Apples to apples…

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Charges at Memorial and Penrose are roughly in line with each other, according to a report from the Colorado Hospital Association.
While charges for a particular diagnosis vary, officials at Memorial Health System believe their charges are roughly similar to Penrose-St. Francis Health Center.
“We’re higher in some, lower in others,” said Chief Financial Officer Gary Flasberg. “These charges are really just a generalization – actual charges can be either higher or lower, depending on the particular patient, what their doctor orders and what the diagnosis is.”
Officials at Penrose say the same: they make sure their charges are comparable, not only to Memorial’s, but to other hospitals that are similar in size and services, said Mike Scialdone, chief financial officer at Penrose.
“Our goal is to keep our charges in the 80th to 90th percentile, compared with other hospitals that are like ours,” he said. “It’s a good source to gauge the changes in the marketplace.”
The hospital association report, “Hospital Charges and Average Length of Stay,” covers the average costs of various illnesses in the state’s hospitals. The association has been producing the report for about 20 years.
“It really benefits just about anybody,” said CHA spokesman Rick Haugh. “Hospitals use it, and we distribute it to public libraries. Researchers and public health officials also use the report – anyone interested in lengths of stay.”
The report is meant to provide some transparency about costs for particular services, but Flasburg said it does have some flaws.
“It’s hard to compare hospital to hospital using this report,” he said. “There’s just too much left out that has to be considered. Physician preference is one of them – a doctor might prefer to use an implant, for example, that is more expensive than what another doctor might order.”
Memorial applied some math to get an apples-to-apples comparison of charges. The average Memorial charge for a hospital stay is a $17,713. Penrose’s is slightly lower, about $16,597.
“But we have a radically different patient base than Penrose,” he said. “We have more patients for some things; they have more patients for others.”
So the hospital then took the figures for its patient bases and compared them to Penrose’s charges. Using those figures, Penrose’s average stay leapt to more than $19,000.
“That’s unusual,” he said. “We’re usually more in line with them than that. And we took a look, and found out that it’s the difference in the procedures – in charges and volumes, so those factors were weighted more heavily. But overall, on average, I think our charges are pretty much in line with theirs.”
Penrose also “crunches” the numbers, but Scialdone said it uses other reports and other hospitals in its figure. The hospital’s overall goal is to charge about 85 percent of what other hospitals charge.
Researchers do find the report to be beneficial, and Dr. Paul Rosser, assistant professor at Regis University’s School of Professional Studies, said hospital transparency is going to be a major issue in the future.
“Because cost is going up for care, they ought to be able to distinguish between hospitals and physicians,” he said. “Historically, there’s been a resistance to that. Hospitals don’t view themselves as a business with a role defined by the market. But people are trying to figure out where to go based on historically accepted measures. This report is as close as we’re going to get at this time.”
Haugh acknowledges that the report is only a good “starting point,” for people researching the costs associated with a particular illness.
“The problem we run into is that charges are all over the board,” he said. “We have a warped system because health insurers contract with hospitals for certain charges. The numbers that we start with are almost never what we end up with. It’s just not an accurate representation; it’s more of a general overview.”
Another flaw in the report is that Memorial and Penrose are grouped with “other metropolitan hospitals,” a grouping that includes Grand Junction and Boulder, but not Denver Metro hospitals.
That listing is unfair to the Colorado Springs hospitals, whose services are much more comparable to Denver’s than to smaller hospitals in other areas, Flasburg said.
“We have a lot more tertiary services than they do in Grand Junction,” he said. “They’re just a lot smaller hospital. It would be much better to compare us to Denver metro hospitals – and when you do that, we’re much cheaper.”
The report isn’t particularly useful to hospitals, Flasburg said, although Memorial does use it to compare its charges with Penrose-St. Francis Health Center. Consumers should also be wary when looking at the report, which runs more than 300 pages.
“It’s just not going to give you an accurate picture of the charges,” he said. “It depends too much on the patient condition and the doctor’s preferences.”
But for Penrose, the report offers a chance to compare its charges to other hospitals. The hospital takes the report and uses it in conjunction with other reports from different organizations. That allows the hospital to adjust its costs, Scialdone said.
“We don’t just look at Memorial, although we pay close attention to their charges because they are our main competitor in Colorado Springs,” he said. “But we also look at the other hospitals. We do not want to be the hospital with the highest charges out there, so we adjust line items when we receive the report.”