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How a cat bite cost one man $55,000
The culprit: David Lazarus' cat, Bear.
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The cat bite was bad enough. But then L.A. Times columnist David Lazarus got an infection. Soon enough he was in the hospital, having surgery that eventually saved his left hand. Of course, he was relieved. Then he got the bill. The total charges came to over $52,000. Add a couple thousand for physical therapy and co-pays for follow-up visits, and it comes to nearly $55,000.
But how? Let's do the math.
Surgery: $12,282
Hospital stay (6 nights at $4,000 per night): $24,000
Anesthesia: $780
MRI: $3,290
Drugs: $3,412
Laboratory services: $4,534
Tube for in-home IV drip: $2,352
Miscellaneous other charges: $2,010
-------------------------------------
Total: $52,660
Digging into some of these individual charges, Lazarus found that they were available for much less elsewhere. Why, for example, was he charged $16 for generic Tylenol?
"It all basically stems from the discounts that are contractually given to insurers in return for them bringing scads of patients into hospitals. So what do the hospitals do? They jack up all the prices so that the prices become so inflated, that once the discount kicks in, they'll still be able make a profit," Lazarus says. "You have no idea what any particular thing really costs."
Luckily for Lazarus, he has health insurance. Blue Cross Blue Shield of Illinois covered $38,448. His co-pay was a little over $1,500. That leaves some $14,000 unaccounted for.
Lazarus went to talk to the head of the hospital where he says he received excellent treatment. He says Dr. Feinberg of UCLA Medical Center told him the extra $14,000 was "funny money." It simply disappears.
You could argue that American health care worked exactly as it should. Lazarus received the treatment he needed and the bulk of it was paid for by insurance, a point he acknowledges.
"Three thousand dollars out-of-pocket for a $55,000 bill -- there's going to be a lot of people who say, 'What are you griping about?'" says Lazarus. "But ... the average worker pays more than $4,000 a year in premiums for family coverage. So is $3,000 out-of-pocket a good deal? A bad deal? I don't know, because I don't know how much anything costs."
And yes, Lazarus still has the cat.
David Lazarus also guest-hosted our personal finance show, Marketplace Money, this past weekend. Click here to listen.
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He suggested that the medical system could change so that doctors could "Keep People Well". Doctors don't keep people well: people do that themselves when they exercise, eat healthy, lose weight, don't smoke, and take their prescribed medications. Many people are "unwell" because they do not do those things to "keep themselves well". Many are also unwell through no fault of their own: breast cancer, prostate cancer, colon cancer. Doctors can sometime DIAGNOSE cancer early, but we can't prevent it.
It is a huge misconception that health care costs will drop if doctors "Keep People Well". They WOULD drop dramatically if individuals did their part: avoid obesity (prevent diabetes), not smoke (prevent COPD), not drink excessively (alcoholism and complications), etc.
Richard Brasington, MD
St Louis, MO
As a biller several years ago I was writing off more than 50% of most bills. Then I got hurt and went to the ER. Since I was a temp and had no insurance I got a discount of 3% on my bill. Now I believe that hospital only gives self pay discounts of 1%.
The write offs are budgeted, they are not counted as losses.
Almost exactly the same thing happened to me about three years ago - the differences were it was my dog, I didn't have surgery, and I was only there about 48 hours. The total bill was a little over $27,000. I have pretty good insurance, so I ended only paying $90 out of pocket. The insurance company paid around $20,000.
It shocked me that for a stay in the hospital where the only care I received was intravenous antibiotics the bill was so huge.
The one thing you left out of the story is that if I had not had insurance the hospital would have billed me for for the full amount and I may not have been able to negotiate with that friendly hospital executive to get a rate similar to what my insurance company received.
The fact that no one can know the price of health care is one of the major problems with our system. The whole "set the price high and negotiate down" model simply pushes prices higher for everyone.
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Adding to what David D was saying, if Lazarus would request an itemized bill, the fiscal department would provide him one. Lazarus' first error was talking to a doctor about business dealings in the hospital. While Dr. Feinburg was correct in different rates being charged by hospitals, it is because the Center for Medicare/Medicaid Services reimburses at a far lower rate than private insurance companies do for similar services.
Because hospitals do not charge for nursing care or pharmacy care, items dispensed (medications and medical supplies) are upcharged from retail to recoup skilled personnel services which are not billed for directly.
Lazarus should have done his homework before filing his report. The lay public thinks if one has a healthcare question, ask a doctor. The reality is that their whole paradigm of science is in active evolution. No longer "captain of the ship", science has found that "evidence-based care" results in safer patient outcomes. More and more physicians are becoming employed by the healthcare organizations that they practice within. Rather that "captain of the ship" physician services are rapidly transcending into becoming an equal member of the healthcare team.
If Lazarus wanted a true explanation of his bill the hospital business office could have done that for him. But that wouldn't have made for emotion-evoking radio, would it?
Norma Larson, MSN, PhD(c), RN
Platt College
Tulsa, OK
Health insurers don’t pay hospital “charges” because the amount charged has very little to do with the “cost” of providing a service. The hospital buys a box of facial tissues for (maybe) 25 cents. However, through the hospital’s “charge structure” that box of tissues might be billed at $7.00. Likewise, an artificial knee might be purchased for $8,000 and billed at $12,000. This might appear to be a rip-off, except that hospitals don’t generally bill for each little item or service they provide. Instead, costs are bundled. That box of tissues and the artificial knee were each ordered, shipped, stocked, warehoused, delivered to the patient, and ultimately used. Each of those activities is not individually billed, but they do go into the charges on the bill. Knowing a bit about this system, health insurers don’t pay charges (when they can avoid them). They contract with hospitals, groups of hospitals, or groups of insurers, to pay at an agreed-upon “discount from charges” or at an agreed-upon rate for a bundle of services. Insurers negotiate the rates. Medicare and Medicaid rates are generally (not always) determined by the federal or state government, and may involve payments that don’t cover the hospital’s costs. The adequacy of all these payments can only be determined by how the hospital does for the entire year. Looking at any of this on the basis of an individual patient bill is almost meaningless. Oh, and those “excess charges” are not “funny money” (per Dr. Feinberg). From a patient’s point of view, they are “funny charges.”
ok, averages are averages and your average for a family of 4 falls way short! I was unemployed for three months last year and paid $1,627.95 per month in cobra payments. I reluctantly paid it because I know if you don't have coverage it's over $100,000 a night for a hospital stay. It's as bad as a Bernie Madoff ponzi scheme. Oh, I'm unemployed again so I get to do this circus all over again!
At least David's insurance company didn't lose his records! Last year (while I was unemployed) our insurance company lost our records submitted by a doctor's office. They didn't lose them once... they lost them multiple times. We almost ended up with the entire amount going to collections. Not only are the health insurance companies only focused on profits, they are incompetent in favor of their own profits. The system is broken. It squelches creativity which ultimately reduces our gdp and drives up blood pressures.
We had a child with a sudden and life threatening illness in early 2000 when insurance had limits of 1,000,000 lifetime maximums; so we routinely poured over our bills and called about things charged for services not rendered. Luckily a year into our child's treatment the maximum was doubled and soon there after it was eliminated.
Because we routinely scanned our bills we were amazed at the amout the insurance companies were able to discount the bills.
People must keep in mind that these higher costs are not only a profit for the hospital as stated in the article, but also offset expenditures by the hospital for treatment of uninsured individuals. Many hospitals don't have very much of a profit, because of expenses incurred by uninsured individuals and one must say this can depend upon location (lower socio- economic area hospitals encur more of these type of expenses). Thus, we should all be supportive of Obama care, which should bring down eveyones cost of healthcare even if it is only giving realistic values instead of the needed overinflated values on your insurance bills.
After all, insurance is mainly for catastrophic coverage, but one never knows when that will occur. So everyone should have medical insurance coverage.
In closing - a 6-day stay in the hospital is not a minor incident and a bill for $55,000.00 is reasonable from my perspective. He had 24hr medical staff available - that is what you pay for - not the HBO channel.
Thank you for this. I spent several years in Austria and the US system seemed even more corrupt when I came back than when I left. There I paid for my appointments and treatments (including two hospital stays for childbirth) and the charges were reasonable and the care was exemplary. In the US, no one knows what it costs to provide a service because of the way the insurance companies inflate and bloat the system--for their profit, not for their customer's health or wellness. I do not understand people who dismiss the single payer option. At least the gov't has an interest in keeping its citizens well so they can work and pay taxes; the insurance companies only care about you as long as you're paying more in premiums than you're costing in treatments. When that ratio shifts, they deny coverage and try to dump you, because it really is all about their shareholders and profit margins.
p.s. We have a cat who looks exactly like Bear; he's nippy, but so far hasn't inflicted any serious damage.
First - cat bites can be nasty, and I'm glad you're o.k.
Your story is very similar to mine (on a larger scale), which is why I set out to determine the industry standard for fair and reasonable hospital charges. What I learned was that I was being gouged for 800% profit for the services I received.
Here's the video I made with a 10-step process to hospital bill negotiation. I hope it helps anyone who needs it:
http://www.youtube.com/watch?v=wRsBFACxbB4
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