Lowering Hospital Charges

A local woman’s bill for minor eye surgery is a good starting point for exploring why medical charges are so high and how the newly enacted Dirigo Health Plan may be able to bring them down.

She spent three hours in the Mount Desert Island Hospital – a half-hour for the surgery and the rest of the time for recovery. The hospital bill alone totaled $3,945.60. The bill showed that Medicare paid $3,156.48 and her AARP supplemental insurance paid the remaining $789.12. She had to pay a small co-payment for the surgeon’s bill. So the three hours in the hospital didn’t cost her a cent.

But the hospital bill seemed high, even though someone else was paying it, so she asked for an itemized statement. The biggest items were $1,711.30 for the operating room, $926.20 for anesthesia services, $488.87 for “eye pack,” and $485.87 for day care services. Smaller amounts accounted for various surgical supplies and drugs. A couple of Tylenol pills were free.

Hospital officials explained that the fees helped to cover not only the services provided but also substantial costs that had nothing to do with this particular patient. Among the biggest was about $l million a year in “charity” work, for patients who were either uninsured or couldn’t afford their high insurance co-payments, and maintaining a high-tech emergency room 24 hours a day.

Another quirk in the system was explained by Art Blank, the chief executive officer. Medicare would not actually pay the amount noted on the bill until it received and approved a year-end list of the hospital’s costs. And he said that Medicare would disallow such costs as television sets in the rooms and public relations expenses – everything not directly related to patient health care. So that shortfall, which he said amounted to 31 percent of total costs, also helped boost the fee schedule. A rising tide lifts all boats, he said.

Mr. Blank agrees that if the Dirigo plan can provide insurance for more people and cut back the amount of “charity” service, the charges could come down. He puts the possible reduction at as much as 30 percent. He supports Gov. John Baldacci’s efforts but thinks the Dirigo Plan needs some changes to make it work. He sees a problem in enlisting employers who are willing to contribute part of the cost, and he sees the inclusion of part-time workers as an unexpected additional expense.

The hospital has developed its own health insurance plan for Mount Desert Island. Gov. Baldacci signed an authorizing bill recently. If the Department of Human Services approves its procedural rules, it could begin operation next summer as a supplemental insurance plan that could be coordinated with the Dirigo Plan.

Trish Riley, director of the Governor’s Office of Health Policy and Finance, says that Mainers should study their health bills, even if they are covered by insurance, to see how the Dirigo plan can reduce charges by converting present “charity” costs into a revenue stream that can insure the uninsured.