Armed with a blessing from HHS, Tenet Healthcare Corp. last week said that it would offer discounts for uninsured patients as the last step in a remake of its uninsured billing and collection procedures that began a year ago.
The Santa Barbara, Calif., company said the recent guidance from HHS that Medicare rules do not prohibit such discounts allowed Tenet to fully implement its "Compact with Uninsured Patients." Announced last year, the compact also limits the measures Tenet will take to collect on a delinquent bill. Tenet had sought a ruling on the discounting policy, but the company said it withdrew that request in light of HHS' guidance.
The policy should be in effect in all Tenet hospitals by June 30, except in Texas, where state law does not allow such pricing, Tenet said.
Uninsured patients typically are billed at gross charges, or list prices, that hospitals discount for commercial insurers. The result, which many hospitals and the American Hospital Association had maintained was required by Medicare rules, was that uninsured patients received sharply higher bills than patients covered by commercial insurance or government programs.
Tenet's discounting policy applies to all uninsured patients, regardless of a patient's income or wealth. That goes beyond policies announced by two other investor-owned chains, HCA and Triad Hospitals, which offer discounts on a sliding scale related to income.
HCA implemented its policy companywide on Oct. 1, 2003, although about 70% of its hospitals employed similar practices before the policy was announced last March. HCA spokesman Jeff Prescott said the company used an income-related sliding scale because that best fit Medicare regulations as the company understood them at the time. Prescott noted that HCA policy came before the recent guidance. Triad's policy is still being rolled out.
Discounting bills for uninsured patients could help investor-owned chains, many of which have been plagued in recent quarters by high levels of bad-debt expense. If the bills are discounted, the companies will book less revenue, but they won't have to write off as much bad debt later. Universal Health Services said last week that bad-debt expense and competition in some markets could trim its profits by as much as 25% for the quarter ending March 31 (See related story, p. 10).
Tenet was the first hospital operator to draw the ire of Consejo de Latinos Unidos, a Latino consumer advocacy group, on this issue nearly two years ago. The issue became particularly explosive for Tenet after the company, in December 2002, cited its strategy of rapidly increasing gross charges as the main driver in its Medicare outlier reimbursements to much higher-than-average levels. The next month, Tenet announced its "Compact with Uninsured Patients."
Consejo consistently has supported Tenet's compact and now has moved on to other targets, including the AHA, HCA and not-for-profit hospitals in Colorado, Florida and Illinois (See related story above).
Meanwhile, three federal officials hammered the AHA in remarks last week at the annual meeting of the federation. The AHA last December asked Thompson for guidance on billing the uninsured and last month received a brusque letter in response accompanied by question-and-answer guidance that fell short of the legal safe harbor the association had requested (Feb. 23, p. 6).
House Ways and Means Committee Chairman Bill Thomas (R-Calif.) told the federation that the AHA didn't do "the smartest thing (it) could have done" in questioning HHS Secretary Tommy Thompson about whether federal law allows hospitals to provide discounts to uninsured patients. Thomas later told reporters that the letter was a "clear cop-out."
Thompson told the federation "(The AHA) tried to politicize this issue and embarrass me and the department."
HHS' acting principal deputy inspector general, Dara Corrigan, said federal law clearly allows discounts for uninsured patients. "You can criticize the antikickback statute for many things, but you can't criticize it for being ambiguous," Corrigan said. The AHA's use of the media during the debate, Corrigan added, was "not the best way to engender a good relationship" with federal officials.
Asked for a response to the comments, AHA spokeswoman Alicia Mitchell said, "We asked for some guidance, and the secretary has given that to us, and we appreciate it. With the guidance in hand, there shouldn't be any confusion, and we're moving ahead."
-with Tony Fong and Jeff Tieman