ZFGH — which ran at a stunning 24.5 percent operating deficit in the latest fiscal year — works to collect $3,321.47 from unemployed former bike messenger who received one stitch

“Goddamn,” says Conan Mattisson with a laugh. “It was probably one of the dumbest accidents ever.”

You know how it is. You buy a new knife and you forget how sharp new knives are and, before you know it, you’ve sliced an inch-deep cut in the webbing of your dominant right hand. Goddamn.

“Oddly enough, there are not a lot of blood vessels there. It didn’t really bleed — but you could see the inner workings of my hand,” continues Mattisson, a 40-year-old former longtime bike messenger. “I could see my tendons. I could see them sliding back and forth in their sheath. It was gnarly.”

Mattisson has gone sailing off any number of bicycles and has learned not to take lightly any injuries to one’s head or hands. He was also short on options: It was nearly midnight on Feb. 14. There was nowhere to go but the emergency room at Zuckerberg San Francisco General. He wrapped up his hand, put on his helmet, and pedaled his bike the mile or so to the hospital from his apartment on Mission and 20th.

He sat for a few hours, was visited by medical personnel for a few cumulative minutes, and ended up with a single stitch in his hand. It was, at most, a five-minute procedure. Done and done — and Happy Valentine’s Day.

Then the bill arrived: $3,321.47.

Gnarly.

“I had no alternative,” says Conan Mattisson. “It was an emergency. That’s why I went to the emergency room.” Photo by Joe Eskenazi.

Jarring billing practices at Zuckerberg San Francisco General made national news earlier this year, with articles coming, first, from Sarah Kliff, then at Vox, and followed by a series from the Chronicle’s Heather Knight. These stories — which Mattisson read, and did indeed ponder as he rode his bike to the hospital — mostly involved “balance billing,” in which insured patients were surprised with astronomical bills because their coverage was deemed “out-of-network.”

Stung by the ensuing political fallout, the hospital in February canceled the practice — and instituted out-of-pocket maximums. This announcement came two weeks prior to Mattisson’s impromptu self-surgery on his right hand.

His situation isn’t entirely similar, however. You need to be insured to be “balance-billed.” And while Mattisson thought he had Healthy SF coverage, it turns out he did not. He is uninsured. And, out-of-pocket maximums or no, the hospital is still aggressively moving to collect what it is owed from Mattisson, who was on food stamps as recently as 2016 and has, in the recent past, experienced bouts of homelessness.

The breakdown of Mattisson’s charges, meanwhile, begs further analysis of the troubling world of hospital billing, which is to economics what Hieronymus Bosch was to tableaus.

The suture kit used for his five-minute procedure — needles and thread, basically — was billed at $226. A tetanus shot ran $309. Mattisson appears to have been billed in two different manners for the actual stitches: It’s listed as a $638 “procedure” on one bill and he also received a $430 bill from the doctor. Just walking into the ER cost $1,665 — regardless of what came next.

“One or two stitches? The bill should be around $200 — for both the doctor and the service. If this was done in a doctor’s office, that would be a reasonable charge,” says Gerard Anderson, a professor of health policy and management at Johns Hopkins University.

The bill should be that. But it isn’t.

“Zuckerberg is notorious for being not necessarily the worst but one of the worst places to go in terms of prices for emergency care,” Anderson continued. “The prices are outrageously high. They are notorious for it. And everybody knows about them.”

Meanwhile, at the billing department of your local public hospital … Illustration by Hieronymus Bosch.

The maddening element about hospital billing is that the costs charged to patients are only abstractly related to the costs incurred by the hospital.

“They do not need to justify their charges. They have full discretion,” explains Ge Bai, a Johns Hopkins professor of both accounting and health management and policy. “There are no regulatory forces to limit their ability to set a high charge. The charge is coming purely from the hospital and subject to no external forces.”  

Patients — especially uninsured patients — “become prey of this charging game.”

Anderson and Bai in 2015 co-authored a paper titled “Extreme Markup: The Fifty US Hospitals With The Highest Charge-To-Cost Ratios.”

So much about healthcare billing is, by design, complicated and opaque and impenetrable. But a charge-to-cost ratio is something that’s relatively easy to grasp. What did it cost them? What do they charge you? Divide the latter by the former.

San Franciscans experience lopsided charge-to-cost ratios every day when they pay $6 for avocado toast that ran the restaurant a few dimes for avocado slices, bread, and electric heat in the toaster.

Or, if you’re Conan Mattisson, you received a stitch from a $229 suture kit.

That’s no fun. But, for Mattisson, it probably would’ve been even less fun at North Okaloosa Medical Center, the gougingest hospital in all the realm per Anderson and Bai’s 2015 paper. It featured a 12.6 charge-to-cost ratio. That’s a 1,260 percent markup.

Your humble narrator unearthed more than a decade of San Francisco General Hospital’s charge-to-cost ratios via the National Bureau of Economic Research. And its 2018 ratio of 4.37 — a 437 percent markup — is nowhere near North Okaloosa’s (49 of the 50 worst gougers as measured by Anderson and Bai were private hospitals and 20, like North Okaloosa, were in Florida).

But that’s still a hell of a markup, and on the high end for a public, not-for-profit hospital. Last year, the ratio at Contra Costa Regional Medical Center was 244 percent. It was 160 percent at San Mateo Medical Center. If Mattisson sliced himself in Martinez or San Mateo instead of San Francisco, he’d probably be facing a significantly lower bill.

To be fair, the ratio across the bay at Oakland’s Highland Hospital was a gaudy 385 percent in 2018. But Highland’s numbers have held relatively steady for 15 years. At San Francisco General Hospital, however, the markup has steadily — and dramatically — risen in that time. Per the National Bureau of Economic Research, SFGH’s markup went from 239 percent in 2005 to 309 percent in 2010 to 398 percent in 2015 to more than 400 percent in recent years.*

But now that SFGH is asking for more and more money from those it serves, it’s doing better and better financially, right?

No. Not right. Wrong. Very wrong.

The “charge-to cost ratio” — essentially the percentage of markup a patient at Zuckerberg San Francisco General Hospital is billed relative to the hospital’s costs — has risen dramatically in the last decade and change. Source: The National Bureau of Economic Research.

The most recent audited numbers we received from the city regarding SFGH’s finances are horrifying.

The hospital, at the end of the latest fiscal year, was more than $530 million in the red — and ran at a negative 24.5 percent operating margin in fiscal 2018-19 ($189.5 million in losses on $772.7 million in operating revenue). SFGH is a county hospital with a mandate to serve the most vulnerable, so it can be expected to struggle financially — but, even among similarly situated institutions, these numbers are alarming. An April article in Modern Healthcare put the median operating margin for public/not-for-profit hospitals at 1.7 percent. That’s positive 1.7 percent.

In other words, if SFGH performed at the median level, it would have made $13 million instead of losing nearly $190 million. (Prorate that loss, by the way, and it comes out to more than $519,000 a day). 

“I’ve read hundreds of these reports,” says a hospital administrator with knowledge of the Bay Area market. “And that is the first time I’ve seen negative operating margins of this size.”

Our hospital has managed to run at a staggering loss, while simultaneously charging its users at such a high rate that a number of health professionals told me, all joking aside, that Conan Mattisson was damn lucky to get out of the ER billed only $3,300 for his single stitch.

Well, that’s a hell of a trick. How could this happen? Good question. We’re working on that. You’re not going to believe this, but it’s not something we can answer in just one article.

Gnarly.

Following the stories in Vox and the Chronicle — and rancor from Mayor London Breed and others — SFGH quickly altered its billing policies.

That’s nice. A shame-based regulatory system, however, is depressing and suboptimal. But that’s the system we’ve got. And not just us: Bai notes that “political cost” and “reputational cost” are factors all hospitals consider when deciding how aggressively to charge and collect from patients.

The No. 1 reason that hospitals aggressively bill their most vulnerable patients? That, too, is relatively easy to grasp. It’s the same reason people from around the world phone you up and demand your Social Security Number: A very small percentage of folks give them everything they want.

Hospitals “don’t get most of the money — in most cases,” says Anderson. “It’s simply preferable for them to charge $3,300 and get it from some people rather than charge $200 and get it from nearly everybody.”

When we presented SFGH with Mattisson’s bill, they refused to parse it. There have been enough stories about outrageous bills and, it seems, they don’t do that anymore.   

SFGH in February belatedly instituted an out-of-pocket maximum, and Mattisson could plead poverty with the hospital and/or apply for Medi-Cal and hope it retroactively covers his bill. He’s doing this. But it still puts the onus on Mattisson to explain why he shouldn’t be charged $3,300 for a single stitch, while the hospital has sent him an itemized bill spelling out exactly why he should.

After much effort, Mattisson may earn a waiver from this crazy, surreal system. But, by all means, the default system remains crazy and surreal. 

Regardless, he says he has no regrets. “I had no alternative. It was an emergency. That’s why I went to the emergency room.” Mattisson does have reservations, though. For Mexico.

“I am saving up to go there for dentistry. I can’t go to General for anything less than bleeding out. It’s disappointing to be abandoned by the American medical system.”

*SFGH did provide cost-to-charge ratios it claimed were gleaned from the Office of Statewide Health and Planning Department. These numbers differed from the National Bureau of Economic numbers. SFGH could not immediately explain the discrepancy. We have used the NBER numbers, as that enables us to compare across multiple hospitals.

**The National Bureau of Economic Research ratios are presented as “cost-to-charge” rather than “charge-to-cost.” You can easily convert the former into the latter by setting up a 1/x fraction.