The $29,000 Appendectomy! (Brought to You by Cost-Shifting)

This past May my married daughter suddenly developed abdominal pain.  She was promptly diagnosed as having appendicitis, and within 12 hours after the pain started, she underwent an appendectomy. Twelve hours later she was discharged from the hospital.  Her entire hospital stay, including emergency room evaluation, testing and surgery, lasted less than 24 hours.  She had absolutely great care throughout and was back to her busy schedule within a few days.

Why am I bringing this up on the eve of the Supreme Court’s decisions on several key elements of the Affordable Care Act (ACA)?  Because the hospital charges for less than 24 hours of hospital care were $29,000!!  That’s right, over $1,000 per hour.  Thankfully she has health insurance through her husband, so she only needed to pay $585.  If she didn’t have insurance, she’d be facing that staggering $29,000 bill.  Remember, this does not include the surgeon’s, anesthesiologist’s or emergency room doctor’s charges.

A couple of points:

• The $29,000 stated cost is the result of cost-shifting.  Remember, my daughter only had to pay $585 which is 20% of the amount that her insurer had negotiated with the hospital.  If you do the math, the negotiated charges to the healthcare insurer were $2,925.  The insurer paid 80% of that which was $2,340 and my daughter paid the $585 balance.  Cost-shifting occurs when one group of individuals pays less than another group for the same service.  Hospitals use this tactic to make up for the loss they incur by providing care to someone without insurance who will not be able to pay the bill or to an insurer whose payment is actually below the cost of that service.
• The non-insured patient could negotiate with the hospital and probably satisfy their debt at an amount much lower than $29,000.  The hospital would probably be very happy if they received anything over the $2,925 that they get from an insurer.  The trouble is, the non-insured individual doesn’t know how much might be acceptable to the hospital, and the hospital doesn’t have to tell them.

This happens all the time, though the difference isn’t usually this huge.  If you have health insurance and have had medical care recently, you have received an EOB (Explanation of Benefits) notice from your insurer that lists the services you received, how much the negotiated fee is, how much your insurer paid & how much you owe.

While this lack of transparency may hide the true cost of care, there is nothing fraudulent or illegal about it. I guess I prefer not to be playing these number games.  The cost of an appendectomy at a specific hospital should be the same for everyone.  There is a lot to consider about the individual mandate, but if the Supreme Court upholds its constitutionality in the ACA, I believe we’ll move closer to that goal by decreasing the need for cost-shifting.

What do you think?  Have you seen these huge differences between what’s billed by a hospital or doctor and what fee is accepted?

For Your Health – Dr. Bob