This article from the Arizona Republic explains one of the causes of high health care costs in America. Read on and you'll discover how surgery costs in the range of $2,250 to $3,500 are inflated to $38,526. 

Teresa Anderson was pleasantly surprised how quick and hassle-free her eyelid-lift surgery was at Havasu Regional Medical Center's outpatient-surgery facility in April 2014.

Courteous staff greeted her. Nurses checked her blood pressure. Then she was fed a dose of anesthesia through an IV line that immediately put her to sleep. She awoke in the recovery room after a complication-free surgery.

It took less than three hours from the time she checked in until her husband took her home. Her eyelids no longer impeded her vision, and she could see clearly.

Weeks later, the bills arrived at her Lake Havasu City home. Her surgeon, anesthesiologist and X-ray provider submitted bills and were paid nearly $2,250.

Only one remained: Havasu Regional's bill. When it finally arrived last May, what she saw shocked her. An explanation of benefits from her insurer, Blue Cross Blue Shield of Minnesota, showed she and Blue Cross had been billed $38,526 by Havasu Regional for prep work, surgery and recovery lasting less than three hours.

Anderson, who worked for a health-insurance company before her retirement, believes hospital charges like hers explain why the economics of health care are askew. And she isn't alone. Consumer advocates say such experiences point to the need for more transparency in the pricing of medical procedures.

Before the surgery, Anderson had asked her surgeon's staff to estimate all costs associated with the surgery. She was considering paying on her own if her insurer denied coverage. The surgeon's staff quoted a price of $3,500 for the surgery, anesthesia and facility fee if she paid on her own without insurance.

So Anderson thought there must have been a mistake in the bill.

"I ended up going to the billing department at the hospital, just to make sure it was correct," said Anderson, 61, who has homes in Lake Havasu City and in a small town outside Iowa City, Iowa.

Anderson was not concerned about her own finances. She'd already paid her health-insurance plan's $2,100 deductible — the amount a consumer must pay at the insurer's negotiated rates before comprehensive coverage kicks in. She did not have to pay any of the hospital's charges.

Blue Cross Blue Shield of Minnesota was responsible for the bill. The insurer determined the "allowable" amount based on a negotiated contract with the hospital was $29,170. The insurer paid Havasu Regional Medical Center the entire allowable amount.

Anderson said she does not know what surprised her more, the hospital's charges or the health insurer's willingness to pay nearly $30,000 for a surgery that lasted about one hour, with a total surgical-center time of less than three hours. Even though she did not need to pay any of the hospital bill out of her own pocket, she filed an appeal with the insurer last July challenging the charges.

After the insurer gathered all the necessary paperwork from the hospital, Blue Cross Blue Shield determined last August that the charges were correct and the insurer was required to pay the contracted price for the procedure.

"While we recognize your concerns, we must provide benefits according to the plan," the insurer said in a letter to Anderson.

Anderson said she thought the hospital billed too much — and the insurer paid too much.

"This is why our health premiums and our health costs are so expensive," Anderson said. "I am not asking for any money. I just think it's a rip-off."

Carol Dumais, a Havasu Regional spokeswoman, initially told Anderson that she could request an itemized bill from the hospital that would spell out the charges. After Anderson requested the itemized bill, Dumais explained that her bill consisted of two billing codes. Those codes were for a revised upper-eyelid procedure and a repaired eyelid defect.

When contacted by The Arizona Republic, Dumais said the hospital could not provide a detailed explanation of the hospital charges beyond that the billed amount came from two billing codes. The hospital's CEO, Mike Patterson, declined interview requests.

The health insurer also had little explanation for the amount of the charges. A Blue Cross Blue Shield of Minnesota spokeswoman said the insurer relies on the contracts of local Blue Cross Blue Shield affiliates when setting rates with out-of-state hospitals.

Anderson said her plan included out-of-state benefits that allowed her the lower, "in-network" rates for the Arizona-based hospital.

Experts say there can be wide variation in how much health-care providers charge for the same procedure. Some insurers provide consumers detailed looks at negotiated rates for certain procedures, and consumer websites offer price estimates for procedures.

One popular pricing website, Healthcare Bluebook, estimates that average Lake Havasu City surgery-center charges for an eyelid lift and repair would be $3,200 — roughly $35,000 less than what the hospital billed. Still, such estimates, built from insurance claims, may not account for all variables of each case.

Healthcare Bluebook CEO Jeffrey Rice said that outpatient surgical centers' services can vary their prices by 500 percent or more. The amount that a hospital or health-care facility charges is often influenced by the provider's size in a marketplace. So a large hospital in a rural market may have little competition from other providers, allowing it to demand more lucrative payments from health insurers.

"If you are the only hospital in town, you get paid what you get paid," Rice said.

Cost variation is critical for consumers who increasingly are covered by health-insurance plans that charge deductibles of $1,500 or more. Consumers must pay the deductible at the insurer's negotiated rates with doctors and hospitals before the insurer begins to pay most claims. Some studies suggest consumers with high-deductible plans are skipping needed health care over concerns about cost.

The nation "has to have a conversation about health-care costs," said Lynn Quincy, director of the Consumers Union's Health Care Value Hub. "It is completely unjust when people cannot access health care because of cost."

Quincy said she would like to see state regulators who oversee health-insurance rate filings scrutinize health insurers' negotiated rates with hospitals and other health-care providers. If health insurers negotiate more aggressively, consumers could benefit with lower health-insurance premiums and out-of-pocket costs.

Hospitals counter that both private and government insurers such as Medicare and Medicaid are becoming increasingly frugal with reimbursement rates. The Arizona Legislature, for example, approved a budget that cuts 5 percent from the state's Medicaid program, called the Arizona Health Care Cost Containment System, or AHCCCS. Administrators of the state Medicaid program will determine how to implement the budget cuts.

Others say price variation may depend on ownership of a center. Medicare pays independently owned ambulatory surgery centers an average of 45 percent less than comparable, hospital-owned surgery centers, according to the Ambulatory Surgery Center Association, an industry group.

Havasu Regional Medical Center is part of Brentwood, Tenn.-based LifePoint Health, a publicly traded hospital chain that reported $126 million in profit last year. The company also counts Valley View Medical Center in Fort Mohave among its 67 hospitals in 21 states, mostly in rural regions.

Together, Havasu Regional and Valley View collected nearly $223 million in revenue last year for the hospital chain, Securities and Exchange Commission filings show.

LifePoint CEO William F. Carpenter III was paid $12.3 million in total compensation last year, with about $9 million of that compensation in the form of stock and option awards. He was paid a base salary of more than $1 million and incentive pay of $2.3 million, filings show.

Anderson said that she wanted to discuss her case publicly because she feels the insurance company paid the hospital too much, which can lead to more expensive health-insurance premiums for consumers like herself.

Blue Cross Blue Shield of Minnesota increased the monthly premium for her health plan this year, so she switched to a Blue Cross Blue Shield of Arizona plan that charged a lower monthly premium but had a higher deductible. She said she needs to scrutinize the monthly charges of her health plan because she will not be eligible for Medicare until she turns 65.

And with a higher annual deductible, she will continue to keep a close eye on what her health-care providers charge.

"For my own conscience, I had to at least say something about this," Anderson said. "It is my little independent, rebellious streak."


May 14, 2015 Arizona Republic

Ken Alltucker covers health care as a member of the Republic's watchdog team. He has written about the Affordable Care Act, consumer health, insurance, prescription drugs and hospitals.



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