A Tylenol Can Cost $7 Depending on the Hospital, Uniform Pricing Needed

Santa Monica, CA — Only about half of the California’s 420 hospitals have submitted their pricing lists, as required by state law. The deadline for submissions is the end of the day today. The so-called “chargemasters” are significant because they compare the prices of services at different hospitals across the state — identifying price gouging and huge price swings. For example, according to 2004 chargemaster data, the cost of a single 325 mg Tylenol tablet at Scripps Memorial in La Jolla was $7.06 compared to $1 at UC Davis and $5.50 at San Francisco General. At Doctors hospital in Modesto Tylenol was free.

The Foundation for Taxpayer and Consumer Rights (FTCR) said that submitting price lists is only the first step — hospital charges should be standardized with allowances for local differences in business costs so that all all hospitals receive a comparable amount for similar procedures.

“It’s absurd that a patient in one part of the state pays $7 for a Tylenol while another gets the pill for free,” said Jerry Flanagan of FTCR. “The only way to ensure access to emergency rooms and hospitals is by employing the same model that California once used to protect our electricity costs and still does for water and telephone service: public utility regulation. HMOs and some hospitals are making a killing, while the county system is hemorrhaging.”

“Cost shifting” — the practice of charging uninsured patients more for the same service to compensate for discounts given to patients in HMO plans — has undermined the health care system and forced many urban hospitals to close.
Ultimately, cost shifting costs taxpayers more because the uninsured are forced to wait until illnesses are critical before seeking care in Emergency Rooms where care is much more expensive. Many patients go without necessary care.

AB 1672, authored by Assemblyman Dario Frommer (D-Glendale) and signed into law in 2003, requires California’s 420 acute care hospitals to annually submit a copy of its chargemaster and list of charges for 25 services or procedures commonly charged to patients to the Office of Statewide Health Planning and Development (OSHPD). Beginning in 2004, hospitals were required to make this information available to the public. Under the 2003 law, “small and rural” hospitals are exempt from the reporting requirements.

Price Disparities

An analysis of 2004 data showed huge disparities in what different hospitals charge for the same procedures. For example, Scripps Memorial in La Jolla charged $881.90 for a head/brain CT/-scan. For the same procedure, San Francisco General charged $950, Sutter General in Sacramento charged $2,807, and Cedars-Sinai in Los Angeles charged $4,037.61.

Maryland

Beginning in the 1970’s, Maryland has protected the stability of its hospital system through an independent commission that determines appropriate reimbursements for hospitals, and all payers are required to pay commission-approved rates. The system ensures access to essential services, controls prices and rationalizes cost shifting, where payments from the insured or taxpayer commonly cover the uninsured. Maryland is one of the few states where the hospital system is not overburdened or insolvent.

The rate-setting system for Maryland hospitals operates under the principles that similar services at similar hospitals should cost the same; that charges should be related to actual costs; and that all payers should share the burden of “uncompensated” care for the uninsured. The system has had widespread support and has been a success in reducing the costs of care.

Public Utility

Public utility regulation of health services in California would create an independent body with representation from patients, providers and other stakeholders to determine the equity of the financing of vital community medical infrastructure and to guarantee adequate public access to emergency rooms and hospitals. For example, the cost-control commission could set reasonable limits on profit-taking by hospitals, HMOs and doctors and guarantee sufficient payments to providers.

For more information about AB 1672 (Frommer), chargemasters and OSHPD go to: http://www.oshpd.cahwnet.gov/HID/hospital/chrgmster/index.htm

FTCR is conducting health care town halls throughout California with patients, business owners, doctors, nurses and hospital executives. A common theme of these meetings has been the need to rid the health care system of waste, inefficiency and profiteering and to reinvest savings to increase access to care.

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The Foundation for Taxpayer and Consumer Rights (FTCR) is a leading nonpartisan and nonprofit consumer advocacy organization.