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LA Times Investigative Report: Whistleblower Leaks Hospital Chargemaster in Medical Claims Software

Described as "huge, automated markups for healthcare," Epic medical billing software was caught in screen images being used to astronomically hike prices on healthcare by Scripps Memorial Hospital. 

This week, investigative journalists at the LA Times published internal images of Epic software at work in the Scripps Memorial Hospital chargemaster automatically multiplying patient medical charges for routine surgical items between 575% - 675%. The rate hikes have shocked the region and point to a much larger problem in health claims.

Epic Systems Corporation is a $2.9 billion privately held healthcare software company that says it holds the medical records of 54% of all patients in the United States including here in Western New York. Epic is based in Madison, Wisconsin and employs 10,000 people.

Scripps Memorial Hospital in Encinitas is a 138-bed facility on a sprawling campus in Southern California with a 24-hour ER and numerous specialty services.

Patients of the hospital, and their insurance carriers, have apparently been overbilled "orders of magnitude over cost" by Scripps Memorial in an automatic, systematic manner. Using equations programmed into Epic software, Scripps Memorial has been hiking up bills by hundreds of percent over cost on everything from stitches and bandage materials to antimicrobial solution. It is yet to be determined how long these super-rate hikes have been happening, and whether or not physician professional service components are also involved. 

The Los Angeles Times says the images of the hospital's chargemaster were brought to them by a whistleblower, a former operating room nurse at the the hospital who is now working at a different facility. Her identity is currently being protected. She was able to see the chargemaster because her job included accounting for all supplies used in surgery. As she would enter the items, the equations for doubling, tripling, quadrupling, and ultimately hiking charges to 5x, 6x, and almost 7x cost were visible to her. 

Markups to cover overhead are one thing, the whistleblower said, but these rate hikes are "insane". She spoke up at work but was reportedly told the hikes were purposeful in order for the hospital to get what it could from insurance payors.

Details about the inner workings of medical claims markups are not often made public. Facilities routinely charge more than an item costs and insurance payers routinely pay much lower rates than billed. Cost sheets and negotiations are held in confidence. But these published markups for between 575% and 675% over cost have outraged the public.

It is not yet known whether there will be further investigation by regulators or insurance payors here or in other parts of the country into whether rate hikes are so high as to constitute abusive billing practices, and whether Epic and Scripps share responsibility in this case. Both are releasing only general statements. Epic cites customer privacy. Scripps Memorial cites medical cost overhead and the need to haggle prices with insurers. They say uninsured patients may be sent these bills but rarely pay the full prices. 

Photo Credit: Los Angeles Times. 

"The issues raised here apply to every medical facility in the country."