In an interview with Memphis' Commercial Appeal, Methodist LeBonheur Healthcare's CEO Gary Shorb calls the current system of hospital charges "crazy" and helps us understand why charges have become so high and, for many, meaningless.
Read MBGH's blog post on the hub-bub created when Medicare released hospital charges back in May 2013.
MBGH's August 29, 2013 Annual Conference "Follow the Money: You Get What You Pay For" focuses on how employers and patients SHOULD pay for care and why we need to move away from a fee-for-service model and certainly one that is based on getting a discount off charges. You can register here for the conference.
Here are some of Gary's comments on hospital charges. Read the complete article here.
"Q: Costs are a huge controversy right now. How do you explain this to people?
A: It really is hard to explain the whole charge structure and have anybody who isn’t familiar with how this business works make s any sense out of it. I will tell you this, that there are a number of kind of conflicting goals out there.
One of them is Medicare itself. So Medicare comes and audits you. One of their audits is that if your charges are lower than what you’re reimbursed for Medicare, which based on what you’ve just described is hard to believe, but it does happen. Then Medicare takes the difference back. So one, you’re incented by the government to make sure your charges are higher than what they’re reimbursing, so that inflates the charge structure.
Secondly, all of the Medicaid, indigent figures we just described, all of that is paid from the commercial market. So providers everywhere are incented to continue to raise their rates so those few opportunities that are still out there to get reimbursed on a percent of charges, which are dwindling, versus on a fixed payment for a diagnostic-related group, which is how Medicare pays typically and increasingly how insurance pays, that incents everybody to inflate charges.
To the point where charges don’t mean anything anymore. I mean, you know those examples you just gave just prove the case.I mean it’s just gotten to be kind of a game of how do we make this whole thing work out financially.
What we really need to do, honestly, is just blow it all up and start over. Now getting that done is a real challenge, because it’s been wired together so piecemeal that unwiring it is very unlikely, without some kind of national reform, I mean something really significantly drastic.
Now another thing that’s happening that’s going to result in a lot more attention being paid to charges is the fact that, and to really to what we agreed to on commercial plans is the fact that some of the large employers in town are moving to higher deductibles and copays. So people like you and me are going to be highly incented to pay attention to what is this going to cost me, and where can I go to get it done less expensively. So that’s on everybody’s radar screen....Most of the commercial contracts are anywhere from a 38 to 44 percent of charges. That’s what we get paid. Medicare, less than that, Medicaid even less than that."