Predatory Health Care

Brian Klepper

Posted 11/17/13 on Medscape Connect’s Care and Cost Blog

ALP_H_BK_0010Recently I was asked to intervene on behalf of a patient who, trapped by circumstance, was paying off an enormous bill for a lithotripsy procedure. What I uncovered wasn’t news, but it drove home how egregious the current system can be, why it so badly needs to be fixed, and how the Affordable Care Act (ACA) helps move us in the right direction.

The patient had health insurance through her husband’s job. But it was cancelled just after the hospital validated it, because the employer failed to pay the premium. The procedure was performed, and the patient was charged as “self-pay.”

If Medicare had been the payor in this case, the hospital’s total reimbursement would have been a little less than $2,000. But the lithotripsy and associated costs were billed at $33,160, or just under 17 times the Medicare rate. After the patient applied for financial assistance, a 30% contractual adjustment was applied, reducing her bill to just under 12 times the Medicare rate.

If the health system had asked her to pay 190 percent of Medicare – typically the upper end of commercial insurance rates – her bill would have been about $3,800. By the time I was contacted, the patient and her husband – responsible people trying to make good on their debt – had already paid the health system $5,700 or 285 percent of Medicare. The hospital insisted they owed an additional $16,000.

I laid this out in a letter to the CEO and, probably because he wanted to avoid a detailed description of this unpleasantness in the local paper, he relented, zeroing out the patient’s balance. No hospital executive wants to be publicly profiled as a financial predator.

But while that resolved that patient’s problem, it did nothing to change the broader practice. Most US health systems, both for-profit and not-for-profit, exploit self-pay patients in this way. Worse, not-for-profit health systems legally pillage their communities’ most financially vulnerable patients while getting millions of dollars in tax breaks each year for providing charity care. Aggressive collections procedures, including home liens, are widespread.

Some states have strictly limited what hospitals can charge low income patients. In California, uninsured patients with incomes below 350 percent of the federal poverty level (FPL) – $82,425 in 2013 for a family of 4 – can be charged no more than Medicare rates. In New Jersey, patients within 500 percent of the FPL cannot be charged more than 115 percent of Medicare.

Section 9007 of the ACA took effect last year and prohibits excessive pricing for self-pay patients, and would revoke a charitable hospital’s tax-exempt status if it charges them more than it charges for insured patients. The language is ambiguous, conceivably allowing health systems to circumvent the law’s intent. But the spirit is clear. To keep their not-for-profit tax status and perks, health systems must stop taking advantage of self-pay patients.

That’s the core point. Most health system executives have, at some time in their careers, released a friend or acquaintance from egregious pricing. Many have forgiven a debtor they didn’t know because the issue was raised and they knew how unfavorable it would look in the local media. In other words, most know that, while these practices are lucrative and mostly hidden, they are also disgraceful.

For that reason alone, it is time for health system leaders to stand up, announce that their systems will adhere to the ACA’s intention, stop pursuing self-pay patients as a windfall opportunity, and encourage systems throughout the country to follow their lead.

In a stroke, this would improve American health care and make life better for millions of patients.

About Brian Klepper

Brian Klepper is a health care analyst and the Chief Development Officer of WeCare TLC onsite clinics.
This entry was posted in Analytics, Benefits, Conflicts of Interest, Health Care Cost, Policy/Law/Regulation, Reform and tagged , , , , , , . Bookmark the permalink.

7 Responses to Predatory Health Care

  1. No question, the chargemaster is predatory. It has been a problem for at least 2 decades — CEOs need some blame but the society that tolerates the practice should also share the blame — I guess society was watching TV and playing video games and did not notice.

  2. Brian, thanks for bringing attention to this issue. It is, was, and will be unconscionable. This would be those people who will still not be eligible for Medicaid in the states refusing to expand Medicaid.

  3. People usually wait to call me about their bills until they get the collection letter. I help people go to court, where the judge always reduces the fee to the Medicare fee. They usually say that the same thing has happened to them. Even the attorney’s for the collection agencies thank me for calling this to the attention of the courts. This kind of billing should be on the Frequently Asked section of the Healthcare.gov site.

  4. seandparnell says:

    The protections in the Affordable Care Act are helpful, but seem pretty weak and easily evaded. There’s no definition of ‘gross charges’ that I can find, it only applies to 501c3 nonprofit hospitals (about 60% or so of all hospitals), and it only applies to patients eligible for patient assistance programs, eligibility set by the hospital (at least they have to put the standards for eligibility standards in writing). There are some pretty good reasons for the limited reach of this new policy, but it still means that chargemaster abuses will continue to be common, in my opinion.

  5. benjamin a. bonnet says:

    Right on! The “retail” billing for services flies in the face of “charitable” care……………

  6. Nate Ogden says:

    Why is this tolerated for anyone, this is a much larger problem for healthplans than it is for individuals. Measured by number of people affected and total dollars.

    http://insureblog.blogspot.com/2013/12/why-do-we-tolerate-hospitals-ripping.html

  7. Thanks for sharing your example Brian. Unfortunately it is happening everyday to millions of people across the country. Your friends were lucky to have you..today there is an emerging practice that is available to consumers to help navigate and to challenge the system when these type of events occur. Health Advocates/Patient Advocates are in place across the country to advocate for the patient and assist in these types of situations. People utilize financial planners to assist with their money management as most people are not experts in financial management. The same can be said for healthcare…Patient/Health Advocates are in place to assist the consumer understand the complex world of healthcare.

    The Professional Patient Advocate Institute just released the 2014 Patient Advocate Salary and Trends Survey that shares insights into this growing practice. To review, go to http://www.patientadvocatetraining.com/store/ViewProduct.aspx?id=2247618

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