June 4, 2014 – A surprising comment from a well-known health policy expert stood out near the top of Tuesday’s June 2 2014, New York Times article about the new CMS data release on hospital charges for the most common inpatient procedures.
Glenn Melnick, a veteran health services researcher at the University of Southern California, suggested that some hospitals base the co-insurance amounts they charge patients on their chargemaster prices rather than on the rates the patients’ insurers negotiated with the hospitals. “You’re seeing a lot more benefit packages out there with co-insurance amounts that require the holders to pay 20% of a lab test or 20% of an X-ray. Well, 20% of which price?” the Times quoted Melnick as saying. “Some hospitals will charge 20% of what Blue Cross Blue Shield will pay; others will play games.”
Really? I’m no innocent but I was skeptical about Melnick’s statement given that hospitals contract with insurers binding them to negotiated rates. So I called him and asked if he’s actually seen cases of hospitals improperly billing insured patients for cost-sharing amounts based on chargemaster prices.
“I haven’t seen that practice directly but I have seen all kinds of misuses of the chargemaster,” he told me. He went on to say that the growth of health plans with high deductibles and cost-sharing, along with hospitals’ continued use of chargemaster prices to help set rates, “continues opportunities for unfair pricing. How that actually happens, I don’t know. But I’ve seen it happen already, as long as the incentive and opportunity is there. Some hospitals will figure out ways to do it.”
All that sounded pretty vague. So I called a couple of other experts for their opinion on whether hospitals engage in this abuse. “Could a provider in theory send a bill to a health plan member that inflates the coinsurance? I suppose the answer is yes,” said David Cusano, senior research fellow at the Georgetown University Health Policy Institute and a former in-house counsel for a health insurer. “But in most cases unless the contract is structured in a funky way, hospitals would be at risk of breach of contract. I haven’t seen the chargemaster used as a way to game consumers.”
“That looks like a flip comment (by Melnick),” said Richard Grundling, vice president of the Healthcare Financial Management Association. “I haven’t seen it as a widespread issue.”
There are two takeaways from this little back-and-forth. One is that the debate over the real-life significance of chargemasters remains unresolved, though the chargemaster is important in setting Medicare’s outlier payment rates.
Second, journalists at the Times and other news organizations like using provocative quotes, even when they are not verifiable.