Sticker Shock: Investigating the High Costs of Hospital Bills

ABC News

After Tracy Rud of Atlanta was rushed to Northside Hospital-Cherokee for urgent gall bladder surgery in April, she received a seven-page bill that totaled nearly $40,000.

"I wanted to cry," she told ABC News. "I just thought, 'This is way too high.' … I was just flabbergasted at what health care costs in the hospital."

Related: "Real Money" shows you how to save on emergency room bills.

Among other items, the hospital bill showed that one blood pressure bill had cost $15.50; a surgical stapler, $895; a disposable scissors tip, $177. And for the three nights Rud had stayed in the hospital, 133 separate charges.

Even after some insurance adjustments, Rud, a mother of one, found herself still responsible for more than $20,000.

In an ABC News investigation, however, Rud's hospital bill was compared line by line with a catalogue from one of America's largest hospital suppliers. ABC News' inside look at the catalogue showed that the $15 blood pressure pill - clonidine - could be purchased by hospitals for just 3 cents. An entire bottle of 100 pills, in fact, costs exactly $2.75.

Related: "Real Money" ways to save families on hospital costs.

Rud received five bags of simple IV fluids during her three days in the hospital at a cost of $148.50 a bag. ABC News found the same bag in the hospital catalogue for $1.17.

And sterile water commonly used for irrigation purposes in hospitals, for which Rud was billed $67, could have been bought from the same catalogue for $1.16.

Rud told ABC News, "Some of the charges really looked out of line to me."

The Northside Hospital System is made up of three separate nonprofit hospitals located in three different Georgia counties. Rud, a mother of one, was treated at Northside Hospital in Cherokee County.

ABC News also found that Atlanta's Northside Hospital System- whose CEO, Robert Quattrochhi, makes $2.1 million a year, according to the most recently available 2010 hospital tax forms obtained by ABC News - had been criticized in 2009 by the consumer advocacy group Georgia Watch for the hospital's inflated pricing.

The 2009 Georgia Watch report found that Northside Hospital-Cherokee, where Rud was treated, had a 339 percent overall markup over cost. The report also found that radiology and other diagnostic procedures were inflated by 455 percent at Northside Hospital-Cherokee.

Georgia Watch told ABC News that the report numbers had not been updated in a few years, but that these were the most recent numbers they had on the hospital system. Northside Hospital refused ABC News' requests for an on-camera interview.

In a phone conversation with ABC News, Northside said that the hospital had lost millions of dollars a year on people who did not pay their bills and on Medicare and Medicaid shortfalls. Northside said that patients like Rud ended up making up the difference.

And in an email to ABC News, Russ Davis, director of marketing and public relations from Northside Hospital Inc., told ABC News, "We will not provide an interview or provide any public comment related to the hospital billing story."

"We prefer to address any specific concerns and/or questions the patient may have related to her bill directly with her and not through the media," Davis said via email.

ABC News also reached out to the American Hospital Association, which refused repeated ABC News requests for an interview.

In an email statement, Rich Umbdenstock, the American Hospital Association's president, told ABC News, "Today's hospital bill is a symptom of a broken payment system. It's an example of the fragmented nature of our delivery system, in which hospital bills often reflect just one aspect of care."

Read the American Hospital Association's full statement here.

Rud hired Beth Morgan, a medical billing advocate from Medical Bill Detectives in Connecticut, who helped her get an itemized bill from the hospital. Morgan also helped Rud come up with an offer that, according to Morgan, is "fair, customary and reasonable for her area."

While Rud's total initial bill was $38,801, her insurance covered $4,750 and an additional $13,000 was taken off as insurance adjustments.

With the help of her billing advocate, Rud offered to settle her remaining share of the bill for $10,000. When her previous insurance payment of nearly $5,000 is taken into account, Rud's $10,000 offer is 38 percent more than the estimated $10,730 that Medicare would have paid for Rud's entire hospital stay.

Northside requested Rud's financial information and today sent Rud a letter offering her an additional $800, a 4.2 percent discount off the nearly $21,000 she still owes.

In this month's special edition of the Journal of the American Medical Association titled "Critical Issues in U.S. Health Care," a panel of experts across the U.S. examined the nation's health-care system problems.

David Cutler of Harvard University and lead author of a special communication in this month's JAMA told ABC News, "Transparency is a key issue. … This has started, but can go much farther."

ABC News also reached out to many of the other JAMA authors on the question of hospital bills. Their message: Prices must be transparent and current measures to create transparency have not been enough.

Dave Matheson, senior adviser to the Boston Consulting Group and author in the special edition of JAMA, told ABC News, "We need much better information on the outcomes of procedures (and other kinds of care) so that we can make value judgments and not just cost judgments."

Dr. Joanne Lynn, director of the Center for Elder Care and Advanced Illness at the Altarum Institute, said, "People shouldn't be expected to run up thousands of dollars in debt without having choices."

People deserve to know not only the "medical care" costs but also the likely long-term care costs, Lynn told ABC News.

Morgan said patients shouldn't be afraid to reach out to billing advocates and negotiate with their hospital if they suspect they have been overcharged.

"I want to pay my bill," Rud said. "I just don't want to overpay. … Give me a fair price and you'll get your money."

ABC News' Dr. Mark Abdelmalek, Rebecca Jarvis and Julia Bain contributed to this article.