Two states, two billing practices, similar bottom lines

California has no limit in the amounts hospitals can bill for services. But Maryland's Health Services Cost Review Commission caps hospital bills. The result: Stark differences in charges but little variation in profit margins, according to the Huffington Post.

That was the conclusion of David Belk, M.D., an internal medicine physician who writes regularly on healthcare finance issues. But Belk noted that California also has plenty of stories, such as Jeff Kortan, whose five stitches and a tetanus shot he received at a Sacramento-area hospital emergency room after a bicycling mishap led to a bill for more than $31,000, including $301 for the tetanus shot. After months of negotiations, the bill was trimmed to $18,000. Those charges did not include the ambulance and emergency physician's bill, which were separate.

"Because hospitals routinely overbill, people's worlds can be upended over the 'cost' of treating a simple cut," Belk observed.

The issue of hospital billing practices has come to greater light in recent years as more Americans have lost their insurance coverage and more stories surface of facilities charging hundreds of times the retail price for basic healthcare items, such as bandages and aspirin. In California, hospital operator Sutter Health recently agreed to pay $46 million to settle charges it routinely overbilled patients for anesthesia services.

Belk compared California's billing practices to Maryland, which has capped prices by law for more than 40 years. Maryland's hospitals billed $15.7 billion and collected $12.7 billion in 2011. By contrast, California's facilities billed $289 billion and collected $79 billion. The pricing markups were 24 percent and 366 percent, respectively.

Yet the profit margins for hospitals in both states are similar, he observed. Maryland's hospitals cleared $847 million in profit, a margin of 6.7 percent. California's hospitals reported a profit of $5.8 billion, a margin of 7.3 percent.

"The state of Maryland has demonstrated pretty clearly that hospitals can get by, and even make a healthy profit, without having to bill $60,000 for an uncomplicated appendicitis," Belk wrote.

To learn more:
- read the Huffington Post article
- here's a portion of Jeff Kortan's bill (.pdf)

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