Experts: Carle's switch to provider-based billing not out of ordinary

Experts: Carle's switch to provider-based billing not out of ordinary

URBANA — A change in billing for the Carle Cancer Center got Kris Hamblin's attention in a big way.

Hamblin, 46, of Savoy, had been paying $142 every three months for Lupron shots as part of her breast cancer treatment.

But after the cancer center switched to provider-based billing six months ago, her cost more than quadrupled, to $630 every three months.

And that's just Hamblin's out-of-pocket expense. The charges turned in to her insurance company rose from $3,800 every three months to $15,077, she said.

"How could one service have that much of an increase?" she asks.

Under provider-based billing — a Medicare provision that winds up affecting both Medicare and non-Medicare patients where it's used — physician offices become outpatient departments of a hospital. So patients wind up getting two bills, one from the doctor and one for a facility charge.

The University of Illinois Hospital and Health Sciences System bills that way, and many other health systems across the country do the same.

Carle's cancer center and radiology departments switched to provider-based billing Dec. 1, 2012.

Other Carle patients will be affected soon, because Carle has also begun phasing in provider-based billing for its physician practice.

Effective June 1, that includes all Carle physician offices in the north and south clinics on the central Urbana campus except for oral and maxillofacial surgery, plus a handful of specialty services on the main campus.

Carle officials say most of the remaining Carle physician office locations will be converted to provider-based billing later in the year, with three Champaign branch clinics on Curtis Road, Kirby Avenue and Mattis Avenue and the Urbana branch clinic on Windsor Road all scheduled to switch g to this system July 1.

Even though she's questioned her bills, Hamblin says she doesn't want to be critical of Carle, because she feels she's gotten excellent care there through two cases of breast cancer.

But the increase in her out-of-pocket costs did prompt her to inquire if she could start getting her Lupron shots at Carle's branch clinic in Mahomet, she said.

Her primary care doctor's office looked into that, but indicated the cost would wind up being the same, Hamblin said.

The University of Illinois Hospital and Health Sciences System began provider-based billing more than a decade ago, says William Devoney, assistant vice president for health enterprise finance.

Under provider-based billing, that health system bills a bit less for the doctor bill and a bit less for the facility charge, "but together, they do pay better," Devoney said.

How much better? Provider-based billing brings in about 20 percent more revenue a year, he said.

Medicaid, the health care program for the needy, continues to pay its standard rate under this billing system, he says, but Medicare and managed care plans accept the extra payment.

Carle also says its physician fees "in most instances" will be lower to reflect the facility charge being billed separately.

Carle's Medicaid patients won't have any additional out-of-pocket expenses, and many Medicare patients with supplemental coverage also won't face any additional extra costs, Carle spokeswoman Jennifer Hendricks says.

And while patients will get separate bills from Carle Foundation Hospital and Carle Physician Group, this is no different than the way Carle already bills for other hospital-based services such as the emergency department, therapy services, lab services and surgical procedures, according to information about provider-based billing Carle has newly posted on its website at

Last year, the Medicare Payment Advisory Commission declared Medicare should pay similar amounts for similar services in freestanding doctors' offices and outpatient departments to reduce costs.

The difference in charges can be substantial. In 2011, Medicare paid 80 percent more for a 15-minute office visit in a hospital outpatient department than it did to a freestanding physician office. That creates an incentive for hospitals to purchase freestanding doctors' offices and convert them to outpatient departments without changing their location or patient mix, according to the report.

"It definitely enhances the revenue," Devoney said.

Hospitals need the money, their professional organizations contend.

Illinois hospitals are facing more than $11 billion in funding cuts over 10 years, says Illinois Hospital Association spokesman Danny Chun.

"That's a huge hit," he said.

The state hospital association doesn't keep track of how many member hospitals use provider-based billing, but on a national level, "it's common," Chun says.

At the same time, he said, there are expenses patients don't necessarily see, for example, for electronic medical records, and more on the way as millions of patients are added under the Affordable Care Act next year.

"It's not the particular service you're paying for," he adds. "It's the other stuff behind it."

Some other things to consider: Medicare rates are volatile and they don't cover costs for physicians and hospitals, says Erik Rasmussen, senior associate director of federal regulations for the American Hospital Association.

Hospitals also need to attract physician talent, making a provider-based billing arrangement increasingly common, he says.

Plus, he says, "physicians want to heal people," not deal with the paperwork involved in a freestanding office.

The AHA estimated a MedPAC recommendation to cap total payment for non-emergency department evaluation and management services in hospital outpatient departments at the same rate paid to doctors providing that service in private offices would cost hospitals $10 billion over 10 years.

Provider-based billing is a "well-intentioned idea to cover the hospital's overhead, which is going to be higher than an office-based physician would have," says Anthony Lo Sasso, a professor at the University of Illinois Institute of Government and Public Affairs.

But that's also giving doctor groups a great incentive to ally themselves to hospitals and collect higher payments, he says.

"It's a win for the provider group," he said.

The patient winds up getting essentially the same service, and some won't face much difference in their out-of-pocket expenses, either, Lo Sasso said.

The providers may lose some autonomy, he added, but "they wouldn't do it if they weren't better off. "

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rsp wrote on June 04, 2013 at 8:06 am

According to this story in the New York Times, it's very profitable.

EdRyan wrote on June 04, 2013 at 9:06 am

It is well established that charging rates in the medical care industry are based on pure fantasy so why not go for whatever the third party payers will go along with.  Of course they have their negotiated rates so who knows what the real bill is.

jlc wrote on June 04, 2013 at 10:06 am

""It definitely enhances the revenue," Devoney said...."It's not the particular service you're paying for," [Chun] adds. "It's the other stuff behind it.""

And that is the problem with for-profit healthcare right there, ladies and gentlemen.

vcponsardin wrote on June 04, 2013 at 10:06 am

People complain about the rising costs of higher education; how about the outrageous costs of medical care?  I just spent two days in Carle Hospital, underwent two tests (no surgery) and was "observed" by the staff.  They found nothing, did nothing, and then finally let me go home with nothing more than a farewell.  Total bill:  $31,800.  For two days and two tests!  They charged for two days in the hospital more than it costs for a FULL YEAR of tuition, fees, room and board at the University of Illinois.  And people complain about the cost of college?  There really is something seriously wrong with this picture...

foosball112 wrote on June 04, 2013 at 3:06 pm

Your point about the costs for tests is irrelevant when you compare the costs at Carle to the other local hospitals.

vcponsardin wrote on June 04, 2013 at 4:06 pm

In what way is my point irrelevant?  I wasn't trying to compare the outrageous costs of one hospitial to another.  But thanks for pointing out that other hospitals are also outrageously expensive.  I was pointing out that two nights at Carle costs more than a full year at the University of Illinois.  That some other hospitals actually charge MORE than Carle is somehow supposed to make me feel better?  How exactly?


rsp wrote on June 04, 2013 at 6:06 pm

Those prices are before Carle added the facilities charge. I guess you should consider yourself lucky. 

lcoil79 wrote on June 04, 2013 at 8:06 pm

Actually, as an inpatient stay, the facility charge would have already been there.  It's just the outpatient visits that are changing from a clinic outpatient to a hospital outpaitent perspective.