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News of the Day ... In Perspective

3/23/2007

State Farm sues Florida Hospital for inflated prices; transparency coming but faces obstacles

Florida’s largest auto insurer is suing the state’s largest hospital system, Florida Hospital, alleging that its officials “set their charges for medical services at highly inflated rates that bear no connection to the actual cost of providing the services.”

State Farm’s main concern may be the Florida no-fault auto-insurance law that requires insurers to pay up to $10,000 on personal-injury claims, but its lawsuit raises many difficult issues on hospital pricing.

Agreeing that hospital prices often make little sense, Florida Hospital senior vice president Ralph Glatfelter said: “It’s a product of 40 years of federal policy on Medicare….”

Hospitals are required by law to have a master list with every service and product they supply. Orlando Regional’s chargemaster has 38,000 items. Rather than re-price each item every year, hospitals do across-the-board increases each year so that revenue can keep pace with costs. With the mix of old and new items, some are marked up 4,000 percent, and others 110 percent.

“Health care is unique in that the person receiving the services is usually not the person who is paying for the services,” said Becky Cherney, who represents many of central Florida’s largest employers as head of the Florida Health Care Coalition. “That gap has left hospitals free to go wherever they feel a need to go” in setting prices.

Hospitals inflate the prices on their chargemaster so they can cover their costs even when they give large discounts to large insurance companies.

Some hospitals will give prospective patients an estimate of how much their services will cost. Cherney is seeking to make the chargemaster a public document.

Price transparency is a year or two away, said Keith Eggert, vice president for revenue management at Orlando Regional Healthcare. It will require re-setting prices on each of the 28,000 chargemaster items to reflect their true cost (Orlando Sentinel 3/12/07).

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