WIS Investigates: The business of health care

COLUMBIA, SC (WIS) - Health care in South Carolina is a $35 billion a year business, just ask an economist like Lynn Bailey.

"It is a business," said Bailey. "It is not a charity, it's not a feel good."

One of the biggest in that business: hospitals.  The Kaiser Family Foundation found hospital care amounted to 40.4% of health care costs in the state.

"We now spend on average, probably, $8,500 per person in South Carolina for every man, woman, and child on health care," said Bailey. "That's the $35 billion."

The top three of the Midlands' largest employers are Palmetto Health Alliance, Blue Cross & Blue Shield of SC, and Lexington Medical Center.

Why does that matter?  You're never sick, so this doesn't affect you right?

Wrong, health care costs can turn up in unexpected places, like the price of a new car.

Consider this: When G-M sells a vehicle, $1,400 of what you pay is paying for GM's employees' health insurance.

The National Institute of Medicine estimated in 2009, $2.7 trillion in the U.S. is spent on health care. But they claim $765 billion is potentially excess spending.  That's right: billions on what they consider unnecessary tests or procedures.

"You hear CMS talking about it, you hear the innovation center talking about it and you've heard Tony Keck talking about it in South Carolina," said Kester Freeman of the SC Institute of Medicine and Health.  "How we need to be paying for value not volume."

Meaning, cut down on health care costs by not rewarding medical providers for the procedures they do.

"Research has shown that there are unnecessary surgeries, unnecessary hospitalizations, unnecessary procedures that go on every day in this country," said Freeman. "If more preventative care was provided, if people lifestyle changed, if they took in some places more responsibility for their health, we could save money and improve lives." 

So what are those unnecessary procedures?

The American Academy of Family Physicians top three: don't get screened for osteoporosis if you're under 65, you don't need an antibiotic for a sinus infection, and you don't need an MRI for lower back pain in the first 6 weeks.

The South Carolina Department of Health and Human Services believes hospitals talking more about their costs also helps.  

"It's important for the public to understand what the costs are, what the expense is, and what the profits are of certain hospitals," said SC Department of Health and Human Services Deputy Director John Supra.

They found from 2008-2011, Palmetto Health Baptist had $36.1 million in profits, Providence Hospital pocketed $41 million, Palmetto Health Richland $90 .6 million in profits, and Lexington Medical Center with a profit of $205.9 million.

WIS tried to talk with all four hospitals, but all declined interviews.

"It's not like any other business," said Bailey. "It's a different business and there is an infinite demand for health care."

These businesses create much-needed jobs. Health care jobs in the state grew fast.  More than 60-thousand jobs from 2000-2011, according to the Board of Economic Advisors.

The Catalysis for Payment Reform report card on state price transparency laws gave South Carolina a "F."  It's why many say it will take more than the Center for Medicare and Medicaid comparing prices at hospitals nationwide to reform prices.

When it comes to health care, we walk into our doctor's office or a hospital and don't think twice about the bottom line, until the bill comes in the mail months later when its too late.

"It's just as important as a vehicle, probably a little bit more," said Tracey Cable, who spent a year shopping around and doing research before buying an SUV.

"This is an industry where typically when you go in for the services, you have no idea what you're going to pay for them," said Supra.

What if there was a way to look at hospital prices giving you some idea what the reimbursement might be?

In May, the Center for Medicare & Medicaid Services released average costs for the 100 most common inpatient services and what Medicare pays, typically what the base rates are.

"We call it becoming an informed patient, when you're the patient you should understand what's being done to you and why they are doing it, what are the alternatives," said Arnold.

We decided to look at two different procedures, one inpatient and one outpatient procedure at four Columbia-area hospitals.

For the inpatient procedures we chose a heart failure and shock procedure.  The shock may be the price difference.  Providence had the best average price at $26,481.  The highest was at Palmetto Health Baptist the average price $80,114, $10,000 more than at Richland, who has the same parent company.

"They are separate entities, they have separate contracts," said Arnold. "Although they have a unified governing structure they still maintain kind of separate arms of business so they have separate cost structures."

Still, there's the $53,632 difference between Baptist and Providence not even two miles away.

Lexington was in the middle at $45,343.

Why the difference?

WIS wanted to ask the hospitals.  When we asked for an interview, we got ironically similar statements, each pointing us to the Hospital Association.  When we contacted the Hospital Association they also declined our request for an interview.

When you look at what Medicare pays the hospital for those procedures, it's a lot less than the average price.

"Medicare is paying probably somewhere between 50% and 60% of what the hospitals charged to deliver that so charges have become sort of a place to start," said Bailey.

The outpatient procedure at all four hospitals, an M-R-I, are more comparable, within $1,300 of each other and the payment from Medicare even closer, within $15 of each other.

Each hospital has what they call a chargemaster, a master cost list for every procedure they do and every pill they hand out. But they're not required to make that public in South Carolina and they don't.

"I think the reason they don't want to give it up, is because then they would, like in the Wizard of Oz, you know, 'Pay no attention to that man behind the curtain,' people would begin to understand that these are just made up, that there's no rhyme or reason," said Bailey.

California requires hospitals to release their chargemasters.  Hospitals were found to have marked up prices for a single Tylenol some 6,000% for something that costs them cents on the dollar.  Why?

"Hospitals quite frankly don't care what you think because you're not paying the bill," said Bailey.  "Not directly.  Now indirectly through higher insurance premiums and increased taxes  that are spent on programs like Medicare, Medicaid, the VA, the Department of Defense, you are in fact absorbing that cost, but you don't do it directly."

Palmetto Health former CEO now CEO of the South Carolina Institute of Medicine and Public Health Kester Freeman said it's tough for consumers to understand the CMS databases and difficult to compare prices among hospitals.

"To try to compare health care to a competitive model to other parts of the industry to me is somewhat naïve," said Freeman.

Some economists aren't convinced making prices more transparent will make much difference.

"There is nobody to negotiate with," said Bailey. "You can not negotiate with the patient accounts person as you are being discharged from the hospital and you can't call the hospital prior to being admitted and say, 'Well, what is this going to cost me?' they don't know.  They don't know or they won't tell you.

Others in the industry are more hopeful.

"Over time we've got to find ways to educate the consumers or the public about what they're buying in health care and build tools and use technology to facilitate that education and comparisons that are easy for consumers," said Supra.

AARP and Freeman say it all starts with arming yourself with information

"You ought to be concerned with the quality of your physician and their training and their background, their experience and their outcomes in terms of  work that they do," Freeman said.

How? It's as close as the Internet and as simple as asking your doctor some simple questions.

The Pay less at the Pig campaign isn't much different from the new CMS health care costs released in May.  Piggly Wiggly shopped the same items at their competitors store posting the prices because they know customers want value.

"Look how the coupon craze has gone in the last two years, it's gone crazy, web sites now people downloading coupons," said Piggly Wiggly store operator Tim Miranda.

Most shoppers are looking for a deal
"This day you just have to look for every penny and I try to do coupons," said customer Diana Parisian. "I don't buy anything that's not on sale so I'm a bargain hunter."

"I try to save money everywhere I can and coupons do save me money," said customer Hope Beddingfield.

But when it comes to health care, customers aren't as cunning or crafty.

You should be because everybody also it's the same thing as a grocery store I would think, I work at a doctor's office," said Parisian.

"I would go with whatever's covered," said Beddingfield.

AARP says we all need to be more educated and a little more assertive with our doctors. Especially when it comes to medical tests.

"I found out one time they were wanting to run another test on me, I asked why and I really didn't get a good answer and so I chose not to have that test done," said SC AARP Executive Director Teresa Arnold. "Now of course you want to do what your doctor is advising you to do, but I also think we need to be very aware of  what's going on."

Both AARP and the South Carolina Institute of Medicine and Public Health say additional or unnecessary tests run up prices for all of us,  claiming hospitals with more residential doctors run more tests.  It's what some refer to as defensive medicine.

"I've had a hospital administrators tell me the reason they use defensive medicine in South Carolina is because of the fear of a lawsuit," said Arnold. "My counter to that is we have instituted malpractice reform, we've done a very thorough job of that in South Carolina so I'm not exactly sure why we would still be practicing defensive medicine when there are caps on malpractice claims."

AARP recommends the Informed Patient Institute web site, but we found other sites including health care blue book that encourages patients to ask about pricing. While your doctor or nurse probably can't answer, their billing office or administrative staff can.  That site also offers a binding price estimate form if you can agree on a better price.

"They're not used to asking questions and it feels uncomfortable but I think it would be very helpful if people would just ask those questions," said Arnold. "And sometimes it's a complicated issue. If you've been diagnosed with cancer or something like that, please have someone, a family member or somebody else go with you because you're not going to be able to hear everything."

It can be as simple as asking your doctor a few good questions.

"How many of these have you done and what are your outcomes?" Arnold suggested asking.  "That's a fair questions for any physician."

John Hopkins recommends several questions every patient should ask:

  • Why is the procedure necessary?
  • What are the alternatives?
  • What are the benefits and how long with they last?
  • Should I get a second opinion?
  • What are the risks?
  • What's the cost?

Transparency has helped the state in another area: patient safety.

"Just the fact that information is online for the public to access, we have had the biggest decrease in hospital acquired infections of any state reporting it," said Arnold.

Showing how hospitals compare on surgeries.

"How many transplants have they done, what was the success rate, how long did he have to wait for a transplant," said Arnold.

Health and Human Services's CFO John Freeman said patients need to be asking themselves questions that may require some digging, because right now there really isn't a one stop shop for health care information.

"Are there alternatives?" suggested Freeman. "Is this the best procedure? Is this the best facility? And how do we start to do that? We really need to get some data available."

The more informed you are, the better off you may be. And AARP is hoping patients will ask more questions when it comes to the new marketplace program being offered this fall as part of the Affordable Care Act.  Enrollment starts in October making coverage available for another $500,000.

"That really should help all of us because it means more people are in that risk pool and so it should lower costs," said Arnold.

The state is still considering more transparency provision in the budget as lawmakers move forward.

Health and Human Services has promised up to $35 million in incentive rates for hospitals who participate in initiatives designed to reduce system costs and increase health outcomes.

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