The Regional Medical Center in September approved a 6 percent increase in charges for its current fiscal year, but exactly how the increase will impact individual payers is a complex matter depending on method of payment or -- in some cases -- nonpayment for hospital services.

“We have different payers,” RMC President and CEO Tom Dandridge said. “It is based on so many different parameters.”

For example, the hospital has patients on Medicare and Medicaid -- which make up about 70 percent of all payers.

These payers have fixed fee arrangements that are impacted little by an increase in charges.

About 11 percent of the hospital’s patients either have no ability to pay or choose not to pay, thus receiving services for free.

The patients most likely to see an increase would be the remaining 19 percent who are with private insurance companies such as Blue Cross Blue Shield and UnitedHealthcare.

But how much of an increase will be experienced in any given circumstance again depends on insurance plan and services rendered.

“Commercial payers like Blue Cross, United, all have different payment arrangements with us,” Dandridge said.

Hospital Chief Financial Officer Cheryl Mason said these individuals likely will not see their deductible increase since these are typically fixed, but she said any increase seen among these payers likely would be a part of a coinsurance payment.

Coinsurance is a percentage of participation that falls on insurer after a deductible is met.

After the deductible is met, the insurer splits the cost with the insurance provider.

For instance, if a health plan has an 80/20 co-payment rate, it pays for 80 percent of eligible medical expenses with a person being responsible for the remaining 20 percent.

To compensate for the possibility that a catastrophic medical loss could cause severe financial distress, many major health insurance carries include a “coinsurance cap,” or stop-loss limit in their plans.

The provision sets limits on a person’s potential out-of-pocket costs per year. Such caps generally range from $2,000 to $3,000.

“You might raise up to that cap faster, but it does not change the basic parameters in their policy,” Mason said.

For example, Dandridge said, if you are a commercial payer with Blue Cross or UnitedHealthcare and your bill is $30,000 and your coinsurance is 10 percent, you pay $3,000.

With charges going up 6 percent, the bill would be about $31,800. With a 10 percent coinsurance, the out-of-pocket would increase to about $3,180.

But again, Dandridge said, the number of variables involved does not warrant speaking in generalities.

Mason echoed that sentiment.

“We have some people who may have the options where they feel they are pretty healthy and so they’ll opt for a plan that has high deductibles and coinsurances as a trade off for lower premiums,” she said.

The reason for the increase in these commercial payers is related to the fact that the hospital by law has to provide health care for all regardless of ability to pay.

Dandridge said the cost has to fall on the commercial payer in that the hospital gets very little from government payers such as Medicare or Medicaid. He said the hospital collects about a third of a bill, with the other portion having to be written off.

Also, the hospital in the coming year is projecting to see a number of inflationary increases.

These include a 4 percent increase in the cost of pharmaceuticals, a 12 percent to 19 percent increase in blood and blood products, a 12 percent to 16 percent increase in orthopedic implants, a 6 percent to 14 percent increase in oxygen and gases as well as potential increases for nurses and other staff.

Patient payments make up about .55 percent of the gross charges.

“We have the cost of doing business and we create a charge structure to recoup that cost,” Dandridge said, comparing the hospital to a grocery store that has to increase its charge structure on goods that are never purchased, such as through theft. “The mass of what we are giving away is much larger. We have to increase our charges to pay for all this cost someone decides they don’t want to pay. If everybody just paid the cost of hospital care, not the charges, just the cost, charges would fall by two-thirds.”

In light of this challenge, Dandridge said something has to change in the nation’s health care system to curtail the transferal of health care costs on the insured.

“It is a hidden tax,” he said. “When an indigent patient is being treated in our emergency room, somebody is paying for that.”

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