How Much Does Hip Surgery Cost? A Medicare Patient's Experience.

My father recently broke his hip and had a one week stay at Banner Thunderbird hospital in Phoenix, AZ. I recently wrote about that experience from my perspective. As promised, I will show you the economics of that hospital stay.  As you may or may not be aware, most large hospitals get paid by the Medicare National Bank  using algorithms that define the economic value of  more than 700 diagnosis related groups (DRGs).  The payments are based on these DRG principle diagnoses with add on   complicating conditions (CC) and major complicating conditions (MCC).   A hip fracture admission gets paid a different amount than a pneumonia admission.  A pneumonia admission gets paid a different amount than a stroke admission.   Whether the patient was in the hospital for two days or two weeks doesn't matter.  The payment would be the same.  However, a hip fracture complicated by a CC or an MCC may get paid more than a hip fracture without any complicating conditions.  This is why length of stay is important in hospital economics.  

You can see how transparency in hospital economics can become quite difficult quite quickly.  It's hard to tell a patient what the cash price for a hip fracture surgery will  be when the cost of care is only known after the fact.  In fact, even Medicare can't tell a hospital how much they are going to make until the patient is discharged because the price is dependent on the preexisting complicating conditions and the hundreds of potentially complicating  conditions that may or may not arise during the hospital stay.   

This is why clinical documentation nurse specialists and hospitalists, working in collaboration, have become necessary for hospitals to survive the negative Medicare margins  they now enjoy with a smile.   Clinical nurse specialists have been hired by hospitals all across the country to scour patient charts, in real time,  and to find those CC and MCCs that provide additional payment for DRGs so  physicians can document them in the chart. 

Did you know if your hospitalist fails to document "morbid obesity" on an 800 pound patient or forgets to write "severe protein malnutrition" on a patient with a documented albumin of 1.5, hospitals can lose millions of dollars a year in funding for care related to these complicated contributing conditions.   If we don't document "pink elephant present" in the chart, even though the elephant took a giant pink poop on the chart, hospitals won't get paid extra for the effort.  Nothing can be assumed, except the assumption that we must assume no common sense is present. 

This is why hospitalist physicians are so valuable to hospitals and why hospitals are willing to pay hospitalists over $130,000 per hospitalist per year to  subsidize and support hospitalist salaries.  Evaluation and management economics have failed miserably to capture the 57 million dollar hospitalist advantage on the back end.  Hospitals are willing to pay for that value when they get buy-in from hospitalists on these types of accounting games forced upon us by unfunded government mandates.   Remember doctors, these are the dollars that allow hospitals to provide all that  free food in the doctor's lounge.  You won't find any hospital Foundation supporting that amenity.

So how much does a hip fracture surgery cost at Banner Thunderbird hospital in Phoenix, AZ?  In my father's case, it was a hip pinning which is different from a total or partial joint replacement, but it was hip fracture surgery none the less.  Transparency is difficult in health care because many medically necessary and medically unnecessary cares provided are only known after the fact.    Here is a review of  what the hospital charged for his eight day hospital stay and how much the hospital agreed to accept from Medicare as payment in full.

Total Charges and Allowable Medicare Payments for Hip Fracture Repair at Banner Thunderbird Hospital In Phoenix, AZ (2012)

Inpatient Charges (2012) For Hip Fracture Repair at Banner Thunderbird Hospital

As you can see, the hospital charged $56,867.10 for my father's eight day hospital stay for his hip fracture.  The hospital agreed to accept $19,688.50 at payment in full.  The $1,156 deductible was included in the charge and was paid for by his supplemental Medicare policy.  What a hospital charges and what they collect are always going to be different.  Is it reasonable to pay a $400 facility fee for an EKG?  Is $43.70 reasonable for a dip stick urinalysis? Is $6,000 for a hip grade titanium nail reasonable?

You decide.  These types of charges are why patients get furious when their home medications are not paid for under DRG economics of observation hospitals stays.  If a hospital is going to charge $40 for a urinalysis, they are going to charge $40 for a home dose of lisinopril.

On the other hand, is Medicare's payment of 34.6% on the charged dollar an acceptable amount?  Can hospitals continue to survive when Medicare and Medicaid payments continue to pressure margins?  Will their demise accelerate under ObamaCare's promise to decimate hospital funding under the current subsidizing private market?  Questions to think about in the next few years.  I guarantee you'll hear more and more about hospitals shutting down, especially in the inner cities and the people in these communities demanding their government save them with money they don't have.

With that said, how much did all the physicians get paid for their care during my father's 8 day hospital stay? In the table below, the first column is the charge submitted by the physician.  The second charge is the payment the physician has agreed to accept from Medicare.   How long will they continue to accept these rates?

Total Physician Charges For Hip Fracture Surgery (2012)

What where the totals billed and totals paid to these physicians?  

Total charges submitted by physicians were $6,747.24 during this eight day hip fracture hospital admission (less than 11.8% of what the hospital submitted for their charges) .  The total agreed upon allowable charges to these physicians from Medicare was $2,539.64 (12.9% of what the hospital was paid for their services).  40% of the paid amount went to the orthopaedic surgeon for this surgical effort   and his 90 day global period in which his assistant cares for all his brief daily hospital follow up visits and an office visit or two in the following month.

In other words, these physicians have agreed to accept 37.7% of their billed dollar as payment in full from Medicare for their services.  On January 1st, 2012, if Congress fails to act, physician compensation will experience an across the board cut of approximately 27.5% due to the failed SGR economics implemented by Congress nearly 20 years ago.  

If one were to apply that cut to these physicians caring for my father on January 2nd, 2013, Medicare would only agree to pay the combined total of $1,841,21 for allowing the ER doctor, the radiologist, the anesthesiologist, hospitalist, neurologist, the gastroenterologist, oh, and the surgeon the right to take care of him for eight long and difficult days.  That's only 27% of the billable dollar.  For many states, that's what their Medicaid rates allow.  And that's why many Medicaid patients can't find a doctor. 

How expensive is hip fracture surgery in Phoenix, Arizona? Over $20,000 in this case.  As described, just over 10% of that was provided to all the physicians who cared for him for over a week.  I believe Joe Public wants to believe physicians are getting rich off of Medicare and could care less if physicians rates were slashed.  If they understood what physicians actually earned from Medicare for taking care of the complicated elderly and disabled in this country, they would better appreciate how grave the current financing holes really are  and why entitlement reform must move forward onto the backs of the beneficiaries.

And when ObamaCare presents its ugly head with the insurance exchanges and businesses abandon health care benefits en mass and private insurance payments plummet on the health exchanges, I believe more and more physicians are simply going to opt out of all insurance in favor of  concierge practices supported by middle class and upper class patients willing to pay for the right to access physician expertise and education.  I recommend those that can should start maximizing their HSA contributions. They're going to need all the help they can get.


CMS has now agreed to pay for personalized engraved messages joint replacement hardware. That's right folks: orthopedic implant tattoos are the next greatest thing in patient satisfaction!

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