never had any really serious health issues. After going on Medicare seven years ago, however, I’d been constantly wondering about the coverage and the costs. As a career journalist I’m the curious sort by nature. And, as a retired journalist, I had plenty of time for analysis when I recently got the chance to dissect a hospital bill for myself. I’ve found the exercise to be both enlightening and confusing, in some ways raising more questions than it answered. Nevertheless, the dissection of my hospital bill might be interesting to others who have had similar concerns.

My issue occurred January 31, 2019, when I visited a neighborhood emergency room for what must be a fairly common concern. I had some chest pains I could not understand, and, given my family history of heart ailments, I decided to err on the side of caution. My concerns turned out to be a false alarm, but I did spend a night under observation before a cardiologist concluded I likely had only strained some chest muscles lifting weights earlier in the day. I know I received an IV line, some blood work, several electrocardiograms, a chest X-ray, aspirin and breakfast. 

In discharging me, the doctor advised, “Go ahead and order breakfast before you leave. You paid for it.”

Uh-oh, I thought. Is he hinting about a bill for me?

“OK,” I said. “I’ll have the omelet.”

Once my bills arrived, I had what I suspect is the normal reaction for most of us: Checking the bottom line for the amount I would owe. I breathed a sigh of relief when I saw my total due to the hospital—a $50-copay. Then I did something that might not be so routine. I reviewed the amounts above my tab. Total charges: $15,344. Insurance discounts: $14,495.23. And, insurance payments: $798.77.

Intrigued, I called Methodist Hospital and requested an itemized statement. I could see $800 as a fairly reasonable cost for my night of observation in the ER. But I had trouble imagining what they had done to generate $15,344 in ER services. I also wondered why they would just discount so much of that total for me.

A separate bill from the ER doctor prompted a similar moment of curiosity. That bill totaled $1,992 but left me owing just $106.56 after deductions for insurance discounts. Altogether, the doctor received a little less than $200 for observing me, and that seemed like a reasonable fee to me as well.

Of course, my itemized statement from Methodist listed a number of alien codes and multi-syllable words that made little sense to a layman. But I deciphered them well enough to satisfy my curiosity, plus I called the billing department with a few questions. The associate on the phone was polite but also a tad confused herself about why I would want to know anything beyond my $50 bottom line.

“I’m just trying to be a savvy consumer of health care services,” I told her.

The largest single item on my bill was $4,336 for something called a “CTA chest noncoronary,” which she described as some sort of a scan. The next largest charge was $2,480 for the ER visit at a Level IV facility. Next in line was a $792 fee for 12 hours of observation.

They charged $754 for the chest X-Ray and another $704 for 100 ML of 300 MG Iodine solution. They hit my account for three EKGs at a cost of $657 each—or, $1,971. A pair of comprehensive metabolic panels rang another $582 apiece—or, $1,164. And they charged $335 for a “B Natriuretic Peptide.”

From there the charges decreased to amounts less than $300 for a variety of things, including $174 for a 0.4 MG Nitroglycerin tablet.

I concluded that both Methodist and Medicare had taken very good care of me. And I was impressed to see that Medicare chopped that bill down to a more realistic $798.77 by extracting a 95-percent discount. I’ll say that again: Medicare received a 95-percent discount!  Medicare can do this NOT because it is a bully to the hospitals but because it knows the actual cost of all things medical and refuses to give hospitals more than a reasonable upcharge.

“Medicare collects troves of data on what every type of treatment, test and other service costs hospitals to deliver,” wrote Steven Brill in A Bitter Pill—his meticulously researched article comparing a number of hospital bills in detail to determine “how outrageous pricing and egregious profits are destroying our health care.”

He wrote: “Medicare takes seriously the notion that nonprofit hospitals should be paid for all their costs but actually be nonprofit after their calculation.”

Under the law, Brill noted, “Medicare is supposed to reimburse hospitals for any given service, factoring in not only direct costs but also allocated expenses such as overhead, capital expenses, executive salaries, insurance differences in regional costs of living and even the education of medical students.”

After all, Medicare cannot survive itself if it runs the hospitals and doctors out of business by undercutting their actual costs. And the hospitals cannot survive without the huge amount of money generated from treating Medicare patients like me. In every sense, it seems like one of the business world’s purest examples of a symbiotic relationship.

The associate in Methodist’s billing department told me that patients receive different levels of discounts depending on the negotiations by their respective insurers. Because I carry supplemental insurance, my deductible is small. But I have friends with employer insurance who now pay deductibles as high as $5,000 or more. The billing associate told me those deductibles also figure into negotiations.

But I also have friends who are uninsured, even in the age of the Affordable Care Act. And statistics show that the uninsured generate about 20 percent of all ER visits. What about them? I asked. Calling them the “self-insured,” she said Methodist gives them a 50-percent discount. For a “self-insured” in my case, she said, the bill only would have been $7,672. But I also wondered if a “self-insured” patient would have received the same level of tests and procedures. I’m sure some corners might be cut, but I also see my services as being pretty basic for a night in the ER.

I’m still mystified by the Voodoo accounting that allows a hospital to claim a bill so large it can grant a 95-percent discount without a whimper. But I remain more convinced than ever that adoption of Medicare-style single-payer health care financing or Medicare-For-All ranks as the most efficient system to keep our society on a level playing field with a medical industry that grows more technologically complex on a daily basis.

“Why should a trip to the ER for chest pains that turn out to be indigestion cost more than a semester in college?” asked Brill in his article. “Why does simple lab work done during a few days in the hospital cost more than a car?”

He called today’s medical industry a “gold rush” for firms that provide everything from wonder drugs to that CT scanner that rang up the single largest, $4,336-charge on my tab. Brill’s research showed hospitals usually recover investments on that technology in the space of a year.

With the entire population in a single insurance pool, a single-payer plan would have the power to pay only the real costs of prescriptions, care and hospitalization. I certainly saw Medicare demonstrate that kind of power after my night in an ER.

I realize my example stands only as an “anecdote”—a tree in a large forest of data that may or may not provide an accurate picture of the business of health care. For anyone curious about the broader view of that forest from 10,000 feet, however, I’d encourage a review of Brill’s article and a visit to the web site of a group called Physicians for a National Health Program. They have charts and historical documents that should answer all remaining questions.

But the real question in my example should focus on the true value of the services I received. Medicare believes they were worth $798.77. For the uninsured, Methodist believes they were worth $7,672. Or, should we look at the showroom price like it’s the Memorial Day sale at a furniture store: $15,344?

For the record, during the course of my working life I paid a total of $26,456 into the Medicare program while my employers added another $17,508 for a total lifetime contribution of $43,964 on my behalf. In addition, I’ve paid about $300 each month since 2012 for supplemental policies to ensure full coverage.  

It won’t take many more hospital visits for me to outpace my payments into the system.  But I’m still expecting Medicare to cover my final hospital bill whenever that arrives. And we all know that last bill is usually the whopper. So, thanks again to all you working youngsters for your monthly payroll deductions under the Federal Insurance Contributions Act (FICA). I’m going to need them. I’m betting you will, too.