Medical Billing Tricks From Up Close

I had of course read accounts like the $75 to $129 hospital charges for a box of tissues. But even somewhat less eggregious billing tricks make you sit up when they affect immediate family. Yesterday I heard of two such instances from my father and brother who live in the (California) Bay Area.

Story 1: My father has been getting hormone suppressing injections of Lupron at Stanford Hospital to treat prostate cancer. A dose of about 22.5mg given every three months was being billed to Medicare for about $1,800. This price is somewhat on the high side considering that it is freely available online in the US for about $1,250. And in India a generic version made by the reputed Wockhardt company has been sold since 2002 for about $140 for the monthly 7.5mg dose, or $420 for three months. So we were surprised to learn that the price of this injection has been almost tripled to $4,800 for the three month dose.

Medicare paid almost the entire amount billed, so my father was hardly affected. But like him enough of my father's urologist's patients noticed these dramatically increased charges to Medicare to enquire about them. This doctor is excellent, and he called the hospital administrative point person to find out what was going on. He was advised "not to worry about it" as this "was a management decision." In other words, the hospital simply jacked up the rates and hit pay dirt, including with Medicare and the taxpayer's money.

Story 2: My brother told me his wife Deanne's car was rear-ended at high speed by a teen-age driver. Her Audi S4's rear as well front scrunched like an accordian (since the impact caused her car to hit the one in front of her) but did its job in protecting her. She heeded the advice of the paramedics called to the scene and was taken to El Camino Hospital to ensure there weren't internal or whiplash injuries. A doctor examined her and ordered a blood test to ensure she wasn't pregnant since X-Rays can harm a fetus. (I thought a simple pregnancy kit can do the job but never mind.) Deanne then had a couple of X-rays taken which didn't show anything abnormal, and was out within an hour of having first entered the emergency room.

The hospital bill for this was $5,000 though they received "only" $1,500 at the discounted insurance rates. The surprising part was the cost of the blood test. The same hospital has in the past ordered these at the adjoining Quest Diagnostics lab which bills $220 and receives a payment of $110 for these services. But this time the attending doctor ordered the test to be done in the hospital's own diagnostic lab. They billed over $1,000 - the amount a hapless uninsured or self-paying patient would have had to pay for this simple test, though Deanne's insurer paid at the "in-network" rate of $110.

Why should the hospital lab charge such exorbitant amounts, that ambushed uninsured or "out of network" payers would be fully on the hook for? Even the negotiated rate of $110 is quite high. In contrast, my in-laws in Pune, India pay only $30 for a far more extensive blood and urine routine. This even includes two home visits by the technician (since my in-laws are largely bed-ridden) to collect samples while fasting and then eating something.

Both of these stories show how providers can and do game the system. Patients and payers have a very limited set of hospitals in the vicinity, and these keep pricing opaque while raising rates at will. Reforms and regulations should put an end to such price gouging, and Medicare as a major payer should be allowed to directly negotiate drug prices. Yet the opponents of reform mislabel the present system as a "free market" and the recent medical overhaul will do little to check such practices. The budgetary crisis and pressures from the crushing health care burden will hopefully allow follow on measures that change the situation.

The first case of Lupron over-pricing also points to administrative lapses by Medicare. I'd have expected their payment systems to automatically flag claims where prices were so high relative to drug costs, rose suddenly or were out of whack with those from other institutions. That's even if Stanford Hospital had tried to disguise its moves through some clever upcoding to beat detection software. Donald Berwick has now been appointed Director of CMS and Obama has been in office for almost a year and a half. So such weaknesses should be fixed quickly - you can't keep blaming these on your preceding Bush's team forever.