Sticker shock: Secrets of hospital billing revealed

13 Investigates New Mexico hospitals billing practices

medical bills

ALBUQUERQUE (KRQE) – It’s a health care system gone wrong.

“I was terrified and I went in and I was totally gullible. They could have told me it was going to cost $1,000,000 an hour and I would have said yes, please save my life.” Gene Cavallo said.

The Angel Fire businessman was diagnosed with cancer in 2011. After a yearlong ordeal, hospital doctors saved his life.

However, Cavallo’s nightmare was just beginning.

“I’d go to my mailbox and there would be five different bills in it,” Cavallo said. “There would be one for pennies, another one for several thousand dollars and another one for several hundred dollars.”

“It’s easier to get information about the cost and quality of a toaster in New Mexico than it is about a major medical procedure.”— Fred Nathan , Executive Director of Think New Mexico

The medical bills nearly bankrupt him.

Health insurance only covered part of the tab. After he underwent major surgery, Cavallo was bombarded with more than 150 bills totaling $40,000.

“I couldn’t figure out what I was being billed for. I couldn’t figure out why the amounts were what they were,” Cavallo said. “Often the statements that the insurance companies sent me bore little or no resemblance to the actual bills I got. I couldn’t even make heads or tails out of anything. It was just a mass of paper.”

Cavallo is just one victim caught up in a health care crisis threatening the wallets of consumers nationwide. More than 60 percent of U.S. bankruptcies are connected to illness or health care debt.

“The tragedy is that in too many cases New Mexicans are paying more than they can afford and more than they should have to pay,” said Fred Nathan, Executive Director of Think New Mexico.

Nathan said the lack of transparency in medical bills costs the average New Mexican hundreds of dollars each year. That translates into millions of dollars statewide.

“Right now when you go to a hospital, in many cases you can’t find out the cost of your care until months afterwards and you usually get a bill that is indecipherable with a little black box that says pay this amount,” Nathan said.

“I think it’s inexcusable that we can’t get at least basic information about price and quality in healthcare.” Boston OB/GYN, Dr. Neel Shah said.

Shah heads a non-profit called Costs of Care. It’s an organization that promotes better health care at lower cost.

“I would say that most of the line items on a hospital bill are not only inflated but the prices are completely arbitrarily determined. It doesn’t make sense to you. It doesn’t make sense to me. It doesn’t make sense to most Americans. But this is a system that’s evolved over several decades and very clearly needs to be fixed.” Shah said.

So how do hospitals charge for their care?

In New Mexico, that’s the $13 billion question. The answer is so complicated that most doctors don’t even understand it.

“The way the system is structured … it makes it very difficult for many hospitals to credibly justify what they are charging,” said Albuquerque Family Practice Dr. Jim Tryon. “I don’t think you can look at the current charges from the hospitals today and look at the wild variations that we see from hospital to hospital and say those variations can be justified by high tech maintenance and workforce maintenance and uncompensated care.”

What is known is that hospital charges never reflect actual cost of care. All hospital bills are inflated and hospitals will never tell patients in advance the price for care.

“The reality is that people are blindfolded in effect when they go into a hospital in terms of the cost of their care,” Nathan said. “It’s easier to get information about the cost and quality of a toaster in New Mexico than it is about a major medical procedure.”

Hospital charges are closely guarded secrets, but not anymore. KRQE News 13 has compiled a first-ever comparison of actual patient charges from all 44 New Mexico hospitals. And what it shows is a bombshell.

For example, if you are treated for pneumonia with major complications at Northern Navajo in Shiprock, your bill will be on average,$13,349. If treated for the same illness at Lea Regional in Hobbs, the bill will average $72,199. It is a difference of almost $59,000.

A major bowel procedure with complications at Christus St. Vincent in Santa Fe will be billed at about $73,881. Just an hour away at Lovelace in Albuquerque, the charge for the same procedure will be on average $165,083. The difference between the hospitals is $91,202.

“This was insane. This was madness. It’s appalling to me that somebody thinks that they can get away with this.”— Gene Cavallo

If someone is treated for blood poisoning at UNMH, they will pay on average $96,745. For the same procedure down the street at Lovelace, the bill will average twice as much, $197,256.

The hospitals with the highest number of expensive procedures are Lovelace in Albuquerque, Eastern New Mexico in Roswell, Lea Regional in Hobbs and Memorial in Las Cruces.

The facilities with the lowest number of charges are Christus St. Vincent in Santa Fe, Presbyterian in Albuquerque, UNMH in Albuquerque and Rehoboth McKinley in Gallup.

If the hospital issues a person a bill, it doesn’t mean they have to pay it. Lovelace Health Systems Chief Financial Officer Stephen Forney says medical bills are always discounted depending on which insurance company is picking up the tab.

“When [patients] get their statement with their full bill charges, it is absolutely not what they are expected to pay. It is merely a statement of charges,” Forney said.

Meanwhile, Cavallo was stuck with stacks of cryptic hospital bills that nobody could explain.

“There was no way to deal with this that made any sense at all so what I decided to do is draw a line in the sand and let the chips fall where they may. It seemed to me that this was really a terrible injustice that I was having to put up with,” Cavallo said. “I was in pain and having to recuperate from my surgery at the same time and it was abusive. And I decided not to play the game anymore.”

After shelling out thousands of dollars for incomprehensible bills, three years ago, Cavallo gave up and boxed up the remaining unpaid medical invoices and put them in storage.

“It was a terrible experience. I felt like I was being beaten up by billing offices that weren’t even aware of who I was or why they were sending me bill,” Cavallo said.

Nathan says one of the reasons health care is so expensive is because it is not transparent.

“We think the fix is to create a user-friendly public website where any New Mexican can go and find out information about both price and quality for any of the hundred most common procedures at any of our 44 hospitals in New Mexico,” Nathan said.

Fourteen states already have medical transparency websites. Similar legislation has now been proposed for New Mexico.

“If you are a hospital and you believe you have fair prices and good quality, you would want the public to know that,” Nathan said. “On the other hand, if you don’t have good prices and you don’t have good quality, then you might want to oppose this bill.”

Nathan says in states that have medical transparency websites where consumers can shop around for price information, there has been roughly a 7 percent decrease in health care costs.

“New Mexico of all the states in the country is one of the states where health care is least affordable,” said Shah. “The first step is to at least start holding people accountable. It just makes sense on a gut level. People ought to know roughly what the differences are in costs.”

The New Mexico Hospital Association says it supports medical transparency, but it does not support the Think New Mexico proposal. The Hospital Association said public websites that disclose price and quality are costly to produce and, for the most part, are not meaningful to most consumers.

The Hospital Association is backing a separate legislative initiative. Both bills are pending in Santa Fe.

According to Forney, hospital bills are the number one dissatisfaction facing the business side of the industry.

“It’s very important for us to figure out how to make that a cleaner, simpler process and it’s a very high priority for the industry,” Forney said.

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