Outrageously Expensive ER Bills, Explained
If I received a bill for thousands of dollars I would be pissed too, and I totally hear you. I really do, because as Medical Director in the ER, I get to hear all the patient complaints, and complaints about billing are the most frequent. And while I — just a lowly ER doctor in the grand scheme of Hospital power — can’t change your bill, I can at least explain it.
For the record, I agree with you: Your bill shouldn’t be that high, but unfortunately that is how much hospitals charge. Someday maybe the system will change, but before that can happen we all need to understand how and why the cost of care is so high. So grab your ER bill and follow along, here is not just what you were charged for, but also why.
Fact: ERs are the most expensive place to access healthcare.
Think back to the day you had to go to the ER. This wasn’t a trip to your doctor, not to Urgent Care, but the ER. Maybe you had to go there because you were feeling so miserable, or it was for something serious, or it was 2am and every cheaper option was closed. You spent hours there, underwent some tests or interventions, and then, exhausted but reinforced with some answers or treatment you headed home. 2 months later you’re feeling all better when the bill arrives. Hopefully you’re sitting down, because the price tag is going to be 4, if not 5, digits long.
Unfortunately, the ER is the most expensive place to get care. Urgent Care is faster and cheaper, but limited in what they can do. Seeing your Primary Care Provider (if you have one) would have been the most affordable choice, but it’s nearly impossible to get a same-day appointment. If you ended up in the ER with a minor illness because it was your only option, it’s not your fault: the healthcare system didn’t offer you cheaper options and you had only one expensive option.
Now that you’ve seen the astronomical bill you agree with me: ER care is expensive. But what exactly are all the items on your bill? Where did they come from? Here are some of the most common charges:
The ER charged you a Facility Fee.
This is one of the largest line items on your bill. It goes by a few different names but this item has a price of hundreds or thousands of dollars, depending on how sick you were and which facility you went to.
Think of the facility fee as a cover charge at a club or resort. This is the hospital’s charge to keep the lights on and the doors open. It covers your nurse’s salary, the bed underneath you, and the monitors and equipment in the room. This fee covers readiness, ie: it helps support the ER so that it is available for patients 24/7/365.
This fee may vary based on how severe your symptoms were. Just a sprained ankle? Lower fee. Having a heart attack? Higher fee. The range reflects how much nursing time and space you’ll take up, how many resources and attention you’ll need based on the ESI algorithm.
You were also charged to see a Provider.
This is a relatively big ticket as well. Whether you saw an MD or PA, it’s still a high priced line on your bill, referenced by a CPT code in the range of 99282 to 99285. Different facilities charge more or less for their ER doctors, but this is likely a few hundred dollars of the total. In some facilities, the doctor actually gets paid this charge, but in my experience, the hospital is usually pocketing the majority.
The different CPT codes are intended to reflect risk, acuity, and decision making. Simple ankle sprain: lower CPT. Knife stabbed into the belly: higher acuity and higher CPT code. Thus, the Doctor gets paid less for the easy cases, and more for the complicated ones.
You pay for the Stuff that was used in your visit.
IV supplies, bandaids, medications, a sling, disposable monitor cords, etc — the list can get quite long. Plus, there is often a range of charges for delivering these items: was the EKG performed by a tech or a Respiratory Therapist? Were the medications given as a pill or an injection? Fair or not, all of these prices are marked up from regular prices, much like a bottle of wine in a restaurant.
And then there are the Medical Procedures.
Did you need your dislocated shoulder reduced? A laceration sutured? These each carry an additional billing code, because they are hands-on interventions from your Doctor. Lacerations less than 2.5cm are one charge, while over 2.5cm is a higher charge. Shallow wounds are cheaper, deeper wounds requiring layers of stitches will cost more. While you might not agree with the high prices of these procedures, we can probably agree that some procedures are minor and some are very involved, thus the range of charges
But wait, there’s more!
Be prepared for when other bills arrive separately, because this big hospital bill may not be your only bill. Depending on what you were seen for, you may get separate bills for anesthesia, from a Radiologist, Orthopedics, etc.
That was everything that went into determining how much the hospital charged you. That may or may not be what you actually owe, so let’s figure out how much you will actually pay, and why.
The Hospital Charge: Healthcare’s “MSRP”
Take a look at the paper in front of you. Are you looking at Hospital charges, or at your actual “pay this amount” bill? Charges are the retail price that the hospital charges. Much like MSRP on a new vehicle, most people don’t pay this full amount.
If you have private payor insurance, your insurance carrier will likely have negotiated a lower rate with the hospital. If the hospital charged you an average-ish $2400 ER visit, your insurance likely reduced this to an “allowed” amount of closer to $2000. The insurance company negotiated this lower price to save them money, but it helps you out as well because this lower allowed amount is what you and your insurance together will remit to the hospital.
How much will you owe? Well, how good is your coverage?
Depending on your insurance plan, the covered amount will vary and you will be on the hook for some percentage of the allowed amount. If you have a platinum plan, maybe 90% of it will be covered. If you have a high-deductible plan and haven’t met your deductible, the allowed $2000 is your responsibility; but at least your insurance saved you $400 up front.
The True Cost of Care.
But still, why is it so expensive? Isn’t this a crazy bill? You might feel like you didn’t receive $2000 of value, and you’d right, you did not receive $2000 of value. Instead, most of your money is subsidizing other patients’ care.
Recall how your insurance has negotiated a discount with the hospital? Can you guess which insurer has the most patients, and thus the best negotiating power? Answer: The US government through CMS/Medicare/Medicaid. While your insurance got you a deal where you only pay 80%, CMS uses some complicated formulas to reimburse a much lower number, sometimes down to around 30% of the charges. That’s a discount so huge that ERs lose money on these patients. Because the ER is not allowed to turn patients away, the losses add up. Your $2000 bill goes towards offsetting these losses.
It’s good that CMS insurance exists because otherwise the poor and elderly wouldn’t have any insurance to pay with. But is it fair that your ER bill subsidizes other bills? I’m not a politician, so I’ll leave this as a rhetorical question.
But really?!? One more time, why is the ER so expensive?!?
If CMS is only going to pay 30% of the hospital’s MSRP and that doesn’t cover the ER’s operating expenses, what can the hospital do? The only option they have is to raise prices. Maybe you think $1000 would have been a more fair bill, but 30% of $2400 is much better revenue than 30% of $1000. And since the ER can’t set different prices for different patients, everyone gets charged the high retail prices.
Many hospitals are non-profit, and every dollar counts. Even in the richest health centers, the ER is usually a necessary but money-losing service line, and that’s why you received a huge bill. I’m not saying it’s fair, and it certainly is not transparent, but it is what the ER has to do to keep the lights on and the doors open.