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MSHA officials: Federal payments a better measure of hospital prices

May 13th, 2013 10:10 pm by Madison Mathews

MSHA officials: Federal payments a better measure of hospital prices

While the amount hospitals charge for various treatments varies dramatically from facility to facility, the amount the federal government pays hospitals for treatment of Medicare patients represents a closer look at the price of actual treatment, an official with Mountain States Health Alliance said Monday.
Figures taken from the federal government’s release of Medicare provider charge data last week show that the average amount the government paid to Johnson City Medical Center for treatment of simple pneumonia and pleurisy in 2011 was $6,041, while paying $5,244 to Franklin Woods Community Hospital and $5,678 to Sycamore Shoals Hospital for the same treatment.
Payments are substantially lower than charges, which Mountain States Chief Financial Officer Marvin Eichorn said don’t reflect the amount that is ultimately paid to hospitals by the federal government.
“That’s what the government says is the most we’re going to collect,” he said of the payments that were included in the report.
According to Eichorn, the amount represented in the charges are based on a combination of factors, including a patient’s length of stay, what type of service is provided, the types of procedures ordered by a physician and more.
That charge is not representative of the amount that is paid by the government to hospitals, which is the amount that realistically shows the difference between facilities, Eichorn said.
The figures included in the report were based on hospital-specific charges for more than 3,000 hospitals across the country and represent the top 100 most frequently billed discharges.
The average charges were calculated at the individual hospital level.
Comparatively, the average payment for treatment of simple pneumonia and pleurisy at Bristol Regional Medical Center was $5,496, while payment for the same treatment at Kingsport’s Holston Valley Medical Center was $5,377.
Both of those hospitals are part of Wellmont Health System.
The highest payments by the government for most of the treatments listed in the report were paid to JCMC.
Eichorn said one of the reasons JCMC was paid more is because the government pays hospitals a little extra money if they treat a disproportionately high amount of people who are unable to pay for their treatment.
“The (Johnson City Medical Center) has the highest percentage of those in our region, and so the government pays us a little more because we’re taking care of a high number of charity self-pay and Medicaid,” he said.
Another reason for the higher amounts at JCMC is due to the hospital being one of the major teaching hospitals in the region.
Whenever a hospital has a large number of residents, Eichorn said a patient’s length of stay tends to be longer and charges tend to be higher because of the various types of tests and procedures that are ordered.
“Major teaching hospitals typically will have a higher average charge than other hospitals in the country. There’s probably only about 200 major teaching hospitals in the country,” Eichorn said.
Eichorn said a better comparison would be to compare the payments of JCMC to Vanderbilt University Medical Center, which also has a higher number of residents than many other regional facilities.
On average, Mountain States loses about 8-10 percent on each Medicare patient. That percentage does not have any connection to how much the federal government pays hospitals for treatment of patients.
To view the data released in the Medicare report, visit

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