Given the current swirl of activity surrounding charging, discounting and collecting bills for uninsured patients, many healthcare executives feel like good actors in a bad movie. That is, they are trying to play their roles as best they can within a script of illogical, contradictory and byzantine regulations and payment systems. It is no wonder that most are bewildered by the latest onslaught-more than a dozen lawsuits filed against tax-exempt hospitals by Richard Scruggs and other class-action lawyers. The attorneys, best known for their successful lawsuits against Big Tobacco, allege that hospitals are "hoarding billions while dispensing pennies" and tax-exempt hospitals are guilty of "excessive profits and overcharging." The script is getting worse.
Every day, providers see heartbreaking cases in which patients with no insurance or inadequate insurance are stuck with hospital bills that they have a limited ability to pay. Hospital executives have tried to deal with this situation as best they can, but they have had to navigate a minefield of regulations, payment concerns and conflicting interests.
For example, federal requirements for a uniform charge structure have been interpreted by many hospitals, lawyers and federal bureaucrats to mean that uninsured patients could not be granted across-the-board discounts, while commercial payers could enjoy negotiated discounts based on volume and cost benefits. Letters from the CMS and proposed regulations from HHS' inspector general's office just nine months ago continued to suggest this interpretation.
Many hospital executives have believed they have to show a good-faith effort to pursue patients whose ability to pay may be slim or none or face formidable red tape to demonstrate indigence. Again, this understanding has come from often confusing federal regulations, memorandums and pronouncements. But as this issue heated up, the script has started to change, with the CMS and the inspector general's office beginning to suggest that hospitals are not restricted by federal rules and are relatively free to set discounts and pursue collections.
It is hard to know your role when the script keeps changing. But spreading blame doesn't get at the problem. Concerted efforts by many groups to work with policymakers have resulted in some much-needed clarification of hospitals' ability to discount charges for self-pay patients. CMS representatives said in a June 1 teleconference that providers have flexibility in applying discounts for reasons other than indigence and can give prompt-pay discounts (regardless of the patient's ability to pay) and courtesy discounts in accordance with the Stark rules issued in March.
The CMS also clarified that if an indigent patient is not a Medicare beneficiary, an asset test is not necessary. If an indigent patient is a Medicare beneficiary, the CMS and inspector general staff agreed that the regulations permit providers to offer help for "extenuating circumstances." Of course, we want to see these script changes in writing.
Providers last week were eagerly awaiting the results of hearings of the House Ways and Means Committee's oversight subcommittee and the Energy and Commerce Committee's oversight and investigations subcommittee. The former is concerned with the general issue of tax exemption, with its first hearing to focus on pricing practices of tax-exempt and other hospitals. The latter continues an investigation kicked off last year on hospitals' billing and collection practices related to the uninsured. This committee is targeting both for-profit and tax-exempt hospitals.
In the meantime, hospitals are reviewing their pricing policies to ensure they are systematic and defensible. More hospitals are taking the step of reviewing their charity-care and debt-collection policies and practices-albeit within a still uncertain regulatory environment.
And hospitals are focusing more attention on how they communicate with patients about financial matters. Hospitals can mitigate some of the problems associated with charges and collections by ensuring that they have processes to identify patients who either do not have insurance or do not have the wherewithal to pay their portions of charges, explain the hospital's policy to those patients and provide payment options.
This effort requires training, particularly for front-line patient-access staff, on the intricacies of collecting and verifying patient financial information and the specific vocabulary necessary for talking with patients about payment issues. This type of initiative fits into the whole range of activities of the Patient Friendly Billing project, which is designed to make financial communication clear, concise and correct. This project is led by the Healthcare Financial Management Association in partnership with the American Hospital Association, the Medical Group Management Association and leading professional-service and technology companies. To date, about 1,000 hospitals and health systems have signed on to this project.
I recognize that our healthcare system is burdened by more than 40 million people without health insurance, that our system is forced to spend 30 cents out of every dollar on administrative costs, that in our system primary care is too often found in emergency rooms, and that in our system most citizens have no idea of the true cost of healthcare.
It's a bad script-the system is in desperate need of reform. And even the most promising ideas for reform are not likely to be implemented anytime soon. Yet, I also find every day in my conversations with healthcare executives that our profession's orientation toward action is yielding demonstrable improvement in our ability to cope with the need for rational charging and collection in healthcare.
Richard Clarke is president and chief executive officer of the Healthcare Financial Management Association, Westchester, Ill.