Stop pursuing self-pay patients as a windfall opportunity

Recently I was asked to intervene on behalf of a patient who, trapped by circumstance, was paying off an enormous bill for a lithotripsy procedure. What I uncovered wasn’t news, but it drove home how egregious the current system can be, why it so badly needs to be fixed, and how the Affordable Care Act (ACA) helps move us in the right direction.

The patient had health insurance through her husband’s job. But it was cancelled just after the hospital validated it, because the employer failed to pay the premium. The procedure was performed, and the patient was charged as “self-pay.”

If Medicare had been the payor in this case, the hospital’s total reimbursement would have been a little less than $2,000. But the lithotripsy and associated costs were billed at $33,160, or just under 17 times the Medicare rate. After the patient applied for financial assistance, a 30% contractual adjustment was applied, reducing her bill to just under 12 times the Medicare rate.

If the health system had asked her to pay 190 percent of Medicare — typically the upper end of commercial insurance rates — her bill would have been about $3,800. By the time I was contacted, the patient and her husband — responsible people trying to make good on their debt — had already paid the health system $5,700 or 285 percent of Medicare. The hospital insisted they owed an additional $16,000.

I laid this out in a letter to the CEO and, probably because he wanted to avoid a detailed description of this unpleasantness in the local paper, he relented, zeroing out the patient’s balance. No hospital executive wants to be publicly profiled as a financial predator.

But while that resolved that patient’s problem, it did nothing to change the broader practice. Most US health systems, both for-profit and not-for-profit, exploit self-pay patients in this way. Worse, not-for-profit health systems legally pillage their communities’ most financially vulnerable patients while getting millions of dollars in tax breaks each year for providing charity care. Aggressive collections procedures, including home liens, are widespread.

Some states have strictly limited what hospitals can charge low income patients. In California, uninsured patients with incomes below 350 percent of the federal poverty level (FPL) — $82,425 in 2013 for a family of 4 — can be charged no more than Medicare rates. In New Jersey, patients within 500 percent of the FPL cannot be charged more than 115 percent of Medicare.

Section 9007 of the ACA took effect last year and prohibits excessive pricing for self-pay patients, and would revoke a charitable hospital’s tax-exempt status if it charges them more than it charges for insured patients. The language is ambiguous, conceivably allowing health systems to circumvent the law’s intent. But the spirit is clear. To keep their not-for-profit tax status and perks, health systems must stop taking advantage of self-pay patients.

That’s the core point. Most health system executives have, at some time in their careers, released a friend or acquaintance from egregious pricing. Many have forgiven a debtor they didn’t know because the issue was raised and they knew how unfavorable it would look in the local media. In other words, most know that, while these practices are lucrative and mostly hidden, they are also disgraceful.

For that reason alone, it is time for health system leaders to stand up, announce that their systems will adhere to the ACA’s intention, stop pursuing self-pay patients as a windfall opportunity, and encourage systems throughout the country to follow their lead.

In a stroke, this would improve American health care and make life better for millions of patients.

Brian Klepper is chief development officer, WeCare TLC, and blogs at Care and Cost.

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  • Suzi Q 38

    Thank you for helping this couple.
    Hospitals do this all the time.
    It needs to be stopped.

  • doc99

    Healthcare is the only biz in which cash paying customers get charged list plus instead of getting a discount.

    • SarahJ89

      Actually, they seem to be paying way MORE than list price. Whatever that is.

  • PoliticallyIncorrectMD

    While the hospital practices described are inexcusable, ACA, by your own admission, does little to change them. How does this “help move us in the right direction”?

    • James_04

      It doesn’t. The exact situation could (and probably will) happen after January 1st, the only difference is we won’t hear about it because it won’t have any useful propaganda value anymore.

      Employers can still mess up on paying health insurance premiums under the ACA, under the ACA employees can still find themselves suddenly uninsured and holding the bag for the inflated costs our third party payor system enables and encourages, and unless she’s pretty poor, this lady is going to be in the exact same situation under the ACA.

      Except, she won’t get any media coverage out of it.

  • ninguem

    First thing you can do is get rid of “facility fees”.

    Disallow them under Medicare and Medicaid, private insurance will quickly follow.

    • Kristy Sokoloski

      I have to agree with this about getting rid of facility fees. Even ambulatory surgery centers apply this fee as I found out just recently as I am getting ready to have surgery on my left foot.

      • ninguem

        Do you have the choice to use a surgicenter that is not part of any hospital system and does not charge those “facility fees”?

        Very often, you have no choice, though it does not hurt to ask.

        My child’s doctor bill doubled because of “facility fees”. My son goes to the doctor once or twice a year, routine matter, no big deal.

        The doc’s fee had been about $120 with various services added up.

        Suddenly, the bill went to $240.

        Same doctor. Same office. Same personnel. Same medical services.

        All that changed was the sign on the door. Instead of “Podunk Pediatrics” independent practice, now it’s “Megacorp Hospital Pediatrics”. The hospital had been independent, and the pediatricians were in an independent practice, in a medical building adjacent to the hospital. An arrangement seen everywhere.

        The hospital got taken over by a big entity that runs hospitals and medical groups. The pediatricians sold out to “Megacorp”. Now the practice is part of the hospital. The office is considered part of the hospital, as a legal or regulatory construct.

        So, walking into that office is now sort of like walking into their emergency department or urgent care.

        The overhead of the office is now billable.

        My overhead……utilities, rent, janitorial, supplies……is not billable to the patient directly. If I were taken over by the same hospital, it would then be billable.

        And I see it over and over again……..the bill to the patient exactly doubles. I’ve seen it coast-to-coast.

        So……when all the practices are taken over by big entities, expect the cost of primary care will not go down.

        In fact, it will double.

        • Kristy Sokoloski

          I probably could have asked my doctor to do it at the hospital where he has privileges but then again there would be a facility fee. I am sure I probably could choose another facility but then I think the cost of the use of the place if my doctor went to somewhere where I didn’t need to pay a facility fee would be higher. Interesting question. And you nailed it with the price for the facility fee estimate. They gave me a figure that I have to pay of roughly that amount for this surgery. I will ask my doctor about this for whenever I should need surgery again in the future.

  • Ron Smith

    Hi, Brian.

    Re: “But while that resolved that patient’s problem, it did nothing to change the broader practice. Most US health systems, both for-profit and not-for-profit, exploit self-pay patients in this way. Worse, not-for-profit health systems legally pillage their communities’ most financially vulnerable patients while getting millions of dollars in tax breaks each year for providing charity care. Aggressive collections procedures, including home liens, are widespread.”

    What most don’t understand is that everything that you see happening with health care charges were perpetrated or patterned by the federal government from the first.

    Where did the government get the idea that they could arbitrarily mark off a percentage of a health care charge? I mean what’s the definition of ‘allowable fees’ in the first place?

    Government, is reducing its cost by unilaterally marking down the price they have to pay. I don’t get to do that with any of my personal bills nor do the hospitals and medical practices in this country.

    The health insurance industry follows suit. The shell game of an ‘allowable’ fee is propagated from the government.

    What the government can’t save by using ‘allowables’ it will try to recoup by false accusation of overpayment of unfairly remitted payments.

    My former partner and I got a notice after a Medicaid review three years ago, that the government had decided based on 100 charts that we owed the $450,000! We did the work, but they used newly created documentation standards to apply to old charting in order to recoup the costs. Let me be clear that that amounted to $4,500 per chart they reviewed? Do you think we made much more than about $20 to $30 per visit on those charts and that the number of visits was more than 100 visits? (We didn’t end up paying, $450,000 but the cheapest way to fight the suit ended up costing us about $50,000.)

    Our government is as unethical in healthcare reimbursement and cost containment as those in the healthcare industry that defraud the government or the patients themselves..

    When it comes to Obombacare, there is absolute lunacy in thinking that it will fix anything, anywhere that isn’t already cold and dead already. Government can not legislate against lack of citizen character especially when it acts no differently.

    More government never fixes anything, and this healthcare mess, even if it drags on for years, is doomed to failure and buyer’s remorse. Just watch and see.


    Ron Smith, MD

    www (adot) ronsmithmd (adot) com

  • querywoman

    Hospitals have been sued for charging patients more than the contracted rates insurers get.
    This hospital would not have scared me.
    My question is if the patient cannot pay, does the hospital get to write off way more dollars than Medicare would have paid? I have never been able to get that question answered.
    I walked out of a public ER exam room one night. I think the bill was for $9000, which I did not pay.

  • Eric Thompson

    The prices are so much higher for ‘other than Medicare’ patients because Medicare reimbursements many times do not cover costs, let alone make any type of profit. Someone has to pay, and the government refuses. Cash patients get screwed.

  • T H

    Funny, no one complains when dentists do this. Ever paid an endodontist or a periodontist? Even with dental insurance, it’s “Cash, check, or credit card, sir,” as you walk in the door. Every single time.

    And ‘facilities fees…’ How we all hate them. And how utterly necessary they are when Government pay structures for don’t cover overhead costs. Yes, the APC actually has to pay to have the place cleaned, cover its mortgage, and its equipment rental fees. ‘Facilities fees’ are what keep hospitals open and available. The lack of being able to charge such is why small practices (that we all say we love, but we complain and moan when the immediate out of pocked expenses are higher) are dying.

    Do I think facilities fees need to be cleaned up? Absolutely. But I am not so naive as to think that simply doing away with them will leave us in a better position.

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