Three times in as many months, Minnesota's Attorney General Mike Hatch and state hospital executives have heralded deals to end one of the most divisive practices in healthcare: billing uninsured patients more for care than those with medical benefits.
The latest agreements, announced last week, included 35 hospitals that voluntarily signed two-year deals with Hatch to give uninsured patients at least the same discount as had been negotiated with each hospital's largest insurer. In May, 16 hospitals with four Twin Cities health systems voluntarily signed identical agreements.
A fifth health system, Fairview Health Services, reached a separate deal announced April 1 that covers six hospitals, after being the subject of a 15-month inquiry by Hatch (For a complete list of participating hospitals, click here.) To date, roughly 75% of Minnesota hospital admissions are covered by such agreements, which also lay out standards for debt-collection policies.
Expect more hospitals in the state to follow, said Hatch and Minnesota Hospital Association President Bruce Rueben. "We believe other hospitals will sign on because it's become an industrywide standard in Minnesota," Hatch said. In many cases, hospital executives must wait for trustees or directors to meet and approve the deal before signing on, Rueben said.
Whether other states follow suit remains to be seen.
"The rest of the country is going to follow," Hatch said. "It has to."
Hatch has long been an aggressive watchdog of Minnesota's healthcare industry. His audits of Bloomington, Minn.-based HealthPartners; Allina, Minneapolis, and its former health plan, Medica, criticized Minnesota not-for-profits for excessive spending on travel and entertainment.
Hospitals face mounting pressure nationally to address aid for the uninsured. Congress and state legislatures have launched inquiries. Lawyers have sued not-for-profits, alleging that unfair billing and aggressive collection practices violate their tax-exempt status. Minnesota hospitals have addressed the problem head- on, Hatch said, and others can, too.
"It's the right thing to do," he said. "If it's the right thing to do that the uninsured should pay the market rate, then do it. If it's the right thing to do to set standards for collections, then do it."
Under the agreements, patients with annual household incomes of $125,000 or less will be charged no more than the amount paid by each hospital's largest insurer according to revenue. The terms apply to patients without insurance and to medical care not covered by insurance. The hospitals and clinics also agreed to adopt a zero-tolerance policy for abusive debt-collection practices and not to sue for payment before first making sure patients owe money and their insurers have been billed, if appropriate. An estimated 400,000 Minnesota residents are uninsured.
A single standard for all U.S. hospitals may be difficult to draft, said Richard Scruggs, the Oxford, Miss., lawyer leading a consortium of lawyers suing not-for-profit hospitals over how and how much they bill the uninsured. But no hospital should bill uninsured patients more than those with coverage, he said. Not-for-profits receive a tax exemption to provide care to the underserved.
"There's no justification for a penalty for being poor and uninsured," Scruggs said, nor will it hurt them financially to change. "That's not where any hospital, big or small, rich or poor, makes any money."
Terence Pladson, president and chief executive officer of CentraCare Health System, is also a member of the St. Paul-based Minnesota Hospital Association's board of directors, which worked with Hatch to draft the billing and collection agreements. CentraCare, St. Cloud, which owns three central Minnesota hospitals, promised to adopt the standards, which modified similar discount and collection policies adopted by its board within the last year.
"We saw this as a positive response to a major public challenge," Pladson said. Hospitals sought a voluntary agreement to avert more stringent state legislation or costly, time-consuming investigations by Hatch.
"Hospitals elsewhere face a similar choice," he said. "I would urge other states to look to proactively enact similar measures or discuss them with their hospital associations before Congress takes action."
"It's a great example," said Nancy Kane, a professor of health policy and management at Harvard University's School of Public Health. Kane testified at a U.S. House Ways and Means Committee hearing on not-for-profit hospitals that too few of them provide enough financial aid for needy patients to justify their tax-exempt benefits. Before Congress, Kane called for stronger standards to be required for hospitals that are granted tax-exempt status, including discounted rates for the uninsured and less aggressive collection practices. "That's where Minnesota is headed," she said.
Minnesota's history as a progressive state, with a commitment to public health and no investor-owned hospitals, made it easier for such an agreement to flourish, Kane said. "Hopefully, more states will see it as something to emulate," she said.
"Of course, that's for other states to answer," said the MHA's Rueben. "I think what we're doing is the right thing for Minnesota."
The deal won't solve the wider problem of access to affordable healthcare, he said. "What led us to this point is a flawed financing system," Rueben said. Government insurers deeply discount payments to hospitals, which seek to make up lost revenue by spreading costs to other patients. Insurers negotiate discounts for enrollees, leaving the uninsured bearing the brunt of a broken system, he said.
Mark Rukavina, director of the Access Project, Boston, praised the deal and said it appears more comprehensive than legislative efforts elsewhere, such as in Connecticut and California, where laws address patients' access to information or what fees and interest hospitals can charge. "This is a new development," he said.
Alicia Mitchell, spokeswoman for the American Hospital Association, said the trade group applauds the Minnesota agreements. The AHA encourages hospitals to develop local solutions to billing and collection issues, she said.
One agreement -- the one between Hatch and Minneapolis-based Fairview -- differs from the rest, which were voluntary. Hatch concluded a 15-month inquiry into Fairview by releasing a damning five-volume report on the health system's collection and billing practices.
No other Minnesota health systems were subject to an inquiry. However, four systems that announced deals with Hatch in early May -- Allina Hospitals & Clinics, Minneapolis; HealthEast Care System, St. Paul; North Memorial Health Care, Robbinsdale; and Park Nicollet Health Services, St. Louis Park -- received requests for information about billing and collection practices from Hatch.
Fairview's low-income patients faced harassing collectors, even after agreeing to payment plans. Fairview garnished wages that should have been exempt from such action and pursued payment from those who did not owe money.
Unlike other agreements, Fairview's deal requires that a third-party reviewer must agree the health system has complied with all necessary safeguards before suing a patient for payment.
David Page, Fairview's president and CEO, said Hatch's inquiries into Fairview highlighted unrecognized problems faced by Minnesota's uninsured. "We have an activist attorney general who is interested in and understands the healthcare industry," Page said.
For Fairview, Hatch's audit provided uncomfortable but important lessons. "We had to get past the criticism and look at ourselves in the mirror," he said, and ask, " `Are we proud of all the things we're doing?' "
The answer was no. Now, as Fairview adopts changes, the health system must do more than follow the letter of the law and be fully responsible for its policies. When an error occurs, "we've got to err on the side of the uninsured," Page said.
Jim Abelsen, senior vice president and general counsel for St. Mary's Duluth (Minn.) Clinic Health System, said Fairview's experience raised awareness among Minnesota hospitals that uninsured patients paid an unfair price for medical care.
"I think you need to give credit to the attorney general for recognizing a problem, and you need to give credit to Fairview for acknowledging it," Abelsen said. As more Minnesota hospitals adopt the standards, it sends a message to the state's residents that the healthcare system is responsive to their needs. "There is a value in acknowledging a problem and agreeing to live by standards and then letting the public know they'll be accountable," he said.
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