Empty operating room with green tile wall

An acquaintance recently had rotator cuff repair surgery at a major New York area hospital. He wound up paying $8,000, by credit card — because the surgeon he chose does not accept Medicare, but did give a cash discount off of his standard list price.

How did it happen?

My acquaintance is 80 years old, and he had some problems that he described as “primarily old age” affecting his shoulder. He and his wife both are devoted to the hospital, which I’m not naming because I don’t want to give the impression that this is common at this hospital — it’s only one event, which I am writing about because it surprised me.

His rheumatologist recommended one specific surgeon at the hospital, and he wanted to go ahead — although the surgeon said he did not accept Medicare.

Not $17,000, but $8,000

“I never actually had a direct conversation with him about the cost,” my acquaintance said in a telephone interview. “My conversation was with the people in his office. And they said, ‘He stopped taking Medicare a few years ago,’ which I found very annoying.

“She said, ‘Yeah, his normal price is $17,000. But let me go see if we can give you a discount. She came back and said, ‘He says $8,000 will be O.K.’ And I said, ‘Fine.’ That was the extent of the discussion of price.”

The surgery was arthroscopic and short. “I was in and out of the hospital in probably no more than two hours,” he said. “I just walked out on the sidewalk and my son came and picked me up.”

So, is this legal? If the doctor does not accept Medicare, can he ask for cash? This was the first time I’d heard of a Medicare patient being able to get surgery at this particular hospital — I live just outside of New York City, and this hospital is known for having doctors who don’t take Medicare.

‘Private contract’ with patient

An expert in health law explained it to me (on the condition that I not use his name) in answer to a question in an online forum we share:

“If the patient is a Medicare beneficiary, the surgeon participates in Medicare, and the surgery is a covered service under Medicare, the surgeon must submit the claim to Medicare for reimbursement.

“The surgeon cannot pretend it’s non-covered and charge the patient cash. (There’s one minor HIPAA related exception to this rule where the patient can instruct the surgeon to treat the patient as self-pay in order to keep the medical records private from the insurance plan — something more often seen with sensitive mental health records, and not orthopedic surgeries.)

“Alternatively, if the patient is a Medicare beneficiary, and the surgeon has opted out of Medicare, the surgeon must give the patient a ‘private contract’ to sign where the patient agrees to pay cash.

“This private contract is a technical document with lots of specific language required in the Medicare manual.  As an opt-out doctor, the service is not subject to the mandatory claim submission rule, and the patient can pay cash. If the patient isn’t a Medicare beneficiary, or the service is categorically non-covered under Medicare, these rules don’t apply and the patient can pay cash.”

Other people on the forum who looked at the scenario had different views, but most agreed that the doctor could set his own rate. “The patient agreed to a rate prior to the procedure,” one said.  “If they found it acceptable, then that’s the value of the service. It can be a little unseemly if you don’t like bargaining.  But the doctor has the right to determine the value of his service, whether others agree or not is up to them.”

Additional charges, $36,585 — or $4,113

Beyond the surgeon’s charges for what was an two-hour operation, he said other charges were billed to Medicare: The ambulatory surgical center attached to the hospital, where the surgery was performed, charged $20,438 for “repair of shoulder rotator cuff using an endoscope (29827-LT).” Medicare approved $3,506.04, according to his statements. Medicare paid $2,804.83 and his “maximum you may be billed” was $701.21.

There were four charges for anesthesia: Two from an M.D, and two from a certified registered nurse (C.R.N.).

The M.D. charged $3,960 two times that day — both of them the same CPT code, 01630-QK, but a different claim number.

For the first one, Medicare allowed $138.71 and paid $49.55, leaving him with a “maximum you may be billed” of $90.07.

For the second one, Medicare allowed $138.99 and paid $49.77, leaving him with a “maximum you may be billed” of $90.13.

The C.R.N. billed $3,960 two times — both of them the same CPT code, 01630-QX, but a different claim number.

For the first one, Medicare allowed $138.71 and paid $0.22, leaving him with a “maximum you may be billed” of $138.77.

For the second one, Medicare allowed $138.99 and paid $0, leaving him with a “maximum you may be billed” of $138.71.

For pathology, a doctor charged $257, Medicare allowed $41.43, Medicare paid $33.14, and his “maximum that you may be billed” was $8.29.

For imaging, a doctor charged $50 for an X-ray (two views minimum), Medicare allowed $10.61, Medicare paid $8.41, and his “maximum that you may be billed” was $2.12.

Notes: Deductible, ‘special payment method’

Notes on the bill included “$77.91 of this approved amount has been applied to your deductible” and “$138.71 of this approved amount has been applied to your deductible.”

Also the helpful notes:

  • “The approved amount is based on a special payment method.”
  • “This is an adjustment to a previously processed claim and/or deductible record.”
  • “This notice is being sent to you as the result of a reopening request.”
  • “After your deductible and coinsurance were applied, the amount Medicare paid was reduced due to Federal, State and Local rules.”
  • “Medicare does not pay separately for this service.”
  • “This claim shows a quality reporting program adjustment.”

Were there other charges?

“I saw him three times after the surgery in the first six months,” my acquaintance said. “And he charged like 300 bucks per visit, which was a little high.”

When all is said and done, he said, it made him feel a little uncomfortable. He got the surgery that he wanted, with an excellent doctor — he said other medical professionals have remarked upon how fast this healed, for an 80-year-old man.

And yet it all seems “preposterously complex,” he said, adding, “It also seems to be another instance of people who can afford things have more access to goods, good services, then
people who can’t.”

Jeanne Pinder

Jeanne Pinder  is the founder and CEO of ClearHealthCosts. She worked at The New York Times for almost 25 years as a reporter, editor and human resources executive, then volunteered for a buyout and founded...