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How to keep your hospital costs under control

Hospital costs keep increasing, leaving many patients at risk of having to dig deeper into their wallets to pay for health care.

A study released in spring 2013 by the America's Health Insurance Plans (AHIP) trade association found that inpatient hospital costs rose 8.2 percent per year from 2008 to 2010.

The AHIP report also found a wide variation in both prices charged and the rate of price increases across states and localities.

hospital costs

In May 2013, the New York Times ran a piece highlighting such disparities. Using data from the Centers for Medicare and Medicaid Services, the Times looked at the cost of the 100 most common treatments and procedures in more than 3,000 hospitals nationwide.

The Times found many examples of widely varied pricing. For example, a hospital in St. Augustine, Fla., billed $40,000 for a gallbladder removal procedure, while another hospital in Orange Park, Fla., charged $91,000 for the same procedure.

Why are hospital costs so high?

Hospital costs are climbing for many reasons, says Jennifer Schleman, a spokeswoman with the American Hospital Association, an organization that represents 5,000 hospitals, health care systems, networks and other providers of care.

For example, some hospitals have higher costs because they support environments that help train health care professionals, including physicians. That means they must provide extra resources, such as ongoing supervised, hands-on training for new physicians and cutting-edge services and equipment, according to the Association of Medical Colleges. These and other hospitals also conduct medical research.

Many hospitals also treat large numbers of uninsured patients despite knowing the hospital is unlikely to receive payment for those services. Treatment of uninsured patients resulted in more than $41 billion in uncompensated care in 2011, Schleman says.

In addition, it can be expensive to maintain around-the-clock emergency care, and trauma and burn units, she says.

All of these factors add to a hospital's expenses, Schleman says. Hospitals attempt to mitigate these costs by charging private insurers – or the government or individuals – more than the cost of the procedure or service itself.

Hospitals frequently do not receive full payment of those charges.

"In many cases – especially in Medicare payments – hospitals receive less than both the charges and the cost of health care," Schleman says.

Amy Bach, executive director at the nonprofit consumer advocacy group United Policyholders, believes hospital overcharges are a result of a health insurance system bloated with counterproductive incentives, inflated costs and inefficiencies.

"The classic story (United Policyholders) hears from consumers is how they're being hit with a $1,000 bill for a blood test at a hospital that they could have gotten for under $100 at an out-patient clinic," she says.

However, Bach says she understands a hospital's motivation for charging such high rates.

Bach says that if she was an executive of a hospital that provided emergency care to poor patients with no health insurance and no means to pay their medical bills, "I'd be looking to cover that cost however I could, too."

4 tips on how to keep your hospital costs low

Here are 4 ways that patients can keep hospital costs low.

1. Ask questions about your cost-sharing responsibilities.

Schleman says most patients have one chief concern about hospital costs.

"What consumers really want is information about what they are required to pay out of pocket," she says.

Patients can answer that question by talking to both their physician and health insurance company about the patient's cost responsibility at a specific hospital, or within a health care system, Schleman says.

Robin Gelburd, president of the nonprofit FAIR Health, also believes consumers need to be proactive to keep costs down.

FAIR Health was formed as part of a settlement of an investigation by former New York Attorney General Andrew Cuomo into the health insurance industry's pricing methods.

The organization maintains a database of health care charge information, and has tools and information on its website intended to help consumers determine their hospital costs, and how they can reduce them.

2. Remain in-network.

Gelburd urges patients to choose hospitals that are in their insurance plan's network. Going out of a health insurance plan's network for care usually results in costly charges for the policyholder.

Also, patients should choose hospitals where their medical providers have admitting privileges, which is the right of the provider to admit patients to that particular hospital.

3. Call your health insurance company before procedures.

When possible, patients should call their insurer prior to any hospital stay and ask the insurer to preauthorize tests and procedures, Gelburd says. Patients having surgery must make sure all providers – including surgeons, radiologists, pathologists and anesthesiologists – are in their insurer's network, or they could face bills for out-of-network care.

"The best way to minimize your costs is to ensure that your insurer covers as many of those costs as possible," Gelburd says.

Gelburd says some states – such as Massachusetts, New Hampshire and Maine – have government websites that can help people determine their likely costs for various types of care.

4. Delay procedures with high out-of-pocket costs.

Consumers whose insurance isn’t comprehensive – or who have no insurance – shouldn’t be shy or embarrassed about airing their concerns regarding out-of-pocket costs when being admitted to a hospital, Bach says.

"Politely tell the admitting nurse and caregivers that your insurance plan caps various expenses," she says.

Patients should ask hospitals to hold off on any procedures, treatments or tests that are optional or nonessential, or that can be done on an outpatient basis somewhere else for a reduced price, Bach says.

"That doesn't mean you should refuse anything they recommend," she says. "You shouldn't."

While it is important to keep an eye on your bottom line, Bach notes that you never should let cost concerns overrule good judgment about care necessary to ensure your long-term health.

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