Seizing on concerns about hospital pricing practices, a congressional subcommittee last week sent letters to 20 health systems asking for detailed information about their billing practices for uninsured patients.
Lawmakers expressed concern that federal law may be requiring providers to charge full rates to uninsured patients while giving insurance companies discounts. The panel requested 51/2 years of data in 20 different areas including bad debt, charity care, collection practices, pricing methods, screening for financial assistance eligibility and source of revenue.
Some industry groups, including the American Hospital Association, said they welcomed the congressional probe as a way of exposing the underlying causes of cost-shifting, including the growing uninsured population. "The effect this many uninsured patients have on hospitals and hospital billing practices-that's a conversation we would welcome," said Tom Nickels, the AHA's senior vice president of federal relations. "The issue, of course, is to get people to understand the enormous complexity of the issue."
The systems, including 13 not-for-profits, four investor-owned chains and three government providers, were picked solely because they are the nation's largest in terms of net patient revenue, committee spokesman Ken Johnson said. "If there is in fact a problem out there, we should be able to determine it after examining these 20 companies," he said. "We are targeting a problem, not a company or an industry."
The systems were given 15 days, until July 31, to provide the data to the House Energy and Commerce Committee's subcommittee on oversight and investigations.
The hospital industry has been under fire for charging higher prices to uninsured patients than those paid by big customers such as managed-care plans, Medicare and Medicaid. Last week, Los Angeles-based activist group Consejo de Latinos Unidos, which earlier sued Tenet Healthcare Corp. over its billing practices, issued a report detailing examples of "price gouging and aggressive collection activities against the uninsured" by hospitals in four cities, particularly targeting investor-owned chain HCA, Nashville (See related story, p. 19).
Hospital industry officials say federal requirements make it difficult if not impossible for hospitals to offer discounts to uninsured patients. That view was bolstered by a Commonwealth Fund report released in June that said fraud and abuse laws and Medicare regulations designed to prevent overbilling and unnecessary care may inhibit providers from offering discounted or free care and encourage aggressive collections.
Back in January, Tenet proposed a plan to bill uninsured patients at discounted rates, but as of last week, the Santa Barbara, Calif.-based company said it still had not received federal approval to do so. A Tenet spokesman said a "controlling opinion" on the matter would come from HHS' inspector general's office.
Some industry critics say federal regulation may be serving as a cover for hospitals to justify their higher charges to uninsured patients and others with no bargaining clout.
The letters sent to the health systems, signed by Energy and Commerce Committee Chairman Billy Tauzin (R-La.) and Jim Greenwood (R-Pa.), chairman of the oversight subcommittee, acknowledge providers "commonly interpret federal law to require the establishment of uniform charge-master lists, setting forth rates for each of their services." But based on the committee's preliminary investigation, hospital rates "are often inflated far beyond their actual costs and reasonable profit due, in part, (to) the providers' need to make up for the steep discounts from charge-master prices demanded by third-party health plans," the letters say.
Princeton University healthcare economist Uwe Reinhardt said it should come as no surprise that hospitals are charging high prices to uninsured patients. "That's what markets do. They fleece the weak and genuflect to the powerful," he said. Reinhardt said a simple solution would be to require providers to charge the uninsured the same rates as Medicare or Medicaid.
Yet others said the pricing issue is vastly overblown, even misleading. Large portions of billed charges ultimately are waived or discounted, said Richard Clarke, president of the Healthcare Financial Management Association, which represents hospital financial executives. But Clarke said some hospitals need better systems to determine patients' financial resources and establish patients' payment expectations.
According to the Commonwealth Fund report, most hospitals have programs to screen patients for eligibility for public insurance and charity care, but the effectiveness of those programs isn't clear. "I think if there was a good way to get at the data, what you'd find is that the actual cash collected from the uninsured is significantly more discounted than what other payers are paying," Clarke said.
Clarke added that there is an "economic rationale" for charging more to individuals. "It's a lot easier to collect from a bulk payer like a Blue Cross or a UnitedHealth than it is from individual patients," he said.
Meanwhile, at least two state legislatures have taken up hospital billing and collections issues.
This month, Connecticut Gov. John Rowland signed legislation designed to protect patients from aggressive hospital collections. Effective Oct. 1, the law lowers the interest rate hospitals can charge for outstanding bills to 5% from 10% and forbids hospitals from garnishing wages, seizing bank accounts or putting liens on homes without an additional court order, even if the hospital has prevailed in a collections lawsuit.
The law also bars hospitals from suing for nonpayment if a patient qualifies for free-bed funds, state assistance or Medicaid. In addition, every time a bill collector contacts a debtor, the collector must tell them about free-care programs. The law followed a state lawsuit filed in February against Yale-New Haven (Conn.) Hospital for allegedly withholding millions of dollars in charitable funds intended for indigent patients.
Ken Roberts, spokesman for the Connecticut Hospital Association, said the new law is not "a wide disparity from what normal hospital practices were in most cases."
The California Healthcare Association, which represents the state's hospitals, is fighting a bill sponsored by Assemblywoman Wilma Chan that would regulate both pricing and collections. The association believes some regulation is appropriate, but the proposed measures go too far, spokeswoman Jan Emerson said. For example, she said, they would require hospitals to give discounts to families of four that make as much as $128,000 per year and would require hospitals to wait six months before turning over delinquent accounts to collections agencies.
"We have to pay all our bills," Emerson said. "The individual needs to take some level of accountability as well."