February 5, 2013
Why Are Medical Charges So High, Mr. Lipstein?
In the Jan. 15 edition of the Post-Dispatch, Steven H. Lipstein presents a commentary on "Why medical charges appear to be so high and still growing." He compares two health care providers who offer the exact same imaging services — XYZ Hospital and ABC Imaging Center. Mr. Lipstein is the president and CEO of St. Louis-based BJC HealthCare; I am the CEO of St. Louis-based Metro Imaging. Is it possible that XYZ Hospital is analogous to Mr. Lipstein’s BJC and ABC Imaging Center is analogous to my organization?
Mr. Lipstein states that ABC Imaging Center is located in a community where most of the patients have private health insurance, while XYZ Hospital is located in a different, more diverse community. Surely this is not analogous to Metro Imaging and BJC. Metro Imaging’s West County office serves the same population as BJC’s Missouri Baptist Medical Center and Barnes-Jewish West County Hospital. Metro Imaging’s North County office serves the same population as BJC’s Christian Hospital. Metro Imaging’s St. Peters office serves the same population as BJC’s Barnes-Jewish St. Peters Hospital. Metro Imaging’s Richmond Heights office and BJC’s Barnes-Jewish Hospital both serve diverse midtown populations.
In his tale, Mr. Lipstein contends that for patients with private health insurance, XYZ Hospital must receive three times more per exam than ABC Imaging Center to cover the reduced reimbursement it receives from its more diverse Medicare, Medicaid and uninsured population. But surely BJC wouldn’t need to receive three times more per exam than Metro Imaging in the St. Louis market since both providers serve the same populations. Not only would BJC’s three times higher rate become the responsibility of patients with high-deductible, high-coinsurance health insurance plans, but it would also result in higher insurance premiums for us all.
Mr. Lipstein tells us that once ABC Imaging Center learned that XYZ Hospital received a higher reimbursement rate per exam from private insurers, ABC immediately negotiated its own higher rate. Again, ABC Imaging Center can’t be Metro Imaging since, over the past 19 years, Metro Imaging has seen the take-it-or-leave-it rates it receives from private health insurers continually and precipitously drop. There have been no negotiations for higher rates.
And what about patients without health insurance? Are they the patients in Mr. Lipstein’s story who are "unable to pay" for their exams? While there are certainly such patients who are served by both BJC and Metro Imaging, many patients without health insurance do indeed pay for their exams.
We called a large hospital in diverse midtown St. Louis (one that Mr. Lipstein might recognize) and asked what a patient without health insurance would pay for an MRI of the knee. We were told the "full price" would be $2,573, but an uninsured patient would be offered a 25 percent discount and an additional 5 percent discount if they paid for their exam within one month of service. Since imaging exams performed at hospitals generate a second bill from the radiologist who interprets the exam, we also called the radiologists who interpret exams for this large hospital, and were told that the radiologist charge for an MRI of the knee would be between $301 and $360, with an uninsured patient receiving a 25 percent discount. If you do the math, the best rate an uninsured patient would pay for an MRI of the knee at this hospital would be $2,026.
Metro Imaging’s "full price" for an MRI of the knee is $775 and, if paid at the time of service, uninsured patients receive a 40% discounted rate of $465. This rate includes the radiologist’s interpretation; there is no second bill.
Now let’s take the five patients in Mr. Lipstein’s story and suppose they’re all uninsured and need an MRI of the knee. BJC and Metro Imaging can both produce the MRI at the same cost of $400 per exam. BJC collects its best rate of $2,026 from four patients and gives away an MRI to one patient who can’t pay anything. Metro Imaging collects $465 from all five patients. Mr. Lipstein would tell you that BJC has to charge more for its MRI exams because it has a 20 percent charity budget while Metro Imaging gives away no charity. But in this example, BJC has made a profit of $6,104 and helped one patient afford an MRI, while Metro Imaging has made a profit of $325 and helped five patients afford an MRI.
Why are medical charges so high, Mr. Lipstein? It’s not geography.