Hospital Billing and the Uninsured-Class Action Lawsuit

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[1], 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

http://www.amazon.com/Unraveling-U-S-Health-Care-Personal/dp/1442222972/ref=sr_1_1?s=books&ie=UTF8&qid=1372838849&sr=1-1

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.

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[1] http://www.bizjournals.com/seattle/news/2013/07/03/case-claiming-swedish-overcharges.html?page=2

Reducing Health Care Costs By Improving Primary Health Care

How Primary Care Reduces Health Care Costs in the Long Run
Now that the teeth gnashing over health care reforms has been ongoing for two years, before the lifelines are cut on financing health care for the forty-nine million uninsured population, let’s examine the health care continuum for the impact of a failure-to-fund the health insurance subsidies. One of the things that is missing from many discussions and assertions about the 2010 U.S. health care reforms are which systems need to be changed in order to reduce the long term cost of American health care. And when I say reduce, I mean reduce the cost increases in providing health care to an aging population. It is essential the U.S.A. get the per-capita cost of its health care in-line with other nations, as it gobbles funds that could be used for education, capital investments for industry, and other economy building activities. The country will need to make substantial investments in k-12 education as well as building a more energy efficient infrastructure to have a chance at competing with global leaders for competitive contracts, as Germany and other countries have done. This article addresses the components of American health care that are impacted by the 2010 mandates and what it means for managing patient care over a lifetime.
Perspective
Rather than thinking of health care as a commodity that deserving people get, for those who have worked where it is provided by an employer or who qualify for Medicare by virtue of accumulating enough quarters of eligible earnings, or military personnel, please consider it a part of the national infrastructure for a moment. A healthy population is necessary to obtain optimal output from workers, students, and for the care of our families. The provision of health care may be considered a utility. Utilities are measured by their output, the efficiency of their output, and the cost of producing the service. Measuring quality across the United States health care system, which is disparate and complex, is a major challenge in building higher efficiency into American health care.
Measuring Health
From the moment we are born until we die, we are introduced to various aspects of health care in the U.S. system. Even from birth, we do not provide the same level of care to all pregnant women, nor do all babies have the same chance of surviving their first year in America. In my book, Unraveling U.S. Health Care, I researched all fifty states for health metrics, including infant mortality statistics and in one area of the country, infant mortality was as poor as it is in developing countries (12.6 deaths per 100,000 babies for the District of Columbia) Only in a hand full of states was the infant mortality rate equal to European standards, of 5 or fewer deaths per 100,000 infants. Health care workers do understand and are alarmed about this dramatic difference in a basic health care outcome in the country; however, it seems much of the population is uninformed. A basic measurement for health is infant care and reducing the chance of infant death.

Another health care measure is degree of healthy living, as measured by the DALE or Disability Adjusted Life Expectancy, which measures the number of years an American can expect to live healthily, able to move around, and do their activities of daily living. In other words, how many years you can expect to be reasonably free of impairment from chronic disease. The World Health Organization, developer of this index ranked Japan as the number one country for living longest in good health to an average age of 74.5 in the year 2,000. Though the earthquake and tsunami disaster may have some impact on this in the future, the Japanese have a national health care system designed to provide primary care for their population. The United States ranked below all other developed nations in these criteria, with a Dale index of 70 years. Women are expected to be healthy to age 72.6 (true in my Mom’s case), and American men are only healthy to age 67.5. Wake-up call for boomers born in 1957 or later, you are not eligible for full Social Security benefits (under current standards) until age 67, so guys, just about the time you are expected to lose your quality of life.
The ability to live free of chronic disease is an indication of the effectiveness of a health care system and how it identifies population needs and deploys successful interventions. The U.S. health care system has been less focused on primary care, largely because clinician reimbursements and the high cost of medical school have driven more practitioners into specialty care, which treats disease, but is not geared for prevention of chronic disease. One of the provisions of the 2010 health care reforms is the Medical Home provision in Medicare, which attempts to correct the primary care problem by paying clinicians more to be the primary care provider. This concept is a start in the right direction, but as a nation we need to have more health care incentives for primary care, which prevents chronic diseases from birth through life expectancy. Only through this process can we hope to reduce the incidence and associated costs, both social and economic of chronic disease like Type II Diabetes, hyper tension, and heart disease.
Cost of Delaying Treatment
As cited above, the United States had the poorest score for healthy life expectancy of any industrialized country, literally at the bottom, yet we spend 25% more than any other country in the world. The only way we are going to be able to change this result is to build efficiency into health care delivery and improve basic preventive and primary care.
Arguments about a person’s right to health care miss the Titanic-size glacier that pummels U.S. hospital systems, which is EMTALA, the Emergency Medical Treatment Act which requires all hospitals to treat patients, regardless of their ability to pay for services. States with huge uninsured populations, like Texas, with over 25% lacking any insurance , and half of those people are working for employers who do not provide any medical insurance . Not only do those people lack access to primary care, they appear at the hospital emergency department in advanced stages of chronic disease, which must be treated. This is not an effective way to deliver health care as a nation. Hospitals are designed to treat the acutely ill, not to provide primary care. Much discussion has occurred around the health care safety net for the nation, which directly addresses the ability of these hospital systems to continue to provide free care and pass those un-reimbursed charges on to full paying customers, enrolled in private sector health care plans.
Pass-Through Costs in the Health Care System
To those who complain about providing health insurance for the uninsured, a significant portion of the insurance premium these individuals already pay is based on reimbursing hospitals for under payment serving the uninsured and to a lesser extent, Medicare and Medicaid patients. By deferring treatment in the form of primary care, the nation has elected to force these folks to develop worse chronic disease conditions, which are more expensive to treat, and result in premature death from preventable conditions. In health care, treating a patient earlier in the care continuum is best clinically and economically and this is the direction the nation needs to go. For all of the caterwauling about health insurance rate increases, if there is any hope of stabilizing these impacts, it must be driven by increasing patient access to early and consistent primary care. Further, to those who object to paying a portion of their taxes for the provisions of health care, you are already doing so, by paying more than any other country for your health insurance and the administration of your health care. A better question would be how can we reduce the cost of health care overall? Should be continue to have employers contributing to health care financing or go the European route of having the individual be responsible? And finally, health insurance is a financing tool and not a delivery system for health care. We need to improve how we provide basic health care, including disease surveillance, continuity of care for those with chronic disease, and assurance of quality care throughout the country, not just for the lucky few who live close to centers of excellence.
Moving Forward
The 2010 health care mandates attempt to address these concerns in a number of ways, including improving access to primary care by subsidizing health insurance purchasing for small businesses and individuals and thus increasing the number of people who have health insurance and thereby the ability to obtain care. The Medical Home provisions are a start to addressing the access problem that seniors have with Medicare, which pays so little to doctors providing the care. And the Accountable Care Organization standards will pay health care systems more money for high quality patient outcomes in targeted areas for Medicare. FYI, changes in Medicare become a part of the private sector as well, so health care reporting of patient outcomes for Medicare, will also be reflected in the rest of the nonmilitary (Veterans Administration has its own health care system)population. None of these components of the 2010 reforms will go away, but further wrangling will continue on standardization of care for the health insurance purchasing cooperatives and the insurance purchasing subsidies. In a worst case scenario congress may choose not to fund the subsidies to help people buy medical insurance, which would of course result in tax penalties on all of the private sector who decide they cannot afford to buy the insurance. But then again the United States is famous for its unfair tax policies which tax the poor and middle-class much more than the wealthy. Just remember any deferment of health care access and treatment now will result in more serious chronic diseases later, which we will pay for, by increased hospital charges apportioned across the private sector insurance payers and higher costs for government health care programs.

This article was written by Roberta E. Winter, MHA, MPA an independent health care consultant and journalist and may be reprinted with her permission.