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Some Charlotte-area hospitals could cut charges and still be profitable

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Some Charlotte-area hospitals could cut thousands of dollars in charges for their private patients and still have plenty left over to run their hospitals, according to data released this week by the National Academy for State Health Policy. Anyone can dig into its new online tool.

Nationally, hospitals charge those with commercial insurance 2 1/2 what Medicare pays. But do they need to bill that much? How much profit are they making?

Those are the $64,000 questions, says Elizabeth Mitchell, who heads the Purchasers Business Group on Health, which represents large companies and public purchasers — like state health plans. And she worries about the term "hospital profit.”

"Remember, profit for a hospital comes from employers and public purchasers. It does not come from Medicare (or) Medicaid," Mitchell said. "So all of their 'profit' is money we are overpaying."

For the large, self-insured employers Mitchell’s group represents — companies like Walmart, Microsoft and Cisco — the calculator will help them rein in costs when they’re negotiating rates.

"They will have to use this information in their contracting and purchasing to really fully leverage it," Mitchell said.

They can leverage them because most of the underlying data comes from the hospitals themselves. It’s what they send to Medicare each year. So employers see Atrium’s Carolinas Medical Center in Charlotte made $3,000 above costs for each private patient in 2019 — about a 36% profit. Others didn’t do as well, but together, Atrium’s 15 North Carolina hospitals made a 29% profit.

Novant’s Presbyterian Medical Center in Charlotte earned only 9%. But its Huntersville hospital made a healthy 29%, and its Matthews hospital earned 24%. CaroMont Regional Medical Center in Gastonia earned a 10% profit.

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The online tool is the brainchild of Marilyn Bartlett. She got the idea when she was the head of Montana’s state employee health plan in 2014 when she was trying to save the plan from bankruptcy.

"It clearly shows you that hospitals are able to set their revenue and up whatever they want to cover their expenses," Bartlett said.

To lower costs for Montana’s health plan, she needed to understand hospitals’ costs.

"I love digging into the numbers. I love following the money. I just love it," Bartlett said. "I’m also not very patient with bull—-."

Bartlett says Montana hospitals didn’t want to tell her what their costs were or how much they needed to break even. So spent her own money to buy a subscription to a database of the hospitals’ reports to Medicare.

"So I built this little model because the hospitals were telling me that we lose 40% on Medicaid and 80% on Medicare and I could go back and I’d say, 'No you aren’t.'”

Data in hand, Bartlett was ultimately able to negotiate down payments by figuring out what each hospital needed to break even. Since Medicare decides what it will pay based on hospital costs, Bartlett agreed to pay each hospital “Medicare plus” to make sure they’d still make a profit, but less than they’d previously earned.

"It didn’t make me any friends," Bartlett said.

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The online calculator also includes other hospital investments. It shows Charlotte’s Presbyterian Medical Center charges 280% of Medicare rates, but in 2019 it could have broken even charging 171% of Medicare rates. Carolinas Medical Center charges 352% of Medicare rates. In 2019, it could have broken even at only 51% but would have needed more than double that in earlier years.

WFAE asked Atrium, Novant and the North Carolina Healthcare Association for interviews. The North Carolina Hospital Association sent a statement in which it pointed out there are limits on some of the data used to calculate hospitals’ break-even. And it says hospitals spend a lot on community benefits outside of direct patient care, like programs to address food insecurity. In Charlotte, Atrium is establishing a four-year year medical school.

But Mitchell questions whether big employers should be paying for all those community benefits.

"When you see a hospital launched, a venture fund or a shiny new research institute, that is all coming from overpayment from my members and others," Mitchell said.

Bartlett says the calculator will allow employers, policymakers and hospitals to have an informed debate over costs.

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