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August 27, 2013

The secret of saline's cost: Why a $1 bag can cost $700

Daily Briefing

The New York Times' Nina Bernstein this week examined why commercially produced intravenous (IV) saline bags—one of the cheapest medical supplies to produce—gets marked up by hundreds of dollars. 

According to prices reported to the federal government, a one-liter bag of normal saline costs about $1.07 to produce, up from $0.46 in 2010. However, Bernstein noticed major variation in what hospitals billed patients for the product while investigating a May 2012 outbreak of food poisoning that sickened more than 100 people in upstate New York.

Even though most of the patients received IVs from the same distributor, Bernstein writes that some of the bills varied significantly, even for patients in the same hospital, and included markups of "100 to 200 times the manufacturer's price, not counting separate charges for" administration.

Specifically, she found that:

  • An older woman and her young grandson were charged $787 and $393, respectively, for "IV therapy." The patients were covered by an HMO under Medicaid and spent just a few hours at the hospital, but the HMO did not reimburse most of the cost of the IV.
  • One patient privately insured through Aetna at another hospital was charged $91 for a unit of saline solution that cost the hospital 86 cents, according to a hospital spokesperson who told Bernstein that the markup is "consistent with industry standards" and includes "related services and processes." The patient was also charged $127 for administering the IV and $893 for ED services. She ended up paying $100 out of pocket for her visit.
  • One patient at the same hospital—who spent three days recovering from food poisoning—was charged only $8 through her United HealthCare coverage. Her insurer was billed $546 for six liters of saline.

Bernstein notes that few hospitals are in the position to negotiate the price of the bags and solution. Instead, hospitals must use middlemen: "a few giant group-purchasing organizations that negotiate high-volume contracts, and a few giant distributors that buy and store medical supplies and deliver them to hospitals," Bernstein writes.

Bernstein writes about her struggle to obtain information explaining the saline markup. She approached the New York State Department of Health for help mapping the IV charges related to the food poisoning incident, a team compiled a chart of what Medicaid and Medicare billed in six of the cases. "But the department as yet to release the chart," Bernstein writes (Bernstein, Times, 8/25).

More from today's Daily Briefing
  1. Current ArticleThe secret of saline's cost: Why a $1 bag can cost $700

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