longreads | Bitter Pill: Why Medical Bills Are Killing Us

One night last summer at her home near Stamford, Conn., a 64-year-old former sales clerk whom I’ll call Janice S. felt chest pains. She was taken four miles by ambulance to the emergency room at Stamford Hospital, officially a nonprofit institution. After about three hours of tests and some brief encounters with a doctor, she was told she had indigestion and sent home. That was the good news.

The bad news was the bill: $995 for the ambulance ride, $3,000 for the doctors and $17,000 for the hospital — in sum, $21,000 for a false alarm.

Out of work for a year, Janice S. had no insurance. Among the hospital’s charges were three “TROPONIN I” tests for $199.50 each. According to a National Institutes of Health website, a troponin test “measures the levels of certain proteins in the blood” whose release from the heart is a strong indicator of a heart attack. Some labs like to have the test done at intervals, so the fact that Janice S. got three of them is not necessarily an issue. The price is the problem. Stamford Hospital spokesman Scott Orstad told me that the $199.50 figure for the troponin test was taken from what he called the hospital’s chargemaster. The chargemaster, I learned, is every hospital’s internal price list. Decades ago it was a document the size of a phone book; now it’s a massive computer file, thousands of items long, maintained by every hospital.

Stamford Hospital’s chargemaster assigns prices to everything, including Janice S.’s blood tests. It would seem to be an important document. However, I quickly found that although every hospital has a chargemaster, officials treat it as if it were an eccentric uncle living in the attic. Whenever I asked, they deflected all conversation away from it. They even argued that it is irrelevant. I soon found that they have good reason to hope that outsiders pay no attention to the chargemaster or the process that produces it. For there seems to be no process, no rationale, behind the core document that is the basis for hundreds of billions of dollars in health care bills.

Because she was 64, not 65, Janice S. was not on Medicare. But seeing what Medicare would have paid Stamford Hospital for the troponin test if she had been a year older shines a bright light on the role the chargemaster plays in our national medical crisis — and helps us understand the illegitimacy of that $199.50 charge. That’s because Medicare collects troves of data on what every type of treatment, test and other service costs hospitals to deliver. Medicare takes seriously the notion that nonprofit hospitals should be paid for all their costs but actually be nonprofit after their calculation. Thus, under the law, Medicare is supposed to reimburse hospitals for any given service, factoring in not only direct costs but also allocated expenses such as overhead, capital expenses, executive salaries, insurance, differences in regional costs of living and even the education of medical students.

It turns out that Medicare would have paid Stamford $13.94 for each troponin test rather than the $199.50 Janice S. was charged.

-Bitter Pill: Why Medical Bills Are Killing Us