Hospital Overcharging-Where the Rubber Meets the Courtroom
In a landmark class action lawsuit, Seattle based Swedish Hospital, now
part of the Providence Hospital Group is being sued for charging an uninsured
Issaquah man who visited the emergency room much more than what it charged
privately insured patients or those covered on government health insurance
programs. Though this disparity in hospital billing phenomenon is not new, what
is raising the level of accountability is the class action lawsuit, because
this will allow the courts to examine the billing of all uninsured patients for
all seven of Swedish Hospital’s emergency departments. Though class action lawsuits
often end in relatively small settlements for the plaintiffs in the suit, they
are big money for the attorneys, at least those with the cojones to see them
through to the end.
Lifting the Veil on Hospital Billing
Basically here is how hospital
billing works, there are different reimbursement levels for services for
different contracts, including the various insurers, as well as Medicare, and
Medicaid. The government plans of course, by virtue of their bully pulpit
actually pay the least for services and private insurers pay more of the reduced
gross hospital charges, per patient. As in the Puget Sound Business Journal
Article
,
the uninsured person was charge $10,000 for the same services(found in legal
discovery) for which the insurance company contracts paid $3,500.
Why charge the patient without health insurance more than the insured
person? The answer is two-fold, first there is no underlying contract to secure
payment for the hospital, so the facility takes on the risk(as required by the
government under Emergency Medical Treatment Act) of providing potentially
costly services. Secondly, often the uninsured person is not able to pay the
normal fees for services, so there are charitable discounts or write offs for
this patient demographic. Is this method of billing legal, yes, ethical, well
that is where it gets to be a sticky wicket. The hospital can charge 100% of
gross prices for services to anyone without insurance coverage, but it rarely
gets that amount of money from the uninsured patients, so the hospital offers a
charitable discount to entice the patient to pay the services, and then the
hospital takes a charitable deduction for the unpaid portion of the gross
charges. Though this may seem reasonable from an accounting standpoint, the
hospital is able to take a deduction for gross charges it never expects to
receive, because the gross charges are inherently
designed to provide at least enough payment from the other payers, including
Medicare, Medicaid, and private insurers to keep the facility solvent.
Thus, in the case of an uninsured patient who actually pays his bill, even if
it is paid at a higher rate than the hospital normally would receive for those
services, the hospital still deducts any
portion of the unpaid gross charges as their charitable discount. This may even make the reimbursement from the
uninsured patient better than from the other contracts, just not as consistent.
So, is it fair that we allow hospitals to charge the uninsured patients more
than what they get from patients with greater resources?
At various times when I have been uninsured and forced to access
services at hospitals, I found quite a variance in the charitable care discount
I was offered, and the billing practices of different facilities. One hospital
required a 40% payment based on gross charges and the other wanted 60%. If one hospital requires the patient to pay
60% of gross charges for services, this is greater reimbursement than most
insurance contracts, and hence a very good deal for the hospital. This is also
enhanced by the fact the hospital can claim the 40% as charitable care, assuring
political fodder for future negotiations with state and federal regulators.This
is yet another example of a health system failure in the United States, because
of our bifurcated financing system, and social inequities. Of course it isn’t
right that the uninsured are charged more than those with insurance plans, but
it is legal, and hospitals develop their fee schedules based on a complex mix
of patient demand, high marginal cost for services, and regulatory
requirements. The class action lawsuit will be costly and in the end just add
to the hospital fees, but it does shine a light on this inequity. One of the
things we all could use is transparency in the prices of health care services
in this country. Though we are making progress on patient safety outcomes and
reporting, thanks in large part to the IOM’s report more than a decade ago, we
still have a huge battle ahead to fully inform and empower health care
consumers as they navigate the black box of the American health care system.
For more information on this hospital conundrum and how to negotiate
with a hospital should you need services and lack health insurance(fifty
million at last count), go to Chapter Nine of Unraveling U.S. Health Care-A
Personal Guide, out this month by Rowman and Littlefield.
https://rowman.com/ISBN/9781442222984
For practical advice on resourcing your health care, read more of what
the healthpolicymaven has to say. This article was written by Roberta E.
Winter, MHA, MPA, someone who has negotiated insurance contracts for private
employers, analyzed network reimbursement data for hospitals, and advocated for
the empowerment of health care consumers.
