A recent report found that Wyoming hospitals are charging private insurance way more than Medicare. The report raised questions about why that may be the case and if hospitals are overcharging.
The RAND report found that 14 Wyoming hospitals charge private insurance more than three times the average of what Medicare pays for the same service. In some cases, it was 400 to 500 percent more. Cheyenne Regional Medical Center was one of the hospitals.
"It indicated that our outpatient relationship of private payment to Medicare payment was a 480 percent factor. That was a little distressing," said Neil Bertrand, the chief financial officer at the Cheyenne Regional Medical Center.
He's not surprised that they would bill private insurance more than they bill Medicare, just not to that extent. In fact, when Bertrand looked into it, he said RAND used insufficient data. Noting that they only looked at 169 sample insurance claims.
"So, 169 statistics on 78,000 is about two-tenths of one percent," said Bertrand. "That's a pretty low basis to draw any conclusion on it."
Bertrand said the reason they do charge more for those who do not use Medicare is that the reimbursement levels are extremely low.
"For our 2018 fiscal year, we received $98 million from Medicare but the cost of care for all of those Medicare patients, inpatient and outpatients, was $134 million so we got a $36 million annual shortfall for Medicare that isn't reimbursed," said Bertrand.
And it's not just Cheyenne. Eric Boley, the president of the Wyoming Hospital Association, said the problem extends across the state.
"It's actually done at a loss. It's about an eleven percent loss for our facilities to provide care for our Medicare patients," said Boley.
So hospitals have to find the money they're losing.
"So, it's not uncommon and pretty much standard that commercial insurance will be charged more than Medicare because Medicare doesn't cover the actual cost of delivering care," said Boley.
This is called cost shifting. Hospitals can get surplus money by charging commercial insurance more for the same service. They are also doing this to make up for those that are uninsured. But Boley said even insurance doesn't pay a hundred percent of the cost.
Of course, some think that's because hospitals are overcharging to begin with. The Wyoming Legislature is currently studying why Wyoming hospital costs seem to be higher than other states. And Anne Ladd, the CEO of the Wyoming Business Coalition on Health, shares a similar concern. Ladd's organization provided the Wyoming data for the report. She said to blame everything on Medicare is unfair.
"No, it's not a matter of us raising our prices," she said. "It's a matter of hospitals getting their cost structures under control."
Ladd said this aggregated data is an important tool.
"We can look at costs in Wyoming versus the cost in any other state, so to me this is a rare opportunity for an apples to apples comparison," she said.
But Boley said it's not surprising that Wyoming hospital costs would be so high when you consider they have to pay doctors and others a national rate.
"60 to 70 percent of hospital costs are in salaries around our state. It's expensive to recruit and retain staff, bring in providers, doctors, lab technicians and so forth into our state. To recruit and retain them here, we end up paying in a lot of cases a lot more than you would in surrounding states," said Boley.
In the past, hospital administrators have noted that Wyoming hospitals don't have the volume of patients that they have in other states to raise enough revenue to pay some of these salaries.
Still, Ladd wants private businesses who provide private insurance to their employees to work with local hospital administrations to stop putting such a burden on employers. She said that might include a more accurate cost system.
Neil Bertrand with Cheyenne Regional Medical Center said they have always been actively searching for a more efficient cost system.
"We're coming at it every way we can," he said. "We just want to make sure we're getting value for the money we write checks for."
The legislative study on hospital costs should be available later this year.
