I have spent two years demystifying my hospital bill. During that time I learned that I was being gouged in excess of 800% profit.
Here’s how I learned the formula to determine fair and reasonable charges, as set by the industry’s standards. My hope is that this information will be helpful to others who are navigating the current hospital billing system.
A LITTLE BACKGROUND:
It seemed so simple: In January, 2007, I went to the ER at Cedars-Sinai Medical Center in Los Angeles for some IV antibiotics to help fight an infection. I also had a stomach virus and was unable to keep down prescribed oral antibiotics. My doctor recommended that I go to the emergency room. After receiving very good medical attention, I stabilized after 6 hours. I was released, went home and had a full recovery.
A month later, the first billing statement showed up from the hospital: $7,051 was being charged to my insurance company with whom I had a PPO plan. $7,051 for IV antibiotics and standard blood tests? I was shocked.
The next month, I received a revised bill with a new amount: $3,525.84 – which was the new cost of services after negotiations with my insurance company. Of that, they paid $648.13. I had paid $100 to the hospital upon my discharge. And now, the hospital was coming back to me for the balance of the bill for $2,777.77.
This is called balance billing. In many states, if you have HMO coverage, it is illegal. The hospital is legally bound to accept the payment from the HMO for services – and for the doctor’s bill, as well. Billing the patient with HMO coverage, for any uncovered charges, is not legal in most states.
But the fact that I had a PPO (a more expensive and supposedly superior coverage to an HMO) – and a $2,500 deductable, meant that this legislation did not apply to me. Even though I went to an in-network hospital.
The bill for the Emergency Room Doctor came separately. The hospital and Blue Cross negotiated some rate that worked for them, and I was left to cover the balance of $35. Which I gladly did.
I like this hospital and I want them to do well. I want them to stay in business. I want them to get paid for their services, and I want them to make a profit.
However, how did I know that what I've been charged was fair and reasonable? The charges seemed to be totally arbitrary – to go from $7,051.74 to $3,525.84 without explanation. And then for me to be left holding the bag for $2,700+, something about this didn’t seem right. I wanted to know what I was being charged for.
I was eager to settle this and was completely convinced that, once we determined the fair and reasonable charges, we would come to a mutually beneficial amount.
HERE’S A 10-STEP PROCESS OF MY 2-YEAR EXPERIENCE OF DEALING WITH THE HOSPITAL BILLING SYSTEM:
1) REQUESTED AN ITEMIZED BILL: I received a list of shorthand descriptions of services that I couldn’t understand. For example: a $403.68 charge for “IV SUPPLIES”. What were the IV Supplies? The needle? The tubing? The gauze? The piece of tape that kept it all in place on my arm? I called to find out. I was referred to three people, but nobody in the hospital billing department could tell me.
2) DETERMINED FINANCIAL RESPONSIBILITY OF MY INSURANCE COMPANY: Blue Cross assured me that they paid out their maximum reimbursement amounts to the hospital for the services I received, and would not be paying any more. They sent me an Explanation Of Benefits form (EOB) and went over it with me to my satisfaction. They said that they were able to negotiate a lower rate with the hospital on my behalf, and covered costs that exceeded my deductable. They suggested that I contact the hospital to see if they would lower my costs, since the hospital determines their own charges.
3) FOUND A PATIENT ADVOCATE: I went online to find people who have gone through this before and discovered a number of Patient Advocacy groups. A couple of them are: Hospital Victims.org (http://www.hospitalvictims.org/) and The Southwest Medical Review and Recovery. (http://www.southwestmedreview.com/) Southwest Medical Review has over 20 years of hospital billing experience under their belt, and left the industry when they realized that they could help people with their knowledge of billing systems. I found them to be very patient and extraordinarily knowledgeable.
4) REVIEWED BILL FOR CORRECT CODING: I sent my itemized bill to my patient advocate for review. A billing code is assigned to each item being charged. This is what is read by the insurance companies to determine how much the hospital will be paid. I learned that up to 90% of all hospital bills are coded incorrectly. My patient advocate told me that there is supposed to be transparency in the billing system – and that there are definitive coding guidelines that apply to each hospital. However, this hospital administers their own coding system – making it impossible to determine exactly what is being charged. Despite this, my patient advocate was able to figure out three incorrect codes in my bill, resulting in over $300 of erroneous charges. They forwarded me the proper verbiage from the most recent coding manual. I went back to the billing department at the hospital and had them amend my bill. The billing specialist apologized for her oversight and resubmitted my bill with the proper coding. I can only wonder how many more codes were erroneous, had they been using a transparent billing system.
5) REQUESTED ALL BILLING AND DOCTOR RECORDS FROM HOSPITAL – PARTICULARLY THE UB-04 FORM: It is the patient’s right, under the Health Insurance Portability and Accountability Act, (HIPAA) to receive a copy of all medical and billing records from the hospital. The UB-04 form is used to determine the cost of services. The billing department at the hospital first told me that they would look into releasing my UB-04 form. After repeated requests, I was told that it was not their policy to release this form to the patient. This is typical. Know your rights as a patient. Every hospital has a HIPAA officer on the premises. I called theirs. She said she would look into it for me. I didn’t hear back. She didn’t return my messages. I then contacted the California Office of HIPPA Implementation. They agreed to contact the HIPPA officer at the hospital. A day later, the HIPPA officer called me to get my address and let me know that my UB-04 form was being sent to me. Release of my U-04 form took me a full year.
· The sections of the HIPAA legislation that the state officer referred to were two federal 45 CFR codes: The Designated Record set was under code 164.501 and the Right of Access was 164.524 (a)(1)
6) DESPITE REMAINING IN GOOD STANDING WITH THE HOSPITAL, I WAS SENT TO COLLECTIONS: I kept meticulously close contact with the billing department, who insured me that I was in good standing with them. Every month, when I received a new bill, I called them and assured them that I wanted to settle the balance, and that I was investigating charges that were in question. Each month, I told them that is was my priority to remain in good standing with them. I even paid them $50 in good faith. But when I went out of town, and didn’t get my mail for a week, I was sent to collections. This was also during the time that I was being told that they were “looking into sending out” my UB-04 form. My challenge here was to keep the perspective that it wasn’t personal. Even though I was on a first name basis with many people in the billing department at that point, the overall billing system didn’t know or care about who I was. I needed to be reminded of this – because I was assured that I was kept in good standing with them.
7) KEPT COLLECTIONS DEPARTMENT FROM PURSUING FURTHER PAYMENT: Diligent effort through close communication and refusal to pay any overcharges for my services kept them at bay. I assured them that I would keep them posted to each and every new bit of information that I received – and kept them in the loop every step of the way. I kept telling them that it was my utmost interest to settle the bill – but that I would only be paying fair and reasonable charges, as determined by industry standards.
8) DETERMINED THE COST OF SERVICES: With the codes on the UB-04 form, my patient advocate taught me how to figure out the cost of services. There is an industry standard for determining cost of services. It is simply what Medicare would reimburse for each line item. The reason why they use Medicare as the guideline is because Medicare reimburses between 92 cents and $1.12 on the dollar. So, for example, if Medicare would reimburse a hospital $1.00 for a box of tissues, it is understood that the cost of the box of tissues is between 92 cents and $1.12. My patient advocate and I went over, code by code, the line items on my UB-04 form. They showed me how to track down, on the internet, the reimbursement amount for each charge. Remember the $403.68 charge for “IV SUPPLIES” on my itemized bill? Well, it turns out that Medicare doesn’t reimburse that cost code – those supplies are not billable. Those supplies are included in numerous other services – like the cost for the antibiotic, the cost for administering the IV, etc. After the reimbursement for each line item was determined on my UB-04 form, I had a total – as calculated by industry standards. The total cost of services being billed to me for my emergency room visit came to a little less than $400!
9) CALCULATED FAIR AND REASONALBE CHARGES: There is an industry standard for calculating fair and reasonable charges. Fair and reasonable charges ensures the hospital receive a profit on their cost. Here is the formula: The amount that Medicare would reimburse the hospital + 25% to 50%. So, in my case, we know that the cost of services were – and we’ll round it up - $400. Add to that, 50%, which is $200 - and the industry standard, for fair and reasonable charges for the services that I received, was $600.
10) OFFERED A SETTLEMENT: Between what my insurance company and I had paid, the hospital had already received $905 at this point – already recouping a 125% profit – as determined by industry standards. I went back to the hospital and insisted that I settle with them, not the collections agency. They complied. I chose to offer an additional 100% profit, giving them a 225% profit on cost of services, to ensure that the hospital does well. They denied it. Instead, they offered me an application for financial assistance.
The silver lining is that I somehow qualified for an 80% discount on my bill. They offered me a settlement of $348. I took it. This does not get them off the hook for their enormous over charges, but it does allow me to settle with them what I considered to be fair and reasonable.
“We can charge anything we want”, I was told by Crystal Crowe, Financial Supervisor at the hospital. Cedars-Sinai Medical Center netted in excess of 190 million dollars in 2007 - which I applaud. I feel secure knowing that there is a reputable, well funded hospital nearby. I just want to pay fair and reasonable charges for the services I receive from them.
I know that there is much talk of overhauling the health care system – but until it is changed, this is what we have to encounter. Here’s hoping that this information can help other people navigating through the existing system.
If you found this to be helpful, and would like to say, "Thank you for this information. I would like to support your efforts," please consider contributing a dollar ($1)…or whatever you would feel would be appropriate. Together, we can try to make an impact on a very difficult situation. Many thanks!