DeLois Gibson never paid much attention to her hospital bills until the deductible of the health plan offered by the Seattle law firm where she works was raised to $1,500 from $200, and she became responsible for 20% of her medical bills. After the change, she started questioning every charge, she said, a practice that ultimately embroiled her longtime healthcare provider, Virginia Mason Medical Center, in a class-action lawsuit.
I do pay more attention to how I spend my medical dollars just like I do when I go grocery shopping, Gibson said. Im looking for the best deal.
Gibsons lawsuit and a related class-action lawsuit involving the 390-bed University of Washington Medical Center, Seattle, are now thrusting the mind-bending complexities of outpatient services into the consumer limelight, a new twist in the burgeoning controversies surrounding the transparency of hospital billing practices.
The case, which focuses on the facility fees that 307-bed Virginia Mason in Seattle legally collects for services rendered at its hospital-based outpatient clinic, was settled relatively quietly last month, but its aftershocks could ripple to every hospital in the country with an outpatient clinic.
I really do think the industry hasnt really had the opportunity to think through the magnitude of change that transparency of pricing will drive, said Jean Chenoweth, senior vice president for healthcare improvement at healthcare research company Solucient.
The direct financial cost to Virginia Mason as a result of the settlement, which is scheduled for a final approval hearing on Jan. 3, 2007, is minimal. Under the terms, Gibson and the approximately 3,200 patients in the class will be refunded facility-fee payments they made over the past six yearsfor Gibson, it amounts to $153.97and the hospital is not required to do much more than it said it was already willing to do in the name of transparency, according to hospital officials.
But indirectly the case potentially affects how hospitals nationwide market their outpatient services to patients. Thats a huge financial stake for hospitals, which have long been fiercely defending their turf against the invasion of physician- and corporate-owned outpatient centers, widely regarded as the biggest growth area in healthcare.
Sometimes hospitals seem to be on the losing side of that battle. While the number of ambulatory surgery centers has grown explosively nationwide, the hospital share of outpatient surgeries has declined precipitously, according to the Healthcare Financial Management Association in a recent report on joint ventures. Ambulatory surgery revenue alone is approximately $15 billion annually, but not-for-profit hospitals own only 10% of all centers, according to the report.
According to the American Association of Ambulatory Surgery Centers, hospitals have ownership interest in 21% of all ambulatory surgery centers nationwide, while only 3% are owned entirely by hospitals. Meanwhile, outpatient utilization in community hospitals has skyrocketed, according to American Hospital Association data, from 202 million outpatient visits and 3 million outpatient surgeries in 1980 to 572 million outpatient visits and 17 million outpatient surgeries in 2004. Earlier this month, in announcing changes to policies and payments for outpatient services, the CMS estimated that from 2005 to 2006, hospital outpatient expenditures increased by nearly 12%, primarily because of growth in the volume and intensity of services, the agency said.
Until now, the turf war has been largely an insiders battle with patients blithely unaware of the competition for their healthcare dollars, but the battle is bound to intensify as federal regulators take greater interest in refereeing the tensions and increasingly savvy consumers take their seats on the sidelines. In a sense, the CMS threw down the gauntlet last month when it said in its final rule on outpatient services that in two years it would launch a set of reportable outpatient quality measures (Nov. 6, p. 8).
And if many consumers were not previously aware of so-called facility feesa commonplace revenue source for hospitalsthey were last week when a USA Today headline proclaimed: Hospital-based clinics can charge more.
For years the nations largest payer Medicarehas willingly paid the so-called facility fees for hospital-based outpatient services without fanfare, and most commercial payers typically followed suit. But as patients become more of a presence in the payer mix with responsibility for higher deductibles and fatter portions of copayments, hospital outpatient services and their arguably crucial facility fees are getting more scrutiny from consumers, said William Cleverley, president of Cleverley & Associates, a healthcare financial data company.
One inpatient stay in a hospital can blow right past a deductible of several hundred, even several thousand dollars, he said, but it could take a number of outpatient visits to reach that threshold. So all of a sudden the relative price of a facility comes into play, and I think that has been a factor for patients, Cleverley said.