When Joseph Swedish considered expanding his hospital system's programs to help uninsured patients pay their bills, the president and chief executive officer of Centura Health said he realized that a plan to offer them discounts would violate Medicare regulations.
The Denver-based system, which operates 12 hospitals in Colorado and provided $190 million in uncompensated and charity care in 2002, announced last week that it was shelving the plan because it could have been "misconstrued as an inducement for referrals" under federal rules governing Medicare, Swedish said.
The nation's hospitals, many of which receive tax exemptions and other financial subsidies to help them care for the poor, have recently come under fire from lawmakers, patient advocates, unions and the media for billing and collection practices that target some of their most financially vulnerable patients. Last week they began an orchestrated campaign to show that these harsh billing practices are at least partly the federal government's fault.
"We live in a web of regulation that does not allow us to be creative in programs that support the needs of the community," Swedish said. "It is the federal ambiguity that does not give us a clear understanding in how to administer discounts for the uninsured."
The American Hospital Association is trying to change that.
In a letter sent to HHS Secretary Tommy Thompson last week and a "white paper" outlining billing guidelines, the AHA urged the secretary to create less stringent federal regulations so hospitals can better respond to the needs of the uninsured. Modern Healthcare first reported on the AHA's effort last week on its Web site, modernhealthcare.com.
Saying it is "far too difficult and frustrating" for hospitals to give the uninsured the same reduced rates as health plans, private insurers and state and federal governments, AHA President Richard Davidson called for less complicated federal guidelines, so hospitals will be more willing to offer programs without fear of penalty.
"We are working to fix the problem and we are going to need some help from the government," Davidson said at a news conference. "The uninsured have nobody negotiating for them and they are paying (in) full."
Thompson said he would consider the recommendations, but "conceptually these issues have been on the table for quite some time," HHS spokesman Bill Pierce said. Medicare regulations already allow hospitals to discount care on a case-by-case basis, he said.
Federal rules that apply to Medicare beneficiaries require hospitals to bill all patients with the same schedule of charges, regardless of who provides insurance coverage, Davidson said. In its letter, the AHA recommended developing a safe-harbor protection for hospitals that discount or waive charges for the uninsured. Hospital programs that fall within the proposed safe harbor would be protected from challenges to their payments.
The AHA-which estimates hospitals provided $22.3 billion in free or reduced care in 2002, 5.4% of total expenses-also wants an advisory process created that would enable hospitals to seek binding regulatory guidance on programs to assist the uninsured. The AHA also recommended creating a panel of hospitals to look at ways of overcoming regulatory barriers to helping the uninsured, Davidson said.
Davidson said he expected "a positive response" to the letter's requests from HHS.
The AHA's recommendations come at a time when hospitals have grabbed headlines with aggressive billing and collections practices. Some hospitals have placed liens on the homes of those who cannot pay their bills while others are requiring emergency room patients to pay a portion of their bills before leaving the hospital (Nov. 17, p. 8).
Last week, the Service Employees International Union Local 1199 filed a class-action lawsuit on behalf of uninsured patients who the union said were denied free medical care at Yale-New Haven (Conn.) Hospital and Bridgeport (Conn.) Hospital. The lawsuit alleges that as many as 10,000 patients were denied access to the hospitals' "free bed" funds and those uninsured patients were charged more than actual costs. The union charges that the hospital did not provide easily understandable information about the bed funds and the patients who could not pay their bills were victims of liens, fore- closures, salary garnishments, bank account seizures and arrests.
Yale-New Haven provided $30 million in care for the uninsured and underinsured last year, with bed funds accounting for less than 2% of the care, said Vin Petrini, senior vice president of public affairs at the hospital. In fiscal 2002, the hospital reported net income of $7.9 million on net revenue of $580 million.
The hospital has reviewed all of its accounts in collection in the last year, removing 92% of property liens and closing 868 accounts of patients who owed money, he said. "We are extremely proud of providing free care," Petrini said.
Centura, the Colorado system that considered expanding its program for the uninsured, has financial counselors meet with uninsured patients before they are discharged so they can help patients apply for charity care, Medicare, Medicaid and the Colorado Indigent Care Program. Uninsured patients are offered reasonable payment schedules and are contacted by counselors before any collection efforts begin, according to Centura's principles for uninsured patients. In the fiscal year ended June 30, Centura reported $112.2 million of net income on $1.3 billion of revenue.
Patient advocates say hospitals use the fed-eral Medicare regulations as an excuse not to offer more discounted care to the uninsured.
"The root of this problem is not so much federal barriers, but the outrageously high charge-master prices, which hospitals use to price gouge the uninsured," said K.B. Forbes, executive director of the advocacy group Consejo de Latinos Unidos. Forbes has negotiated with Centura for managed-care discounts for the uninsured.
"So many hospitals have hidden behind federal regulations," Forbes said. "Even if a safe-harbor rule is established, that does not necessarily mean that hospital price gouging will end."
Andrew Stern, president of the healthcare union SEIU, said hospitals have "always been able to reduce the burden on uninsured patients by providing financial aid without any changes in Medicare regulations." However, Stern said, charity care rarely amounts to more than 2% of hospitals' gross revenue.