[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
A REVIEW OF HOSPITAL BILLING AND COLLECTIONS PRACTICES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
----------
JUNE 24, 2004
----------
Serial No. 108-107
----------
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
U.S. GOVERNMENT PRINTING OFFICE
95-446 WASHINGTON : 2004
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A REVIEW OF HOSPITAL BILLING AND COLLECTIONS PRACTICES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
JUNE 24, 2004
__________
Serial No. 108-107
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
__________
COMMITTEE ON ENERGY AND COMMERCE
JOE BARTON, Texas, Chairman
W.J. ``BILLY'' TAUZIN, Louisiana JOHN D. DINGELL, Michigan
RALPH M. HALL, Texas Ranking Member
MICHAEL BILIRAKIS, Florida HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio EDOLPHUS TOWNS, New York
JAMES C. GREENWOOD, Pennsylvania FRANK PALLONE, Jr., New Jersey
CHRISTOPHER COX, California SHERROD BROWN, Ohio
NATHAN DEAL, Georgia BART GORDON, Tennessee
RICHARD BURR, North Carolina PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
CHARLIE NORWOOD, Georgia ANNA G. ESHOO, California
BARBARA CUBIN, Wyoming BART STUPAK, Michigan
JOHN SHIMKUS, Illinois ELIOT L. ENGEL, New York
HEATHER WILSON, New Mexico ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona GENE GREEN, Texas
CHARLES W. ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi, Vice Chairman TED STRICKLAND, Ohio
VITO FOSSELLA, New York DIANA DeGETTE, Colorado
STEVE BUYER, Indiana LOIS CAPPS, California
GEORGE RADANOVICH, California MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire CHRISTOPHER JOHN, Louisiana
JOSEPH R. PITTS, Pennsylvania TOM ALLEN, Maine
MARY BONO, California JIM DAVIS, Florida
GREG WALDEN, Oregon JANICE D. SCHAKOWSKY, Illinois
LEE TERRY, Nebraska HILDA L. SOLIS, California
MIKE FERGUSON, New Jersey CHARLES A. GONZALEZ, Texas
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ``BUTCH'' OTTER, Idaho
JOHN SULLIVAN, Oklahoma
Bud Albright, Staff Director
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Oversight and Investigations
JAMES C. GREENWOOD, Pennsylvania, Chairman
MICHAEL BILIRAKIS, Florida PETER DEUTSCH, Florida
CLIFF STEARNS, Florida Ranking Member
RICHARD BURR, North Carolina DIANA DeGETTE, Colorado
CHARLES F. BASS, New Hampshire TOM ALLEN, Maine
GREG WALDEN, Oregon JANICE D. SCHAKOWSKY, Illinois
Vice Chairman HENRY A. WAXMAN, California
MIKE FERGUSON, New Jersey EDWARD J. MARKEY, Massachusetts
MIKE ROGERS, Michigan JOHN D. DINGELL, Michigan,
JOE BARTON, Texas, (Ex Officio)
(Ex Officio)
(ii)
------------------------------
C O N T E N T S
__________
Page
Testimony of:
Anderson, Gerard F., Director, Johns Hopkins Center for
Hospital Finance and Management, Professor, Department of
Medicine, Johns Hopkins School of Medicine, Professor,
Departments of Health Policy and Management and
International Health, Bloomberg School of Public Health.... 15
Bovender, Jack O., Jr., Chairman and Chief Executive Officer,
HCA........................................................ 91
Collins, Sara R., Senior Program Officer, Health Policy,
Research and Evaluation, the Commonwealth Fund............. 37
Fetter, Trevor, President and Chief Executive Officer, Tenet
Healthcare Corporation..................................... 103
Jacoby, Melissa B., Associate Professor, University of North
Carolina at Chapel Hill, School of Law..................... 23
Kuhn, Herb, Director, Center for Medicare Management, Centers
for Medicare and Medicaid Services, U.S. Department of
Health and Human Services.................................. 130
Lofton, Kevin E., President and Chief Executive Officer,
Catholic Health Initiatives................................ 85
Morris, Lewis, Chief Counsel, Office of Inspector General,
Department of Health and Human Services.................... 135
Pardes, Herbert, President and Chief Executive Officer, New
York Presbyterian Hospital................................. 97
Rukavina, Mark, Executive Director, the Access Project....... 31
Tersigni, Anthony R., Chief Operating Officer and Interim
CEO, Ascension Health...................................... 79
Additional material submitted for the record by:
Bovender, Jack O., Jr., Chairman and Chief Executive Officer,
HCA:
Letter dated July 19, 2004, enclosing response for the
record................................................. 782
Letter dated July 27, 2004, enclosing response for the
record................................................. 832
Clarkson, Douglas S., Assistant General Counsel, Tenet
Healthcare Corporation:
Letter dated August 5, 2004, enclosing response for the
record................................................. 596
Letter dated September 10, 2004, enclosing response for
the record............................................. 801
Fetter, Trevor, President and Chief Executive Officer, Tenet
Healthcare Corporation, letter to Hon. John D. Dingell,
dated July 20, 2004, enclosing response for the record..... 795
Lofton, Kevin E., President and Chief Executive Officer,
Catholic Health Initiatives:
Letter to Hon. John D. Dingell, dated July 20, 2004,
enclosing response for the record...................... 819
Letter to Hon. James C. Greenwood, dated July 22, 2004,
enclosing response for the record...................... 1591
Pardes, Herbert, President and Chief Executive Officer, New
York Presbyterian Hospital:
Responses for the record................................. 669
Letter dated July 22, 2004 enclosing additional responses 770
Rukavina, Mark, Executive Director, the Access Project,
response for the record.................................... 724
Service Employees International Union, prepared statement of. 590
Tersigni, Anthony R., Chief Operating Officer and Interim
CEO, Ascension Health:
Letter to Hon. John D. Dingell, dated July 20, 2004,
enclosing response for the record...................... 719
Letter to Hon. James C. Greenwood, dated July 22, 2004,
enclosing response for the record...................... 1237
The Cost of Care for the Uninsured: What Do We Spend, Who
Pays, and What Would Full Coverage Add to Medical
Spending?, a report prepared for the Kaiser Commission on
Medicaid and the Uninsured................................. 575
(iii)
A REVIEW OF HOSPITAL BILLING AND COLLECTIONS PRACTICES
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THURSDAY, JUNE 24, 2004
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Oversight and Investigations,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:20 p.m., in
room 2123, Rayburn House Office Building, Hon. James C.
Greenwood (chairman) presiding.
Members present: Representatives Greenwood, Stearns, Burr,
Bass, Walden, Ferguson, Rogers, DeGette, Allen, Schakowsky, and
Waxman.
Staff present: Mark Paoletta, majority counsel; Anthony
Cooke, majority counsel; Brad Conway, majority counsel; Michael
J. Abraham, legislative clerk; Edith Holleman, minority
counsel; Amy Hall, prsfessional Staff; Bridget Taylor,
professional staff; Voncille Hines, research assistant; and
Dave Vogel, legislative clerk.
Mr. Greenwood. The subcommittee will come to order. Let me
begin by apologizing to all for the delay, it's the unavoidable
exigencies of voting, but we welcome you all. The Chair
recognizes himself for the purpose of making an opening
statement.
We convene this afternoon to review hospital billing and
collection practices for uninsured/self-pay patients. Today in
this country an average working man or woman treated at a
hospital can be stuck with a bill that is double what managed
care or government programs pay. These are uninsured/self-pay
patients who don't have the weight of an HMO to negotiate on
their behalf, or don't qualify for government health
assistance. Then, to add insult to their injury, they are
sometimes aggressively pursued for these inflated debts. The
situation is unfair and it is unjust.
To put these hospital charges in perspective, let us look
at a simple chart that paints a troubling picture. This
provides a basic breakout of hospital revenues and costs. Based
on our research, these proportions seem common in the hospital
industry.
The black column, second from the left, is the cost to the
hospital for providing the service. On either side of the cost
column, Medicaid and Medicare can be seen to pay, on average, a
bit less and a bit more, respectively. Third-party payers, such
as insurers and managed care, represented by the yellow column,
pay within a wide spectrum but, on average, provide profitable
reimbursement. The red column on the far right is what many
hospitals expect the uninsured and self-pay patients to pay.
This charge to uninsured and self-pay patients is, generally
speaking, the hospital's ``charge master'' rate. That term will
come up a lot today, so let us talk about charge masters for a
moment.
Charge masters are catalogs of prices for all services and
supplies offered at a hospital. They sometimes run hundreds of
pages and contain thousands of line items. The prices in a
charge master, as indicated in the chart, can bear little
relation to the actual cost to the hospital. Indeed, some items
on a charge master can reach well over 1000 percent markup.
And these prices continue to grow each year increasingly
out of proportion to costs. In California urban hospitals, for
example, the average price mark-up over cost has risen from 174
percent in 1990 to 310 percent in 2003. Most hospitals, I
think, will admit to being hard-pressed to justify these
charges. Rather, hospitals will explain that charge master
prices are the product of many complex and sophisticated market
forces in health care, including government entitlements,
managed care, and rising costs. There is, without a doubt, a
number of significant and powerful moving parts in health care
finance, but we must not allow the working class uninsured to
get chewed up in these machinations.
Hospitals will say they address the matter of high charge
master prices through their charity programs which provide care
free or at a reduced cost to the needy. Unfortunately, this too
often covers only some people for only certain services.
Further, I question whether we can be assured of the
fairness or reasonableness of charges which, in some instances,
are merely discounts from an already inflated number. For
example, let us return to the chart using the 2002 numbers.
Even if an uninsured patient had a 25 percent discount, he or
she would still be paying twice the cost. A partial discount
off an inflated number seems very arbitrary. Even given all the
well-administered, generous and commendable charity programs
offered by hospitals, ultimately, there are still individuals
who are expected to pay these full charge master rates.
It would seem that through these charity programs hospitals
are trying to include the uninsured in a finance and accounting
system that appears simply not designed for or allowing for
participation by individual consumers. And if, in the end,
managed care, government programs and the uninsured are not
paying the charge master price, then what purpose does the
current charge master structure serve?
Let us turn to what happens when someone is eventually
asked to pay these inflated bills. Hospitals will point out
that they collect only pennies on the dollar and, based on our
investigation, this would seem to be the case.
The question for our purposes here, however, is not what
they actually collect, but what happens to the part they don't
collect? In a September 2003 study, one nonprofit hospital in
Connecticut was found to have had over a 9-year period medical
liens on 7.5 percent of the homes in a community it purported
to serve. A hospital may indeed only collect 10 cents, but the
other 90 cents may be secured by the patient's home. Many
hospitals have claimed to have recently revisited and revised
their collection practices. While that is encouraging, I remain
concerned, however, when I read articles like the two that
appeared in the Wall Street Journal over the past couple of
weeks, about two of the systems appearing before us today.
In the first article, from yesterday, one hospital system
conceded that as many as half of those uninsured patients,
possibly eligible for discounts under a new charity program,
were not told of their potential eligibility. And they offered
this admission, unfortunately, only after being confronted with
a report by an advocacy group alleging that large numbers of
uninsured patients seeking care in their facilities were not
learning about available charity discounts.
The second article from 2 weeks ago described the case of a
man who recently had his bank account seized because of a 13-
year-old hospital bill from one of the systems here today.
Perhaps what is more troubling in the story and the age of the
bill was the excuse offered by the hospital. The hospital
indicated that this was a mistake on the part of a lower-level
hospital staff that, when brought to the attention of senior
executives, was immediately remedied.
Are the new commitments recently articulated by so many
hospitals to reform their billing and collection practices only
known at the management level? Are lower-level staff, who are
actually the front-line staff, aware of these new policies?
Not to put too fine a point on this, but the awareness,
participation, and cooperation of this front-line hospital
staff is vital. How these hospital employees present payment
options to a patient can mean the difference between having a
bill covered by a charity program or placing the full amount on
a high-interest credit card.
As a further illustration, one system with us today, in a
customer service training manual produced to the subcommittee,
made an explicit statement of ``four main priorities when
securing payment on a self-pay account. Priority 1, obtain any
insurance information; priority 2, attempt to obtain payment in
full or settle the account; priority 3, negotiate a payment
arrangement; priority 4, determine fund eligibility.''
The manual goes on to say that billing agents should use
their discretion in applying these principles, but if an agent
followed these priorities, as written, a needy patient might
never learn about charity care before paying by a credit card
or agreeing to an unmanageable and unreasonable payment plan
with the hospital. How the billing process is executed and
practiced by the hospital staff is more important than any new
written policy or any promises or pledges from management.
At the outset of this investigation, hospitals generally
acknowledged many of these concerns with billing and collection
practices, but claimed Medicare rules, in some instances, tied
their hands with respect to what they could do for uninsured
and self-pay patients.
In December 2003, 5 months after the start of this
committee's investigation, the American Hospital Association
sought guidance from the Department of Health and Human
Services on these rules. Two months later, both Secretary
Thompson and the HHS Office of Inspector General responded,
largely rebuking the industry's positions. The final panel of
this hearing will feature two representatives of HHS, and will
explore further with them this guidance.
In this regard, I will seek from HHS and the hospitals, an
answer to the question of why steps to address the situation
have not been taken until now. If hospitals believed that
Medicare rules created roadblocks to doing the right thing for
the uninsured, why did they not raise it with HHS earlier?
Cost-to-charge ratios are reported to HHS in Medicare costs
that the Agency must have seen this growing divergence between
cost and charges. Is no one at HHS watching to see whether
their rules and regulations are causing harm?
In December 2002, Trevor Fetter, CEO of Tenet Healthcare,
who is here with us today, made some very interesting remarks
in an investor conference call shortly after joining Tenet.
This was almost 1\1/2\ years ago, and in many ways he framed
precisely the issues for which we come here today. Quoting Mr.
Fetter: ``I would like to turn to an issue that has bothered me
for years. I mentioned earlier that Medicare requires hospitals
to set charges the same for everyone. This means that the
uninsured or underinsured patient receives a bill at gross
charges. In other words, the entire hospital industry renders
its highest bills to the customers who are least able or likely
to pay. The problems that this creates are obvious. The bills
are tremendous and incomprehensible to most people. The patient
leaves the hospital, presumably after some traumatic event, and
the hospital bill adds to the trauma. As a result, they don't
pay. Thirty percent of the patients account for nearly 100
percent of the collections from this group, 70 percent of the
patients pay virtually nothing, but Medicare requires that the
hospitals make a bona fide effort to collect. The
administrative costs are huge. The ill will that is generated
among the patients is huge. And the whole situation is far from
ideal, from a social or economic perspective. Tenet employs
more than 5,000 people to render bills and attempt to collect
from these patients. It is ridiculous.''
Mr. Fetter could not have put more clearly into words what
this committee's investigation is about. It is not unreasonable
to assume that Mr. Fetter was not the only member of the
hospital industry to recognize this problem. If so, why is
there action only now? Were lawsuits and a congressional
investigation necessary for the industry to address this?
Finally, we will likely hear today testimony and comments
about the role of universal health coverage in the issues we
are addressing in this hearing. In anticipation, let me say
this: In Congress, we have debated, and will continue to
debate, the critical matter of health care coverage. But since
this committee started this investigation almost 1 year ago, we
have seen concrete action improving the condition of uninsured
and self-pay patients facing medical debts. Our focus on
billing and collection issues has yielded specific and
immediate results. I look forward to continuing and building
this direct approach to these problems that is helping real
people right now.
We welcome today representatives from the Department of
Health and Human Services, and the Chief Executives of
Ascension Health, Catholic Health Initiatives, HCA, New York
Presbyterian, and Tenet Healthcare.
We also welcome our panel of experts and advocates, Dr.
Anderson, Ms. Jacoby, Mr. Rukavina, and Dr. Collins. Thank you
all for joining us here today, and I look forward to your
testimony. The Chair recognizes the gentlelady from Colorado
for an opening statement.
Ms. DeGette. Thank you, Mr. Chairman. I agree with the
chairman, this is a very important hearing on the hospital
billing of the uninsured and underinsured. In particular, I
want to extend a welcome to Kevin Lofton, who is the President
and CEO of Catholic Health Initiatives in Denver, who is on the
second panel today.
Each year, thousands of Americans without health insurance
receive hospital care because of urgent and emergency
situations. Through no fault of their own, though, these
patients are unable to pay their bills. This puts both
hospitals and patients in a quandary. The hospitals have spent
money and manpower providing critical medical care, but they
have no way to recover the cost. The patients have incurred
catastrophic debts. The amount could be $1,000, $10,000, or
even $100,000, and have no ability to get the amount of money
necessary to pay off these bills in a proper period of time.
The problem stems from the inevitable collision of
uninsured patients needing health care and hospitals needing to
be paid for health care. Now, there are anywhere from 43 to 81
million Americans who go without health insurance for at least
part of a year. This is a burden that neither our health care
system or our patients can continue to bear. And as a result of
this system, both patients and hospitals are facing severe
financial pressures.
There is no question that some hospitals took collection
efforts too far. Everyone here is aware of reports of body
attachments and other types of financial penalties. The stories
frankly are horrifying, and we must look into steps to protect
patients from overzealous bill collectors. This hearing,
though, must keep the problem of hospital billing in context.
Too many Americans are unable to pay for health care because
they do not have health insurance.
This subcommittee's investigation reinforces the reality
that the entire health care system is extremely ill. Some
hospitals seem to view uninsured patients as revenue enhancers.
Studies uncovered that hospitals charge insured patients only
46 percent of the rack rate for services. This pricing reveals
that it is essential that patients have an advocate in the
discounting process. In the current system, the uninsured are
the only ones who have no advocate. Like any other type of debt
collection, hospital billing and collection practices can have
a devastating effect on patients without the ability to pay.
These patients, many of them still recovering from illness or
surgery, may see their credit rating ruined and their financial
lives destroyed.
As Professor Jacoby will describe, this could even mean
denial of housing or employment. This can spiral into a vicious
trap. How can these patients pay their hospitals without new
income? And if the patients have left the hospital still
recovering from their illness, how easy is it for them to
negotiate with a billing department?
Now, one Wall Street Journal article I read talked about a
man who was billed $22,000 for a 3-day hospitalization
following emergency appendectomy surgery. He couldn't pay the
$22,000. But the problem we have, I will bet he couldn't pay it
even if under a fee reduction program his bill was cut in half,
to $11,000. And that is the problem we have.
Our second panel, comprised of hospital CEOs, will provide
more information on this price system and the collection
practices. They will also describe the steps that they are
taking to improve their billing systems. I am looking forward
to hearing the details of these plans for the uninsured
because, up to this point, it has been unclear how robust these
needed discount programs are.
The investigation of this subcommittee has been extremely
comprehensive and valuable. Examination of this problem has
brought to light some specific examples of egregious billing
practices, but I hope that these stories do not overshadow the
fact that both patients and hospitals are caught in the same
vicious cycle. Hospitals cannot be expected to absorb all the
cost of serving the growing number of uninsured and
underinsured, and I am sure the chairman did not mean to imply
that in his opening statement. What this country needs is a
system in which everyone has access to and can pay for
essential health care services, both emergency and preventive.
Every American should have basic health insurance that is
affordable.
As this hearing will show, the financial burdens that our
uninsured patients and our hospitals struggle with every day
make this an issue that can no longer be delayed and, frankly,
it is a problem that is getting worse and worse, both for the
un- and underinsured, and for the hospitals which are trying to
bear an increasing burden of this.
Now, it would be easy for us to simply blame hospitals for
overaggressive bill collection and too high rates, but it would
miss the larger point. Too many Americans are unable to pay for
health care services because they do not have health insurance.
I hope this hearing serves as the impetus for us to address
this larger issue that is at the root of the problem. And, Mr.
Chairman, I would ask unanimous consent to put Mr. Dingell's
opening statement in the record, and also any other member of
the full committee who wishes to insert an opening statement in
the record.
Mr. Greenwood. Without objection, that will be the order.
Thanks to the gentlelady. Recognize the gentleman from
Oregon, Mr. Walden, for an opening statement.
Mr. Walden. Thank you very much, Mr. Chairman. I appreciate
the fact of the work of the staff on this issue, and certainly
your leadership on this issue, and recognize the problem that
is before us.
I spent several years on a community hospital board, a
nonprofit hospital board, before coming to the Congress, and
every month we would go through our billing, and every month we
would write off a goodly share for charity care. And I recall
that the biggest shifter of cost--if that is the right word--in
the system was both Medicaid and then Medicare that often had
reimbursement rates that, frankly, didn't necessarily cover
even the cost of care. And, so, those are issues I think we
need to look at. Clearly the billing issue, though, is the
legitimate one that needs to be examined, and I know many of
the hospitals have begun to do that, many are in the process of
doing that, and certainly the light that has been shed on this
practice has moved that effort forward.
It is interesting to note, however, that when it comes to
the uninsured, there are some folks that probably do have the
ability to pay, and I got the census data. And it is kind of
interesting to note that of those who went without health
insurance for an entire year, 8.2 percent had household income
in excess of $75,000, and 20 percent had household income over
$50,000.
Interesting, too, as we look at how do you get health care
coverage, especially insurance, for folks who are these folks--
and, in some cases, obviously 20 percent have income over
$50,000--43.3 percent are noncitizens of the United States,
according to the census population study; 33.4 percent are
foreign-born. So, you have 76, 77 percent are either foreign-
born or not citizens of the United States, who are uninsured.
So, as we look at how do we reach out to provide affordable
health care, there is clearly a target group there that stands
out in certain need. And I know we work with those folks in
many different ways.
I think this hearing is important. I think looking at the
charge master and what people are being billed, and whether or
not those are reasonable charges is very important for this
subcommittee. And so I look forward to the testimony of the
folks from the various panels, and hopefully together we can
find a more equitable way to make all this work and still allow
hospitals to be able to keep their doors open and provide care,
including the enormous charity care that is already given.
Mr. Chairman, thank you for your leadership, and I look
forward to the witnesses.
Mr. Greenwood. The Chair thanks the gentleman. Recognize
the gentleman from California, Mr. Waxman, for an opening
statement.
Mr. Waxman. Thank you very much, Mr. Chairman. This hearing
before the subcommittee today is a critical one. It is
resultant from an investigation which focused on a number of
billing practices by hospitals which have resulted in
unconscionable practices in going after uninsured persons who
owe debts far beyond their ability to pay.
Turning bills over to collection agencies who engage in
practice of harassing individuals, garnishing their wages,
going after their homes, freezing their bank accounts, these
activities have no place in this country when the debt is
occurred because of a person's critical need for health care.
Uninsured people who facing bills of tens and even hundreds of
thousands of dollars and no possible way to pay need help, not
harassment. The fact that medical bills and the debt from those
bills is the second leading cause of bankruptcy in this country
is, simply put, unacceptable.
I want to make a couple of critical points. First, we all
need to acknowledge that in the face of these revelations, the
hospital industry has, by and large, responded with concern and
a commitment to stop the more abusive practices.
We will hear today of the adoption of policies designed to
address the more egregious abuses. And while I commend them for
that, the real test, of course, will not be in the signing of
pledges to do better, but in actually carrying them out and
stopping these troubling practices.
The second point is, the clear and critical point here is
that all these problems occur because we have so many uninsured
people in this country. We know that over a 2-year period, over
80 million people find themselves without insurance for some
period of time. This is completely unacceptable. We will never
solve the problem we are discussing today until that situation
changes.
Third point, we know that the practice of uninsured people
facing the very highest charges is not just a problem for
people getting hospital care. While the bills might be the most
overwhelming, the fact is that uninsured Americans without drug
coverage every day face the problem of paying the highest
prices when they can least afford it. They pay more than people
with insurance. They pay more than citizens of Canada and other
countries. And this is also unacceptable, and I hope this
subcommittee will show equal interest in the problem in this
area. After all, they have no one negotiating for them to get
lower drug prices, either.
Finally, I have to note that the policies now in vogue with
the Republican Majority of pushing health savings accounts and
high deductible insurance plans runs directly contrary to what
is needed to give people the assurance of coverage and access
to favorably negotiated prices. It is unfair to our hospitals
to ask them to provide their most favorable discounted rates to
insurers who have deliberately designed policies where people
will face a long period of essentially being uninsured because
the deductible is so high. Hospitals give discounts to insurers
because they are assured of payment for essentially all of the
services they provide, less a small deductible amount. Asking
them to provide the same discount to a truly uninsured person
is sensible and humane, but requiring them, in essence, to do
the same for uninsurers with deliberately designed high
deductible plans is another matter entirely. Asking hospitals
to bear the brunt of the unmet cost in the long period before
insurance kicks in, asking them to protect the profits of
insurers is not a sensible policy and will ultimately hurt the
very institutions that are on the front line of delivering
care.
I look forward to hearing from our witnesses today and
exploring this issue further with the members of the
subcommittee.
Mr. Greenwood. The Chair thanks the gentleman, and
recognizes the gentleman from New Hampshire, Mr. Bass, for an
opening statement.
Mr. Bass. Thank you, Mr. Chairman. This is indeed a very
interesting hearing. It is not simple. There are many different
parties involved. There is, if you will, problems and issues to
be shared by all. On the part of the hospitals, there are
allegations of inflated billing to the uninsured, unethical
collection practices, but yet, on the other hand, hospitals--
most, if not in fact all hospitals, engage in significant and
important charity programs that provide essentially deeply
discounted services to the poor, and the reality is that
hospitals are not great profit centers nationwide anyway, we
know that. We just went through a debate on possible
reimbursement from the Federal Government, and we provided
significant increases in this area, and it wasn't because the
hospitals were being over-reimbursed.
Patients are another factor. Most patients are insured, but
those that are not are divided, as my friend from Oregon
pointed out, into some who can pay and some who cannot. And we
do not want to establish a situation where individuals who do
not choose to buy either managed health care or any form of
health insurance can qualify for benefits or payments under
those circumstances.
And, of course, the insurance companies are another factor
because they are the biggest--besides the Federal Government--
reimbursement mechanism, and they negotiate and they create
differences in prices because of their negotiating power, which
is another part of this complicated equation.
And, last, the Federal Government and its reimbursements
for Medicare and Medicaid is, I guess, probably the biggest
reimbursement single entity, and growing every day, that the
relationship that the hospitals have to determine what element
of discount occurs is a difficult one, and it is at times
somewhat awkward or perhaps arbitrary. So there are no clear
answers here, but there might be some interesting findings that
come out of this hearing that will help make the system more
predictable, help the hospital community perhaps make their
collection processes and their billing processes more
predictable and fair for those who really need health services
and cannot afford to pay for them.
I would also point out that I think that--I appreciate my
friend from California's comments relative to health savings
accounts--but there are also other scenarios that could work
out that would be very beneficial to the process, if consumers
really have a voice in the process of paying for hospital care,
at least the first-dollar hospital care, through health savings
accounts which provide accountability and an incentive for
patients to hold hospitals, doctors and other entities
accountable for the bills that are sent out, rather than
awaiting the lawyers to file suits, or interest groups, or
committees of Congress to conduct investigations.
So, like all the hearings that this good subcommittee has,
they are important, but--especially in this case--there are no
clear villains and there are no clear heroes in the process of
investigating this issue. And with that, I will yield back and
look forward to hearing from our witnesses.
Mr. Greenwood. The Chair thanks the gentleman, and
recognizes the gentlelady from Chicago, Ms. Schakowsky, for the
purpose of making an opening statement.
Ms. Schakowsky. Thank you, Mr. Chairman, for holding this
hearing on hospital billing and collection practices. Many of
the issues that we will talk about today are the focus of
attention in Illinois and are being considered by the
Legislature, investigated by the State Attorney General's
Office, and debated by the hospital community and the public.
I want to thank Mr. Greenwood, Mr. Dingell, and Ms. DeGette
for including a report on the Chicago situation called ``A
Failing Mission: The Decline of Charity Care at Resurrection
Hospital'' in the hearing record. I would like also to ask
unanimous consent to include a statement by the Service
Employees International Union that also addresses billing and
collection practices in Illinois in the hearing record.
Mr. Greenwood. Without objection, the material will be
included in the record.
Ms. Schakowsky. Thank you. In fact, several Chicagoans have
traveled here today to attend this hearing because they have
been personally and extremely seriously affected. I want to
recognize them. Zaida Perez was a hospital nurse for 21 years.
Her troubles began when her working but uninsured husband was
in a car accident in January 2003, and admitted to Advocate
Lutheran General Hospital. Two days later, her father died, and
she faced $13,000 in burial expenses. She was diagnosed with
breast cancer and, fortunately, was treated at Cook County
Hospital, which helped arrange payment for her bills. In March,
Lutheran General sent her husband a bill for $12,000. Although
she asked for help in devising a payment plan, no help was
given, and in April the threatening calls began. After a
payment plan was finally worked out and payments were being
made, she was sued. Her husband's wages were garnished at the
rate of $75 a week, until she finally got legal assistance to
erase her debt.
Lesszest George is a working single mother. Her 19-year-old
son spent 2 weeks in Illinois Masonic Hospital after he was
shot in a case of mistaken identity. Asked after the surgery
who would be responsible for the bill, Ms. George signed the
paper that was put before her, thinking that her son was
covered by her insurance but not realizing that he had lost
that coverage upon graduation from high school. She received a
bill for $52,000. The hospital did work to help her apply under
the Victims' Assistance Fund, but she was denied. Instead of
working with her for charity care, they filed a lawsuit. Her
son is now doing well physically, but is still uninsured
because, as a part-time student and part-time worker, he
doesn't qualify for insurance.
Their stories underscore that hospital billing and
collection practices can turn a medical injury into a financial
nightmare as in the case of Lutheran General Hospital and
Illinois Masonic Hospital. Or, as in the case of Cook County
Hospital, those practices can provide the necessary financial
assistance so that the focus is on getting well, not dealing
with collection agencies and lawsuits.
We need to address charity care policies, discriminatory
pricing, and abusive collection practices, but we must also
recognize that our health care system itself has failed Zaida
Perez, Lesszest George, and many other Americans. Despite
working full-time, they are uninsured and facing medical debts
that will be hard to dig out from and that make it hard to care
for their families' ongoing needs.
As we will hear, the problems of medical debt and the lack
of affordable health care are most acute for the uninsured.
They are more likely to forego care, are charged more for care
in hospitals and other settings, and are the most likely to
face medical bankruptcy. But being covered by insurance isn't a
guarantee by any means. As Sara Collins points out in her
excellent testimony, more than one in three of the continuously
insured reported problems paying medical bills. We know that
access to affordable health care benefits, cost-sharing
requirements and discounts varies not just by whether you are
insured or uninsured, but on the type of insurance coverage you
have. The bigger the group, the better the coverage.
We in Congress can act to solve these problems, or we can
act to exacerbate them. High deductible plans and health
savings accounts will shift more cost onto individuals and
families, increasing the likelihood of medical bankruptcy.
Limited tax credits for the purchase of inadequate individual
policies will not guarantee that policyholders will be able to
pay their bills. Instead, it is time that we enact universal
health care that assures access to comprehensive, affordable
care. Thank you, Mr. Chairman.
Mr. Greenwood. The Chair thanks the gentlelady, and
recognizes the gentleman from New Jersey, Mr. Ferguson, for an
opening statement.
Mr. Ferguson. Thank you, Mr. Chairman. I commend you for
your interest in the problems of the uninsured, and your
leadership in investigating how some of the Nation's largest
hospital systems handle uninsured patients, and I have a great
deal of interest in the topic of today's hearing.
There is much about our health care system in this country
that we take for granted. Our hospitals are the finest in the
world. Our doctors and nurses are the best trained. Our
technology is the most advanced. At the same time, I, like
many, am deeply concerned about the number of uninsured
Americans.
About 1.2 million residents in my home State of New Jersey,
or about 15 percent of our population, are uninsured. Most of
them are from working families, good people who play by the
rules, provide for their children, and pay their taxes.
I believe that every person should have access to quality
health care, adj that we in the Congress should be working to
make health insurance more affordable, but until that time it
is imperative that our health care system treats the uninsured
and the poor with respect and with mercy and with fairness.
From the evidence uncovered by this subcommittee, it is
clear that although oftentimes that is the case, it doesn't
happen every time.
I commend the subcommittee for its role in prompting
hospitals across the Nation to examine how they handle
uninsured patients. These examples do not take anything away
from the many hospitals that, for decades, and in some cases
for centuries, have provided charity care to the poor and the
vulnerable. This is especially the case of many of the
nonprofit hospitals in my home State of New Jersey and across
the country that are sponsored by religious organizations. In
New Jersey, I give examples like St. Michael's Medical Center
in Newark and St. Claire's Hospital in Morris County.
In this day and age of making your numbers and creating
shareholder value and growing the bottomline, I am awed by
their continuing tradition and commitment to care for the poor.
In many respects, our Nation's hospitals, especially those who
focus exclusively on care for the indigent, are the health care
providers of last resort. People can go to the hospital when
they have nowhere else to go for care. The proof is in the
numbers.
A recent study by the Kaiser Commission on Medicaid and the
Uninsured estimated that uncompensated care in 2004 will total
more than $40 billion. Hospitals will account for about 60
percent of that total.
Mr. Chairman, I ask unanimous consent that a copy of this
study, the Kaiser Commission Study, be entered into the record.
Mr. Greenwood. Without objection, it will.
Mr. Ferguson. Thank you. No one should feel good about
these numbers. The cost of uncompensated care at hospitals
should concern everyone. This is what Stuart Altman, a health
policy expert who teaches at Brandise University recently said
on NPR about unpaid bills at hospitals, and I quote: ``They are
a symptom of a much broader issue, which is whether the
hospital system is financially in good shape, or not, and that
affects both access to care and quality.''
I urge my colleagues on this subcommittee and members of
the audience here to heed those concerns. Again, I thank you,
Mr. Chairman, for holding this critically important hearing,
and I certainly look forward to hearing from several panels of
our witnesses here today. I yield back.
Mr. Greenwood. The Chair thanks the gentleman, and
recognizes the gentleman from Maine, Mr. Allen, for his
statement.
Mr. Allen. Mr. Chairman, thank you for calling this hearing
today. It is an important subject matter, and I welcome all of
our witnesses.
Medical data is a serious problem faced by a growing number
of Americans who are uninsured or underinsured, and the process
by which hospitals charge and obtain payment from individuals
without insurance deserves careful scrutiny, especially
considering that medical data is a leading cause of personal
bankruptcy in the United States.
Hospital bills are just one service that many uninsured are
paying out-of-pocket. They also have doctors' bills, outpatient
services, and prescription drugs. Most people accessing
hospital services have some kind of third-party coverage, but
those who are not insured and have no one negotiating on their
behalf for setting a price, as happens with Medicare and
Medicaid, have to pay the charge master rate.
I am willing to guess that very few of the 44 million
people who lack health insurance today have a clue what a
charge master rate is, nor would the average uninsured person
know that if they go to the emergency room, they may be charged
a good deal more than a health plan is charged by a hospital to
provide the same care, often 2 to 3 times more. And while 120
days may seem like a reasonable time to pay a $100 or $200
bill, the average cost of an emergency room visit is between
$500 and $1,000 for an individual without insurance. I suspect
that many uninsured would have difficulty paying a bill of that
amount or more within 4 months, and if they need just one
overnight stay, they can wind up with a bill of $4,000 or so in
just 24 hours.
Some things could help. Transparency in the billing
process, enrolling patients who qualify in a charity care
program, establishing reasonable payment plans for those who
don't. All of that can help alleviate the anxiety associated
with a daunting medical bill.
In Maine, all of our acute care hospitals are nonprofit. On
average, self-paying patients make up about 7 percent of
overall hospital payments. And, currently, most of our
hospitals offer free care for patients who are between 175
percent and 200 percent below of the Federal poverty level. And
our hospital CFOs in Maine have been working together to
develop guidelines regarding charity care, sliding scale fees,
billing and collections.
I realize that the chairman's intention for calling this
hearing today is to examine hospital billing and collection
practices, but given the number of uninsured in this country
and the rapid growth in health care premiums, we need to look
deeper. Health insurance premiums in the U.S. rose 13 percent
in 2003, the third consecutive year of double-digit inflation.
As a result, many employers are forced to increase cost-sharing
or switch to products which put a greater financial burden on
employees, including so-called ``consumer-driven high-
deductible health plans,'' which I believe will only make the
problem we are dealing with here today worse than it is.
Congress, someday, must focus on how to make affordable
quality health insurance available to all Americans, but today
Congress is simply stumbling along like a man shackled and
bound in a straightjacket, not limited really by physical
barriers, but limited by our ideological preconception about
the role of government in the private sector when it comes to
health care. We are limited by our own ideas in a way that is
doing a great disservice to the people of this country, and if
we are going to make progress on the larger issue in front of
us, we have to work through that issue.
We won't solve all those problems today, but I do welcome
the panels, and I thank the chairman for holding this hearing.
With that, Mr. Chairman, I yield back.
Mr. Greenwood. The Chair thanks the gentleman, and
recognizes the gentleman from Florida, Mr. Stearns, for his
opening statement.
Mr. Stearns. Thank you, Mr. Chairman. I congratulate you on
having this hearing. I think all of us realize we are not here
to be overly critical of the hospitals, or sort of beat up on,
we are just trying to arrive at some explanation of the reality
between the cost and the charges.
America's hospitals, urban and rural, for profit and not-
for-profit, I think do a superb job of taking care of patients
of every age and health condition. I am very proud of the
charitable outreach of the hospitals in my congressional
district and, with that, Mr. Chairman, I would like to put into
the record a summary of my charitable hospitals into the
record, with unanimous consent.
Mr. Greenwood. Without objection, the document referred to
will be made a part of the record.
Mr. Stearns. Anyone who enters their hospital is treated,
without question, and I think they should seek payment for
their services. They have to make a profit for their
shareholders or, if they are not-for-profit, they still have to
have enough profit so they can have capital expenses. However,
Mr. Chairman, there is a great disparity between what a
procedure costs and what is charged. This accounting creature
is called a ``charge master.'' Is it based on some realistic
computation of the factors involved in the care of the
individual, or is it a fictitious number in hospital finance?
And we all remember the ``average wholesale price,'' AWP
system. And the pharmaceutical wholesale pricing system,
remember the hearings we had on that, and the concerns we had
on that.
Dr. Anderson's testimony says that in the 1960's, while
there was a proliferation of uninsured Americans because they
had become tax exempt, there were no discounts, everyone paid
the same rates. The rates that insured and self-pay people paid
were similar. Yet, today, on the average, ``self-pay patients
are currently being charged 2 to 4 times what people with
health insurance coverage pay for hospital services.'' So, why
are the self-pay patients paying 200 to 400 percent more? That
is a legitimate question.
Also, as taxpayers have an interest in both Federal health
programs and the tax benefits, I am interested to know the
relationship, if any, between the charge master, the taxes and
the Medicaid reimbursement.
So, the question is, after we finish this hearing, where do
we go from here? Well, there are going to be some people that
are going to call for a price control. I don't recommend that
as a solution. I think that out of the box, we should not have
price controls, but I think the three panels we have, and all
the witnesses, are to be commended for coming here, and I look
forward to an open honest debate on this. Thank you, Mr.
Chairman.
[Additional statement submitted for the record follows:]
Prepared Statement of Hon. Joe Barton, Chairman, Committee on Energy
and Commerce
Let me begin by thanking Chairman Greenwood for holding this
hearing today. I share his concerns with what we have been learning
about the billing and collection practices of too many hospitals with
regard to uninsured/self-pay patients. Today I look forward to learning
more about these issues as well as the steps the hospital industry is
taking to address them.
Hospitals across America have long been community leaders in
helping those less fortunate. Last year alone, hospitals provided $22
billion in charity care in their respective communities. For this,
hospitals should be commended.
There has been a substantial group of needy patients, however,
sometimes left out of these efforts. I am concerned that uninsured/
self-pay patients are too often expected to pay far more than others
for their care and then aggressively pursued for this inflated debt.
This is particularly troubling for me because my home state of Texas,
in 2002, had the highest rate of uninsured citizens at 28.5%. I am
committed to ensuring fair and reasonable treatment by hospitals in
their billing and collections practices--for every patient regardless
of their means or manner of payment.
All hospitals have specific charges for each service they provide
and compile these thousands of individual charges into one price-list
catalog called the ``charge master.'' However, these charge master
rates do not reflect the actual cost and reasonable profit of providing
that service. Mark-ups have rendered these charges sometimes hundreds
of percent above the actual costs to the hospital.
As health care costs continue to rise, these mark-ups also continue
to increase. A study just recently published shows that hospital prices
increased 8% in 2003, the sixth straight year of accelerating price
increases and the largest one-year spike in a decade. Managed care,
commercial insurance, and the government pay hospitals substantially
less than charge master rates. But the uninsured/self-pay patient is
left with the short straw and the full charge. They are the ones often
expected pay these full mark-ups. They are the ones paying the sticker
price. They are the ones charged an arm and a leg in order to get one
fixed.
The collection tactics sometimes used to pursue these inflated
bills can be even more disconcerting. There have been a number of
reports and articles over the past year describing some particularly
aggressive collection practices. Collections are an unfortunate reality
of business life, but every corporation has a duty to make sure any
such policies and practices are measured and reasonable. And let me be
clear, I hold the individual corporation responsible, particularly in
health care, for knowing and monitoring the practices of any collection
agent acting on its behalf.
I am encouraged that the industry has seemed to have heard the
message and taken recent steps to revisit and enhance its billing and
collection policies. However, we all know policies can be little more
than talk; the proof is in the results. I look forward to hearing how
your commitments have taken form in action--from the industry, to the
systems, to the hospitals, to finance departments and to the men and
women sitting across the table from an patient seeking to meet their
fair obligations in a fair and respectful manner.
I want to also say that I am pleased this Committee has been able
to facilitate communication between hospitals and the Department of
Health and Human Services on these matters and I expect that dialogue
to continue.
I thank Chairman Greenwood again for his efforts and I look forward
to today's testimony.
Mr. Greenwood. The Chair thanks the gentleman, and would
now call forward our first panel, consisting of Dr. Gerard F.
Anderson, M.D., Professor of the Department of Health Policy &
Management and International Health, at the Bloomberg School of
Public Health. He is a professor in the Department of Medicine
at Johns Hopkins School of Medicine, and he is the Director of
the Center for Hospital Finance and Management, as well.
We also have with us Melissa B. Jacoby, Associate
Professor, University of North Carolina at Chapel Hill, School
of Law; Mark Rukavina, Executive Director of The Access Project
in Boston; and Sara Collins, Ph.D., Senior Program Officer, The
Commonwealth Fund, in New York. We welcome all of you this
afternoon. I know that you expected to be sitting there an hour
and a half ago, but we thank you for your indulgence.
It is the custom of this subcommittee to take testimony
under oath, and so I need to ask if any of you object to giving
your testimony under oath?
[No response.]
Seeing no objection, I also need to advise you that
pursuant to the rules of the committee and the House, that you
are entitled to be represented by counsel. Do any of you wish
to be represented by counsel?
[No response.]
I didn't think so. If you would then stand and raise your
right hands, please.
[Witnesses sworn.]
Mr. Greenwood. You are under oath, and we will start with
you, Dr. Anderson. You are recognized for 5 minutes for your
opening statement. Good afternoon.
TESTIMONY OF GERARD F. ANDERSON, DIRECTOR, JOHNS HOPKINS CENTER
FOR HOSPITAL FINANCE AND MANAGEMENT, PROFESSOR, DEPARTMENT OF
MEDICINE, JOHNS HOPKINS SCHOOL OF MEDICINE, PROFESSOR,
DEPARTMENTS OF HEALTH POLICY AND MANAGEMENT AND INTERNATIONAL
HEALTH, BLOOMBERG SCHOOL OF PUBLIC HEALTH; MELISSA B. JACOBY,
ASSOCIATE PROFESSOR, UNIVERSITY OF NORTH CAROLINA AT CHAPEL
HILL, SCHOOL OF LAW; MARK RUKAVINA, EXECUTIVE DIRECTOR, THE
ACCESS PROJECT; AND SARA R. COLLINS, SENIOR PROGRAM OFFICER,
HEALTH POLICY, RESEARCH AND EVALUATION, THE COMMONWEALTH FUND
Mr. Anderson. Good afternoon, Mr. Chairman. You said we had
been waiting for an hour and a half, we have been waiting for
several months for this opportunity. I am glad you waited for
my birthday to give me the opportunity to testify today.
Mr. Greenwood. Which one is it, Dr. Anderson?
Mr. Anderson. Fifty-three.
Mr. Greenwood. Fifty-three. You are under oath, Dr.
Anderson.
Mr. Anderson. I understand. I direct the Johns Hopkins
Center for Hospital Finance and Management, the only
academically based research center focusing exclusively on
hospitals. My written testimony begins by explaining how we got
to the current situation of self-pay patients paying 2 to 4
times more for hospital services than the uninsured patients.
It concludes that the marketplace does not constrain hospital
charges for self-pay patients, and the Members of Congress have
done a better job than I could in explaining the reasons why.
What I would like to explain is why hospitals have these
high charges. The first one is the Medicare payments, outlier
payments, are partially based on charges. This encourages
hospitals to maintain high charges.
Second of all, bad debt and charity care is typically
calculated at full charges. High charges make it appear that
hospitals are being more generous than they really are.
Third, some self-pay patients actually pay full charges.
These self-pay patients fall into three groups. The first are a
very few people with medical savings accounts. The second
category are international visitors. These are typically
affluent individuals who need a procedure that can be performed
most effectively in the United States. These individuals are
willing to pay full charges even at inflated rates. The third,
and by far the largest group that is asked to pay full charges,
are the 43 million Americans who are uninsured. The uninsured
have very little bargaining power with hospitals. My review of
hospital practices suggests that less than 1 in 20 uninsured
patients actually negotiate a lower rate with hospitals.
Because hospital charges for a heart attack average about
$30,000 per admission, most uninsured Americans, even those
making $50,0000 or $75,000, are unable to pay full charges.
Even if they don't pay, however, the toll on the uninsured can
be substantial. People who do not pay are sent to collection
agencies, and some are driven to bankruptcy. One study found
that nearly half of all personal bankruptcies were related to
medical bills.
The question, therefore, becomes what is a reasonable rate
for hospitals to charge self-pay patients, given that the
marketplace does not work? I propose four guiding principles
for Congress to consider.
The first, that the rates should be above what insurers and
managed care plans are currently paying hospitals; second,
self-pay patients should not be asked to pay exorbitantly high
rates; third, self-pay patients should know in advance what
they are going to be asked to pay; and, fourth, the system
should be easy to administer and to monitor.
And, therefore, I have two payment options for Congress to
consider. My preferred option is to mandate that the maximum a
self-pay patient should pay is the Medicare rate plus 25
percent. The rationale for allowing hospitals to charge 25
percent more than Medicare is based upon three factors. First,
self-pay insurers pay about 14 percent more than Medicare. I
then add 1 percent for prompt payment and, finally, I add an
additional 10 percent because the amount paid by private
insurers is an average, and some commercial insurers will pay
more than the average. Adding these three factors together
results in a proposed payment rate of Medicare+25 percent. The
Medicare+25 percent rate is easily monitored and adjusts for
the complexity of the patient. It would be continually updated
by Medicare as Medicare updates its own PPS rates. The major
disadvantage is that it is not market determined. In most
markets, however, it would be above what the insurers and the
managed care plans are paying, and so it wouldn't interfere
with the marketplace.
A second option is to allow hospitals to charge the maximum
they charge any insurer or any managed care plan. The advantage
is that, in fact, it is market determined. However, I see four
disadvantages with this option. First, it would require
regulations and auditing to verify that the rate is really the
maximum hospitals charge any insurer or any managed care plan.
Second, in order to make the rate transparent, it would be
necessary to keep the rate in place for an extended period of
time, probably a year. Third, it would require hospitals to
tell insurers and managed care plans who is the worst
negotiator. And, finally, it requires all payments to be done
on a per-day basis. Any other payment would probably make
comparisons difficult, and all this does interfere with the
marketplace.
Balancing the pros and cons of both options, therefore, I
recommend Medicare+25 percent. It satisfies all four
principles. It is above what the insurers are paying, it is a
reasonable amount, it is transparent, and it is easy to monitor
and verify.
In summary, both Congress and the hospital industry should
recognize that hospital charges for self-pay patients are not
determined by market forces and, second of all, Medicare+25
percent is a reasonable amount for self-pay patients to pay.
I would be happy to answer any questions.
[The prepared statement of Gerard F. Anderson follows:]
Prepared Statement of Gerard Anderson
Mr. Chairman, members of the Committee; my name is Dr. Gerard
Anderson. I have been working on hospital payment issues for many
years. Between 1978 and 1983, I worked in the Office of the Secretary
in the US Department of Health and Human Services. In 1983, I was one
of the primary architects of the Medicare Prospective Payment
legislation. Following passage of the Medicare Prospective Payment
legislation, I joined the faculty at Johns Hopkins where I have been
for the past 21 years. At Johns Hopkins, I direct the Johns Hopkins
Center for Hospital Finance and Management--the only academically based
research center focusing exclusively on hospitals. I am also a
professor of Health Policy and Management and professor of
International Health in the Bloomberg School of Public Health and
Professor of Medicine in the School of Medicine at Johns Hopkins
University.
I would like to begin my testimony by highlighting several
milestones in hospital payment policy. Because of the evolution of
hospital payment policy, self pay patients are currently being charged
2 to 4 times what people with health insurance coverage pay for
hospital services. These are not market rates and need to be lower.
After reviewing the milestones, I will then make a series of specific
suggestions to the committee that will make the current hospital
payment system more equitable to the self pay patients. My preferred
option is that hospitals be limited to what Medicare pays plus 25
percent.
critical milestones that have led to market failure in hospital payment
One hundred years ago most hospital care was either free or very
inexpensive. In 1900, hospitals could provide little clinical benefit
for most illnesses and were primarily places for housing the poor and
insane who were sick. Hospitals were primarily philanthropic
organizations. They were established primarily in poor urban areas.
Beginning in the 1920s, the ability of hospitals to improve the
health status of patients increased dramatically. For the first time,
rich and poor Americans sought out hospital care when they became
seriously ill. Anesthesia expanded access to surgery and antibiotics
made it easier to treat infections.
Physicians had a wider range of services to provide to hospitalized
patients. New drugs and new equipment became available and better and
more highly trained personnel were required to provide these services.
The cost of providing hospital care began to accelerate. In order to
recover these higher costs, hospitals began to charge patients for
services. Hospitals developed a charge master file. Initially there
were only a few items on the list. It listed specific charges for each
service the hospital provided. A hospital day had one charge, an hour
in the operating room had another charge, and x-ray had a third charge,
etc. As the number of services the hospital offered increased, so did
the length of the charge master file. There are now over 10,000 items
on most hospital charge master files.
Before 1929, there was no health insurance and patients paid the
hospital directly. In 1929, Baylor Hospital in Dallas, Texas began a
program selling health insurance to school teachers in the Dallas
County School district. Baylor created this health insurance system
because many of its patients were having difficulty paying hospital
bills. It became the prototype Blue Cross Plan. As the depression
worsened in the 1930s, the ability of people to pay their hospital
bills also worsened. Blue Cross and other types of insurance programs
proliferated. These insurers paid charges based upon the charge master
file.
During this period, the charges were based on the cost of providing
care plus a small allowance for reserves. The markup over costs was
typically less than 10%.
Private health insurance received a major boost during World War II
when Congress made health insurance tax exempt. After World War II,
private insurers continued to pay the charges that hospitals had
established. Over time, the ability of hospitals to improve the health
status of their patients increased, the kinds of services provided by
hospitals increased and the costs of hospital care began increasing at
2 to 3 times the rate of inflation. By 1960, the typical hospital had
established a list of prices for approximately 5,000 separate items.
There were no discounts; everyone paid the same rates. The rates that
insured and self pay people paid were similar.
Hospitals set their prices for these 5,000 items on a few criteria.
The most important factor was costs. Charges were typically set at a
given markup over costs, usually 10 percent. The hospital would
estimate how much it cost to deliver a service and then charge 10%
more. The ability of hospitals to estimate cost for individual
services, however, was extremely limited by cost accounting. No
hospital really knew how much it costs to provide a particular service
because cost accounting techniques were not sufficiently detailed.
Market forces determined charges for only a few services. Child
birth for example, was one service for which patients could engage in
comparative shopping. Pregnant women had almost nine months advance
warning that they would be admitted to the hospital and their families
could therefore engage in comparative shopping. In theory, they could
compare differences in the out-of-pocket costs and the perceived
quality between two hospital delivery rooms. Thus, hospitals kept
delivery room charges at or below actual costs.
For most services, however, it was often impossible for consumers
to engage in comparative shopping because either the admission was an
emergency or their doctor had admitting privileges in only one
hospital. For most admissions, they had no idea what services they
would use during their hospital stay. They could not engage in
comparative shopping if they did not know what services they were going
to need. In addition, for most people, insurance paid the full bill and
so patients had no financial incentive to engage in comparative
shopping.
MEDICARE BECOMES INVOLVED
When the Medicare program was established in 1965, Congress decided
that the Medicare program would pay hospital costs and not charges.
This was the method of payment used primarily by Blue Cross. Congress
recognized that charges were greater than costs and that the Medicare
program would be able to exert little control over charges. A very
detailed hospital accounting form called the Medicare Cost Report, was
created to determine Medicare's allowable costs.
In order to allocate costs between the Medicare program and other
payors, the Medicare program required hospitals to collect uniform
charge information. Uniform charges were necessary in order to allocate
costs to the Medicare program. The Medicare Cost Report could determine
allowable costs for the entire hospital, however, it needed a way to
allocate these costs specifically to the Medicare program. Charges are
used to allocate costs to the Medicare program. If, for example, 40% of
the charges were attributed to the Medicare program, then the cost
accounting system would allocate 40% of the costs to the Medicare
program.
In order to prevent fraud and abuse, the Medicare program required
hospitals to establish a uniform set of charges that would apply to
everyone. Otherwise, the hospital could allocate charges in such a way
that would result in more costs to the Medicare program.
Hospitals continued to have complete discretion on how they
established their charges. The Medicare program did not interfere with
how hospitals set charges for specific services. One hospital could
charge $5 for an x-ray and another hospital $25 for the same x-ray. A
number of studies conducted at the time showed wide variation in
hospital charges.
People with insurance generally had little reason to scrutinize
their bills because they had first dollar coverage. Insurance paid the
full hospital bill. Also, patients did not know what services they
would need and so they did not know what prices to compare. Insurance
companies did little to negotiate with hospitals regarding hospital
charges in the 1960s and the Medicare and Medicaid programs did not pay
on the basis of charges.
In the 1970s, market forces still had a small impact on hospital
charges. In reality, the hospital had virtual carte blanche to set the
charges. The number of separate items that had a charge associated with
them, doubled from 5 to 10,000 at the typical hospital, where it is
today.
Two major changes occurred in the 1980s that had a major impact on
hospital charges. First, Medicare created the Prospective Payment
System which eliminated any need for using hospital charges to allocate
hospital costs. Second, most insurers began negotiating discounts off
of charges or using some other mechanism to pay hospitals. As a result,
any market forces that existed to limit what hospitals could charge
were almost completely eliminated.
In 1983, the Medicare program moved away from paying costs and
instituted the Prospective Payment System (DRGs). As the Medicare
Prospective Payment System became operational, the need for the
Medicare Cost Report and therefore the need for a uniform charge master
file to allocate costs became less and less important. Today, because
nearly all of the Medicare program uses some form of prospective
payment, the requirement of a uniform charge master file by the
Medicare program is virtually unnecessary.
Managed care plans began to negotiate with hospitals in the early
1980s. They wanted discounts off of charges in return for placing the
hospital in their network. They successfully negotiated sizeable
discounts with hospitals. As insurers began to compete with managed
care plans in the mid 1980s, they also began to move away from paying
full charges and started negotiating their own deals. Some insurers
decided to pay on a per day basis, others decided to pay discounted
charges, or a negotiated rate. Nearly all private insurers and managed
care plans stopped using full charges as the basis of payment by 1990.
They simply could not compete in the market place if they paid full
charges.
COST SHIFTING AND MARKET FAILURE
As each segment of the market developed a different way to pay
hospitals, this lead to a phenomenon known as ``cost shifting''. As the
Medicare program instituted the Prospective Payment System (DRGs), the
Medicare program began to limit the amount that Medicare would spend.
Faced with constraints on Medicare (and soon thereafter Medicaid)
spending, the hospitals began to engage in ``cost shifting''.
To do this the hospital industry increased prices to commercial
insurers. Given that most commercial contracts were written to
reimburse hospitals based on the hospital's own charges, it was
relatively simple matter for hospitals to raise their prices. When
commercial insurers tried to raise prices to the employers, however,
employers began to examine alternatives. Employers slowly and then
rapidly embraced managed care. Managed care expanded rapidly using
their market power to negotiate discounts off of charges with
hospitals. Soon commercial insurers asked for similar discounts.
Private insurers continued to pay more than Medicare however in most
cases.
Without the federal government, state governments, private
insurers, or managed care plans paying full charges, the regulatory and
market constraints on hospital charges were virtually eliminated. By
1990, the only people paying full charges were the millions of
Americans without insurance, a few international visitors and the few
people with health savings accounts. These individuals had limited
bargaining power and were asked to pay ever increasing prices.
Effectively, there was market failure in this aspect of the hospital
market.
Without any market constraints, charges began increasing much
faster than costs. In the mid 1980s charges were typically 25% above
costs. Without any market constraints, it is now common for charges to
be two to four times higher than costs. Charges are also two to four
times what most insurers pay. Most insurers, including Medicaid,
Medicare, and private payors, pay costs plus/minus 15 percent. Over the
past twenty years, the difference between what the hospital charges and
what it costs to provide care has grown steadily in nearly all
hospitals.
Hospitals have been able to increase charges because self pay
individuals have limited bargaining power when they enter a hospital.
They first must find a team of physicians willing to treat them who
also have privileges at that hospital. Then they must negotiate with
the hospital. Often they wait until they are ill before they seek
medical care. This further diminishes their bargaining power because it
is now an emergency. Often the hospital wants prepayment. Because most
self pay persons have limited resources and cannot make full payment in
advance, this further diminishes their bargaining power.
Perhaps the most important constraint on their bargaining power,
however, is that they do not know what services they will ultimately
need. They do not know how long they will remain in the hospital, what
x-rays or lab tests they will need, and therefore they cannot know in
advance what services they will require and which of the 10,000 prices
they should negotiate.
COSTS, AND WHAT INSURERS PAY IN PENNSYLVANIA
Using the most recent data available I compared what insurers pay
and what hospitals charge in Pennsylvania. As noted earlier, charges
vary considerably from hospital to hospital. Pennsylvania collects data
on what hospitals charge and what insurers pay in Pennsylvania for
different illnesses (www.phc4.org). For example, I looked at the
charges that Philadelphia area hospitals charged for medical management
of a heart attack in 2002. The average charge was over $30,000. Most
insurers paid less than $10,000.
WHY ARE CHARGES SO MUCH HIGHER THAN WHAT INSURERS PAY?
There are three main reasons why hospitals set charges 2-4 times
what they expect to collect from insurers and managed care plans. The
first is that Medicare outlier payments are partially based on charges.
The second is that bad debt and charity care is typically calculated at
full charges. The third is that some self pay patients actually pay
full charges.
In the Medicare program, a small proportion of patients are much
more expensive than the average patient. These are known as outlier
patients. Medicare pays for these patients outside of the DRG system.
Medicare continues to use charges as part of the formula used to
determine outlier payments.
Recent investigations have shown certain hospital systems
manipulating the payment system in inappropriate ways to over charge
the Medicare program for outlier patients. One aspect of this fraud was
the exceptionally high amounts these hospitals charged. Lowering the
charges would diminish the over charges in the Medicare program for
outlier payments and would reduce the level of fraud.
Second, hospitals routinely quantify the amount of bad debt and
charity care they provide. This helps with fund raising and is used to
meet charitable obligations. However, by valuing bad debt and charity
care at full charges, these numbers vastly over estimate the amount of
bad debt and charity care the hospital actually provides.
There are three groups that still pay charges. The first are people
who have health savings accounts. Some of these individuals may be able
to negotiate discounts although most pay full charges. It is extremely
difficult for one person to negotiate with a hospital, especially in an
emergency situation. The hospital holds all of the cards. Lowering the
charges will benefit people with health savings accounts.
The second category is international visitors. These are typically
affluent individuals who need a procedure that can be performed most
effectively in the United States. These individuals are willing to pay
full charges, even at inflated prices.
There are compelling arguments to charge international visitors
higher prices than Americans. Most can afford to pay and, in addition,
they have not subsidized the hospital sector in the United States
through tax payments and other public subsidies. On the other hand, in
most other countries Americans are usually treated free of charges if
they have an emergency. An American injured while traveling in Canada,
Australia, France, etc would be treated free of charge or receive a
very small bill. Although there is no data that I know of that would
allow us to compare the cost of care provided to Americans traveling
abroad to the cost of care provided to foreigners receiving care in the
U.S., I expect it would be similar. In that case it seems unfair to
charge foreign visitors so much more for a service when Americans
receive care free of charge overseas.
IMPACT ON THE UNINSURED
The third, and by far the largest group that is asked to pay full
charges is the uninsured. There are 43 million Americans who are
uninsured. The uninsured can theoretically negotiate with hospitals
over charges, but they have little bargaining power. My review of
hospital practices suggests that less than 1 in 20 uninsured patients
actually negotiates a lower rate.
Many uninsured people are unable to pay full charges. In fact, most
studies suggest that less than 1 in 10 uninsured people pay a portion
of their charges and relatively few pay full charges. In fact, in most
hospitals only 3 percent of total revenues comes from people who are
uninsured. Self pay patients represent a very small proportion of
hospital revenues.
The toll on the uninsured, however, can be substantial. There are
numerous reports that show hospitals attempting to collect payments
from the uninsured. The people who do not pay are sent to collection
agencies and some are driven to bankruptcy. One study found that nearly
half of all personal bankruptcies were related to medical bills (M.B.
Jacoby, T.A. Sullivan, E. Warren, ``Rethinking The Debates Over Health
Care Financing: Evidence from the Bankruptcy Courts,'' NYU Law Review
76, May 2001: 375). Another survey (D. Gurewich, R. Seifert, J Pottas,
The Consequences of Medical Debt: Evidence From Three Communities, The
Access Project, February 2003) found that hospitals were routinely
requiring up front payments, refusing to provide care, or encouraging
uninsured patients to seek new providers if they did not have health
insurance. Many respondents found the terms the hospitals were offering
were difficult to maintain given the hospitals' inflexible collection
processes and their own financial situations.
Nearly all hospitals do this to some extent. For example, a series
of stories in the Wall Street Journal examined the collection
procedures at Yale-New Haven hospital. The Wall Street Journal found
that in 2002, the Yale-New Haven hospital was lead plaintiff in 426
civil lawsuits, almost all of which concerned collections or
foreclosure lawsuits against individuals, compared with 93 lawsuits at
a similarly sized local hospital. Yale-New Haven Hospital also
frequently engaged in aggressive collections measures, such as wage
garnishment, seizure of bank accounts, and property liens. In 2001, the
hospital filed 134 new property liens in New Haven, almost 20 times the
number filed by the city's other hospital.
BENEFITS OF LOWER CHARGES
If charges were lowered there could be two beneficial outcomes.
First and most important, fewer self pay individuals would declare
bankruptcy. Second, more self pay patients would be able to pay their
bills if the charges were more in line with prevailing rates.
GUIDING PRINCIPLES FOR SETTING RATES
The question therefore becomes what is a reasonable rate for
hospitals to charge self pay patients given that neither market forces
or regulations constrain hospital charges.
I propose four guiding principles. First, the rate should not
interfere with the market place. The rate that self pay individuals
should pay should be greater than what insurers and managed care plans
are currently paying hospitals. Second, the charges should not be
substantially higher than what insurers and managed care plans are
currently paying hospitals. Individuals with limited bargaining power
should not be asked to pay exorbitantly high rates because they lack
market power. Third, the rate should be transparent to patients.
Patients should know the prices they will be asked to pay when they
enter the hospital. Fourth, the system should be easy to administer and
to monitor.
TWO PAYMENT ALTERNATIVES
I have two specific suggestions for the Congress to consider.
The first is to mandate that the maximum a patient can pay is the
amount paid by Medicare plus 25%. I call this DRG+25%. The rationale
for allowing hospitals to charge 25 percent more than Medicare is based
on three factors. First, private pay insurers pay an average of 14
percent more than Medicare for a similar patient. I then add one
percent for prompt payment. Finally, an additional amount (10%) is
added because the amount paid by private insurers is an average and
some commercial insurers pay more than the average. Adding the three
factors together results in a proposed payment rate of DRG + 25%.
The advantages are that the DRG + 25% rate is easily monitored and
adjusts for complexity of the patient. It would be continually updated
by Medicare as Medicare updates the PPS rates. The disadvantage is that
the rate is not market determined. In most markets, however, it would
be above what insurers and managed care plans are paying.
A second option is to allow hospitals to charge the maximum they
charge any insurer or managed care plan on a per day basis. The
advantage is that it is market determined.
There are four disadvantages. First, it will require regulations
and auditing to verify the rate is the maximum they charge any insurer
or managed care plan. Second, in order to make the rate transparent, it
will be necessary to keep the rate in place for an extended period of
time, probably a year. This interferes with the market place. Third, it
will require hospitals to tell all insurers and managed care plans who
was the worst negotiator. This also interferes with the market place.
Fourth, it requires all negotiations to be on a per day basis. Any
other payment system would be too complicated. This interferes with the
market place.
Balancing the pros and cons of both options, I recommend the
DRG+25% option. It complies with all four principles--it is above what
insurers are paying, it is a reasonable amount, it is transparent, and
it is easy to monitor and verify.
RATE IS TOO LOW
Insurers may argue that they are entitled to more substantial
discounts over self pay individuals for two reasons--prompt payment and
volume discounts. The prompt payment argument has some validity. A two
month delay in payment at a 6 percent interest rate is equivalent to a
1 percent savings. This is built into the DRG + 25% payment.
The volume discount argument is more complicated. In my opinion it
has limited financial impact, especially on medical services. Most
insurers and managed care plans do not guarantee a certain volume of
patients and certainly they do not guarantee a certain case mix of
patients. Instead, they agree to put the hospital on a preferred list
of hospitals. The patient and the physician still make the final
decision regarding which hospital to select. The choice, therefore is
fundamentally different from a purchase in the manufacturing or retail
sector where a large volume of goods or services is actually purchased.
The second part of the volume argument, however, is probably more
important. The same medical services will be used if the patient is
self pay or insured. The patient will use the same set of laboratory
tests, spend the same time on the operating table, require the same
nursing hours, etc. The medical services are what is most expensive in
a hospital and this does not depend on the volume of patients that an
insurer has.
INCENTIVES TO PURCHASE HEALTH INSURANCE
Some individuals with high incomes choose to self insure. An
important and difficult question is whether these individuals should be
able to get the benefits from these lower rates.
One argument is that these individuals have voluntarily chosen to
go without health insurance and they should pay a much higher rate if
they get sick. A second argument is that these individuals should be
given financial incentives to purchase health insurance and that
lowering the hospital rates for them will only induce them to go
without coverage.
Although there is merit in both arguments, the question is what is
a fair rate for them to pay when they get sick? When they need
hospitalization they should pay a rate that is somewhat higher than
people with health insurance coverage pay. The DRG +25% criterion meets
this objective. This group of people should not be asked to pay for the
bad debts of other self pay patients any more than the insured
population. And, if the rates were reasonable they would be more likely
to pay.
SIMPLIFICATION OF PAYMENT SYSTEM
The medical care system could be simplified if such a change were
enacted. One major change would be the elimination of the Medicare Cost
Report. A second simplification is that it would be easier to calculate
any discounts that hospitals are offering to low income individuals.
The Medicare Cost Report was created in 1965 with the passage of
the Medicare legislation and the decision by the Congress to pay costs.
The Medicare cost report is now a document that is over 6 inches thick
and requires many hours for hospitals to complete. However, with the
passage of the Medicare Prospective Payment legislation in 1983 and
subsequent adoption of additional Prospective Payment Systems for
outpatient care etc., there is no longer a compelling reason for
maintaining the Medicare Cost Report. Any information the Congress
needs from hospitals to set hospital payment rates could be summarized
in a few pages. The only relevant information is the profit of
hospitals and some information used to calculate graduate medical
education and disproportionate share payments.
Hospitals often give discounts to low income self pay patients. It
is therefore key to understand what is the basis for the discount. A
discount from full charges is not really a discount if it is still
greater than what insurers and managed care plans would pay. A true
discount would be below what public and private payors are expected to
pay. If the payment system for self pay patients were simplified (DRG +
25%) then it would be easier for them to determine if they are really
getting a discount and how much they were expected to pay. Currently
the self pay person does not know the real extent of the discount or
how much they will pay.
SUMMARY
In summary, what should be done?
Both Congress and the hospital industry should recognize that
hospital charges are not determined by market forces. The only people
paying full charges are those with limited or no bargaining power.
The maximum that self pay individuals should have to pay for
hospital services should be DRG rate plus 25%.
I would be happy to answer any questions.
Mr. Walden [presiding]. Thank you, Dr. Anderson, we
appreciate your comments and testimony.
Ms. Jacoby, you are next. Welcome.
TESTIMONY OF MELISSA B. JACOBY
Ms. Jacoby. I thank the subcommittee for inviting me to
participate today. I am a law professor, and I study contracts
and bankruptcy, and specifically medical bankruptcy, which many
members of the committee have already mentioned, as has my co-
panelist, and I have been researching the impact of medical
debt, illness and injury on households of modest means, from
the background of someone who looks at contracts and
bankruptcy.
The main observation I want to offer you today is this:
Uninsured patients of modest means actually may be paying a
steep price for what hospitals and others characterize as
``uncompensated care.'' In other words, charging uninsured
patients the highest prices coupled with assertive debt
collection affects patients and their families, even if the
hospital ultimately writes off the entire bill. And I think
that government, industry, and individual hospital policy
should be evaluated with this in mind.
Millions of American families are in debtor/creditor
relationships on account of medical care, and this certainly
may not be problematic for those with generous incomes, high
quality insurance and, frankly, those with good luck. Modest
income families, on the other hand, struggle when they are
personally liable for unexpected and undiscounted hospital
bills. A bill of even $500 or $1,000, as many others have
noted, can derail the budget of a working family, let alone
bills of $5,000, $10,000, or more. And certainly it is evident
that a lump sum often is infeasible. But even paying
installments with accruing interest has the potential to leave
a patient in a state of perpetual indebtedness.
Debtor/creditor laws are not self-executing and do not
require that creditors call, pressure, threaten, sue, garnish,
or record liens on patients' homes in an effort to get paid,
and hospitals may believe no harm comes from trying to collect
before they write off the bills as bad debts or before they
consider charity care eligibility, and the complex way of the
laws and regulations seem to make this the easier course, but
there is harm to patients and their families even if the
hospital never collects a dime.
We are finding a lot of medical related financial trouble
in the bankruptcy system, and we do estimate that half of all
personal bankruptcy filings are medical-related. In a study
still underway, uninsured medical bankruptcy filers have
reported an average of nearly $11,000 in medical bills since
illness onset. And bankruptcy filers with most medical
diagnoses identify hospital bills as their largest uncovered
expense, or their largest medical expense.
Now, bankruptcy offers some benefits, some help to
indebtedness patients. For example, it stops debt collection
attempts, it removes liens that hospitals may impose on homes
under some circumstances, and discharges some debts, although
not all, but we all know that bankruptcy has a lot of
consequences. Among other things, it ruins credit for 10 years,
and may affect the ability to access nonemergency health care
in the future. No one sees bankruptcy as a solution to the
problems that we are talking about today. And of course
bankruptcy filers really are the tip of the iceberg. The
financial impact of hospital billing and collection extends to
many households with similar problems, who never do file for
bankruptcy. For these households, like their bankrupt
counterparts, defaulting on a hospital bill sent to collection
results in negative credit report notations. Medical debt
collectors actively do report to credit bureaus.
Federal Reserve researchers who studied credit reports in
1999 estimated that medical bills accounted for more than half
of collection agency actions listed on credit reports. Credit
reports also may list hospital lawsuits, judgments and liens.
Notations related to payment history and legal action reduce
one's credit score, and a borrower with a low credit score,
assuming she can get credit at all, may be expected to pay as
much as several hundred dollars more every month for credit.
This affects home buying, refinancing, and sending kids to
college, among other things. And, when employers or potential
employers or landlords also access these credit reports, the
ramifications can multiply.
Beyond the financial impact, hospital billing and
collection practices may have a health impact. First, debt and
collection may induce stress, and a large body of
interdisciplinary research suggests that stress adversely
affects health. Second, hospital debt may affect future access
to care. Half of medical bankruptcy filers report chronic
health conditions. They need more care in the future like even
those who do not have chronic conditions. Yet, health providers
may turn away indebted or bankrupt patients, or patients may be
too embarrassed or fearful to seek care after being subject to
debt collection efforts.
So, I will conclude where I started. Uninsured patients of
modest means pay a steep price for what so often is
characterized or even touted as uncompensated care. This is an
important piece of the puzzle, as lawmakers, regulators, and
health care providers work through the issues underlying this
investigation.
I thank the subcommittee.
[The prepared statement of Melissa B. Jacoby follows:]
Prepared Statement of Melissa B. Jacoby, Associate Professor,
University of North Carolina at Chapel Hill
Thank you for the opportunity to participate in this important
hearing. I approach this issue from the perspective of a law professor
who studies and teaches bankruptcy, contracts, and related subjects.
While as a member of the Temple University faculty in Philadelphia, and
now as I join the faculty of the University of North Carolina at Chapel
Hill, I have been studying the impact of indebtedness and debt
collection on individuals and families with illness or injury.
In the current health care environment, patients often are debtors
of their medical providers.1 Characterizing medical
providers as creditors means little independently; the law gives
creditors a set of tools to coax or require their debtors to
repay,2 but does not require that creditors use them.
Creditors generally exercise their discretion in using, or refraining
from using, their debt collection toolbox depending on the
circumstances. Thus, for example, credit unions on the whole take a
different approach to debt collection than retailers.
---------------------------------------------------------------------------
\1\ See generally Melissa B. Jacoby, The Debtor-Patient; In Search
of Non-Debt Alternatives, 69 Brooklyn L. Rev. (forthcoming 2004).
Courts routinely characterize patients and providers as debtors and
creditors. See, e.g., Trevino v. HHL Financial Services, 945 P.2d 1345,
1348-1349 (Colo. 1997) (describing hospital as patient's creditor, as
patient received medical care for which he agreed to pay); Porter v.
McPherson, 479 S.E.2d 668, 673, 675 (W. Va. 1996); Bashara v. Baptist
Mem. Hosp. Syst., 685 S.W. 2d 307, 310-311 (Tex. 1985) (describing
hospital patient relationship as debtor-creditor relationship).
\2\ Those tools include informal communications and threats, along
with more formal approaches invoking the power of the state, such as
filing lawsuits and instructing the sheriff to levy on property.
---------------------------------------------------------------------------
A confluence of circumstances makes the hospital billing and
collection situation particularly troubling. Hospitals have zealously
used their debt collection toolbox even against patients who did not
expect this liability (at all, or of this magnitude), are of modest
means,3 and may be suffering income loss alongside their
illness or injury.4 Hospitals engage in debt collection
activities amidst allegations that these practices conflict with their
missions, and despite arguments that they already receive significant
governmental support to subsidize their care of modest income patients.
To the extent that hospitals pursue collection before dispositively
determining charity care eligibility,5 some patients subject
to collection for undiscounted bills never should have been considered
debtors in the first place.6
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\3\ For a striking study showing low incomes of patients written
off as bad debt after failed collection, see Joel S. Weissman, Paul
Dryfoos, & Katharine London, Income Levels of Bad-Debt and Free-Care
Patients in Massachusetts Hospitals; Does uncompensated care serve the
truly needy, 18 Health Affairs 156, 161 (1999). Yet, even uninsured and
underinsured families better described as middle class have trouble
paying hospital bills. Middle income households already have committed
their incomes to important fixed costs such as housing, transportation,
and child care, leaving little or no cushion. See Elizabeth Warren and
Amelia Warren Tyagi, The Two-Income Trap: Why Middle-Class Mothers &
Fathers Are Going Broke (2003).
\4\ See, e.g., Melissa B. Jacoby, Collecting Debts from the Ill and
Injured; The Rhetorical Significance, but Practical Irrelevance, of
Culpability and Ability to Pay, 51 Am. U. L. Rev. 229, 238 (2001)
(overlap in debtors reporting job problems and medical problems in
chapter 13 bankruptcy); Melissa B. Jacoby, Teresa A. Sullivan &
Elizabeth Warren, Rethinking the Debates Over Health Care Financing:
Evidence From the Bankruptcy Courts, 76 N.Y.U. L. Rev. 375, 408 (2001)
(overlap in debtors reporting job problems and medical problems).
\5\ See, e.g., Ray B. Lefton, Developing Organizational Charity-
Care Policies and Procedures, Health Care Financial Management 52, 54-
55 (April 2002) (describing hospital policies that permit collection
attempts to proceed against charity care accounts); Health Care
Financial Management Association, Principles and Practices Board
Statement Number 15, Valuation and Financial Statement Presentation of
Charity Service and Bad Debts By Institutional Healthcare Providers,
available at www.hfma.org/resource/P_and_P_board/Statement_15.htm (last
accessed June 1, 2004) (describing debt collection activity as part of
``information gathering process'' to determine charity care
eligibility).
\6\ See, e.g., Universal Health Care Action Network of Ohio, A Well
Kept-Secret: The Challenge of Finding Out About Hospital Free Care in
Cleveland Ohio (Oct. 2003). They also may have been eligible but not
enrolled in other programs that would have covered part or all of the
costs of their care. See generally General Accounting Office, Means
Tested Programs: Determining Financial Eligibility is Cumbersome and
Can Be Simplified, GAO-02-58 (November 2001); Barents Group LLC, Final
Report On ``Review of the Literature On Evaluations of Outreach for
Public Health Insurance and Selected Other Programs'' (Mar. 31, 2002),
available at www.cms.hhs.gov/schip/outreach/rpt33100.pdf; Jennifer P.
Stuber, Kathleen A. Maloy, Sara Rosenbaum & Karen C. Jones, Beyond
Stigma: What Barriers Actually Affect the Decisions of Low-Income
Families to Enroll in Medicaid? (The George Washington University
Medical Center, Issue Brief, July 2000); Dahlia K. Remler, Jason E.
Rachlin & Sherry A. Glied, What Can the Take-Up of Other Programs Teach
Us About How To Improve Take-Up of Health Insurance Programs? (National
Bureau of Economic Research, Working Paper No. 8185, Mar. 2001);
Michael J. Perry, Evan Stark & R. Burciaga Valdez, The Henry J. Kaiser
Family Foundation, Barriers To Medi-Cal Enrollment and Ideas for
Improving Enrollment: Findings From Eight Focus Groups In California
With Parents of Potentially Eligible Children (Sept. 1998), available
at www.kff.org/medicaid/1436-index.cfm; Michael Perry, Susan Kannel, R.
Burciaga Valdez & Chrstina Chang, The Henry J. Kaiser Family
Foundation, Medicaid and Children Overcoming Barriers to Enrollment:
Findings from a National Survey (Jan. 2000), available at www.kff.org/
medicaid/2174-index.cfm.
---------------------------------------------------------------------------
The patient-hospital debtor-creditor relationship is different from
many others in its origin. If a consumer does not like the terms a
store offers for the purchase of a television, we expect that the
consumer should be able to walk away. As one court put it, however,
when a loved one legitimately needs medical care, ``the option of
walking away from the deal [is] simply unrealistic.'' 7
Patients or family members often seek hospital care and sign various
hospital documents and agreements under trying
circumstances.8 These documents--frequently the basis of the
hospital's creditor status 9--may require that the patient
or loved one promise to pay the full-charge rate, and sometimes have
required payment of attorneys' fees, costs, interest, or even
penalties, if the bill goes to collection.
---------------------------------------------------------------------------
\7\ Valley Hospital v. Kroll, 2003 WL 23416577 (N.J. Super. 2003)
(``terms contained in the form were non-negotiable. The hospital
clearly exercised a decisive advantage in bargaining. Prior to any
treatment, a patient--or in this case someone acting on his behalf--was
compelled to sign it. The patient was in no position to reject the
proffered agreement, to bargain with the hospital, or, in lieu of
agreement, to find another hospital'').
\8\ For example, a mother rushed her son to the hospital after an
accident left him unconscious and bleeding. After the hospital sued her
for payment, she explained that ``I signed where she told me to sign,
so they would give him medical treatment because he needed it because
he was bleeding out of his ears, out of his mouth, the bone out of his
elbow was sticking out through the skin.'' Heartland Health Systems v.
Chamberlin, 871 S.W.2d 8, 11 (Mo. App. W.D. 1993) (holding patient's
mother liable under terms of admission agreement based on her
signature). See also Bethesda Hospital v. Kessnick, 174 B.R. 481 (S.D.
Ohio 1994) (hospital acknowledging that father signed form during very
stressful time upon daughter's admittance to hospital).
\9\ But see, e.g., Doe v. HCA Health Services of Tennessee, Inc, 46
S.W.3d 191 (Tenn. 2001) (refusing to enforce hospital debt on basis of
agreement due to indefinite price term, but considering value of
services for purposes of holding patient liable on quantum meruit/
unjust enrichment theory).
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Hospital decision-makers may believe there is little harm in
charging full price and trying to collect before writing off these
accounts as bad debt. Hospitals also may be responding to incentives
built into the complex regulatory environment; even if current law and
regulations do not expressly preclude discounts and more lenient
collection practices, it likely is easier to ensure compliance with the
regulatory scheme by imposing full charges and engaging in assertive
collection.
Given this situation, it is important to set the record straight:
hospital billing and collection practices can adversely affect patients
and their families whether or not those practices produce payment or
ultimately are written off as bad debt.
1. Hospital collection activity has credit report implications
Medical bill collection activity hurts patients' credit rating
whether or not the activity produces payment for the hospital. In the
words of Federal Reserve researchers, ``[p]erhaps the most important
factors considered in credit evaluation are a consumer's history of
repaying loans and any evidence of money-related public actions or non-
credit-related collections.'' 10 These researchers estimated
that medical bills accounted for nearly one fifth (18.2%) of court
judgments recorded on credit reports, and more than half (52.2%) of
collection agency actions reported to credit bureaus, many for rather
small amounts of money.11 When a collection agency action,
lawsuit, judgment, and lien all are listed on a patient's credit
report, the adverse effects of one default not only multiply, but
linger.12
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\10\ Robert B. Avery, Paul S. Calem, Glenn B. Canner & Raphael W.
Bostic, An Overview of Consumer Data and Credit Reporting, Federal
Reserve Bulletin 47, 60-61 (Feb. 2003) (emphasis added); My FICO (a
division of Fair Isaac), www.myfico.com (reporting on credit history
components, including judgments and liens).
\11\ Robert B. Avery, Paul S. Calem, Glenn B. Canner & Raphael W.
Bostic, An Overview of Consumer Data and Credit Reporting, Federal
Reserve Bulletin 47, 67, 69 (Feb. 2003). See also Sara R. Collins et.
al, The Affordability Crisis in U.S. Healthcare: Findings from the
Commonwealth Fund Biennial Health Insurance Survey, The Commonwealth
Fund Issue Brief #723 17-19 (March 2004); S. Felt-List, M. McHugh, & E.
Howell, Monitoring Local Safety-Net Providers: Do They Have Adequate
Capacity? 21 Health Affairs 277 (Sept/Oct. 2002) (reporting on
collection agency contacting the uninsured).
\12\ Accounts placed for collection, civil suits, and judgments can
be reported for seven years for most purposes, but the seven-year
period starts and ends at different times for each notation. Fair
Credit Reporting Act 605, 15 U.S.C. 1681c. Information about
failure to pay medical debts will affect credit nothwithstanding the
fact that recent amendments to the Fair Credit Reporting Act impose
additional conditions on the handling of medical information.
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As suggested above, the credit report and credit score are key
determinants of whether a patient will receive credit and, if so, what
the terms will be.13 In addition, the Fair Credit Reporting
Act permits credit reports to be used for a variety of other purposes,
such as employment-related inquiries.14 Thus, one expensive
trip to a hospital, followed by zealous collection and reporting, can
bring about a host of unexpected negative effects.
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\13\ Regularly updated charts on the ``My Fico'' website show that
a borrower can pay several hundred dollars more on a loan each month
because of a low credit score. www.myfico.com (last accessed June 4,
2004).
\14\ See, e.g., Fair Credit Reporting Act 604, 15 U.S.C. 1681b
(listing permissible purposes of furnishing consumer report, including
employment purposes, and specifying conditions); id at 1681k
(procedures relating to reporting of public record information for
employment-related inquiries).
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2. Large medical debts and collection activity contribute to bankruptcy
Bankruptcy researchers have discovered that almost half of personal
bankruptcy filers have significant medical debts and/or say that
illness or injury was a reason for their bankruptcies.15 A
variety of studies find between one third to more than half of
bankruptcy filers owed debts directly to medical providers at the time
of filing,16 and these understate the problem because they
do not include medical bills charged to credit cards or rolled into
home mortgage loans. Bankruptcy filers sixty-five or older had the
highest rate of reporting that illness or injury was a reason for
filing bankruptcy.17
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\15\ See Melissa B. Jacoby, Teresa A. Sullivan, & Elizabeth Warren,
Rethinking the Debates Over Health Care Financing: Evidence From the
Bankruptcy Courts, 76 N.Y.U. L. Rev. 375 (2001) (46.2% medical-related
filings); Bruce Jancin, Medical Bills Cited in 55% of U.S. Bankruptcy
Cases, Skin and Allergy News (Aug 2003).
\16\ See, e.g., Hugh F. Daly III, Leslie M. Oblak, Robert W.
Seifert & Kimberly Shellenberger, Into the Red To Stay in the Pink: The
Hidden Cost of Being Uninsured, 12 Health Matrix 39, 56 (2002) (47%
with medical debt among Legal Aid Society of Greater Cincinnati clients
who sought assistance with bankruptcy filings in 2000-2001); Ed Flynn &
Gordon Bermant, The Class of 2000, Am. Bankr. Inst. J., Oct. 2001
(56.2% of chapter 7 no-asset bankruptcy filers with medical debt on
bankruptcy schedules); Melissa B. Jacoby, Teresa A. Sullivan &
Elizabeth Warren, Rethinking the Debates Over Health Care Financing:
Evidence From the Bankruptcy Courts, 76 N.Y.U. L. Rev. 375, 387 (2001)
(31.2% reported owing money to ``health care providers, services,
supplies'' at time of filing bankruptcy); Champaign County Health Care
Consumers Medical Billing Task Force, How Medical Debt Affects
Champaign County Consumers; A Community Report on Medical Debt-Related
Bankruptcies and Small Claims Lawsuits (July 11, 2002) (58% of cases in
Central District of Illinois in December 2001 involved debts owed to
medical providers). For a less recent study finding a high incidence of
medical debt, see Susan D. Kovac, Judgment-Proof Debtors in Bankruptcy,
65 Am. Bankr. L. J. 675 (1991) (80% of judgment proof chapter 7 debtors
in Tennessee district had medical debt, with mean amount of over $7,800
in mid-1980s). In a recent study, one couple owed $200,000 of medical
bills not covered by insurance, while another debtor accrued $20,000
debt a year for care of her husband who had been in a coma for five
years. See Melissa B. Jacoby, Collecting Debts from the Ill and
Injured; The Rhetorical Significance, but Practical Irrelevance, of
Culpability and Ability to Pay, 51 Am. U. L. Rev. 229, 248-249 (2001).
\17\ See Melissa B. Jacoby, Teresa A. Sullivan, & Elizabeth Warren,
Rethinking the Debates Over Health Care Financing: Evidence From the
Bankruptcy Courts, 76 N.Y.U. L. Rev. 375, 397-398 (2001).
---------------------------------------------------------------------------
Even insured patients may see their credit ruined through medical-
related bankruptcy.18 The majority of those in medical-
related bankruptcy say they have some insurance at the time of
filing.19 Among married joint bankruptcy filers who were
insured at the time of their bankruptcy filings, almost 40% reported
owing debt to a provider of medical services or supplies.20
---------------------------------------------------------------------------
\18\ See, e.g., Fair Credit Reporting Act, 605, 15 U.S.C. 1681c
(permitting bankruptcy cases to be listed for ten years ``from the date
of the entry of the order for relief or the date of adjudication).
\19\ See Melissa B. Jacoby, Teresa A. Sullivan, & Elizabeth Warren,
Rethinking the Debates over Health Care Financing: Evidence from the
Bankruptcy Courts, 76 N.Y.U. L. Rev. 375, 399-400 (2001). Whether they
experienced gaps in insurance, however, is an important question that
warrants further study. See generally Congressional Budget Office, How
Many People Lack Health Insurance and For How Long? (May 2003) (nearly
60 million people were uninsured at any point within 1998); Hearing on
the Uninsured, Committee on Ways and Means Subcommittee on Health
(March 9, 2004) (statement of Douglas Holtz-Eakin, Director of the
Congressional Budget Office, figure 1).
\20\ See Melissa B. Jacoby, The Debtor-Patient; In Search of Non-
Debt Alternatives, 69 Brooklyn L. Rev. table 1 (forthcoming 2004).
---------------------------------------------------------------------------
3. Large hospital debts and collection activities adversely affect
patient health
In addition to financial costs, patients suffer health-related
costs from hospital bills.21 The first relates to the health
impact of stress.22 Some researchers are concerned
specifically about the negative impact of indebtedness and related
financial trouble on certain diseases or conditions.23
---------------------------------------------------------------------------
\21\ See generally Melissa B. Jacoby, Does Indebtedness Influence
Health? A Preliminary Inquiry, 30 J. L. Med. & Ethics 560 (2002).
\22\ See generally M. Katz, Stress, Control, and Psychological
Interventions, in Stress and Health Among the Elderly (M.L. Kykle et.
al, eds., 1992); W.R. Lovallo, Stress and Health; Biological and
Psychological Interactions (1997); A. O'Leary et. al, Stress and Immune
Function, in Clinical Disorders and Stressful Life Events (T.W. Miller
ed., 1997); Steven C. Ames, Glenn N. Jones, & Phillip J. Brantley, A
Prospective Study of the Impact of Stress on Quality of Life: An
Investigation of Low-Income Individuals with Hypertension, 23 Ann.
Behav. Med. 112 (2001); P.A. Barnett, J.D. Spence, & J.R. Jennings,
Psychological Stress and the Progression of Carotid Artery Disease, 15
J. Hypertens. 49 (1997).
\23\ See, e.g., Patricia Drentea and Paul J. Lavrakas, Over the
Limit: The Association Among Health, Race and Debt, 50 Social Science
and Med. 517 (2000); Simon Hatcher, Debt and Deliberate Self Poisoning,
164 British J. Psychiatry 111 (1994); Richard Reading & Shirley
Reynolds, Debt, Social Disadvantage and Maternal Depression, 53 Social
Science & Med. 441 (2001); Steven Hope, Chris Power, & Bryan Rodgers,
Does Financial Hardship Account for Elevated Psychological Distress in
Lone Mothers?, 49 Social Science & Med. 1637 (1999); G.W. Brown & P.M.
Moran, Single Mothers, Poverty and Depression, 27 Psychological Med. 21
(1997); Robert J. Havlik, Allexander P. Vukasin, & Stephan Ariyan, The
Impact of Stress on the Clinical Presentation of Melanoma, 90 Plastic
and Reconstructive Surgery 57 (1992); Hilary Graham & Clare Blackburn,
The Socio-Economic Patterning of Health and Smoking Behavior Among
Mothers With Young Children on Income Support, 20 Sociology of Health &
Illness 215 (1998); H.G. Morgan et. al, Deliberate Self-Harm: Clinical
and Socio-economic characteristics of 368 Patients, 127 British J.
Psychiatry 564 (1975); J.H.J Bankroft et al, The Reasons People Give
for Taking Overdoses, 128 British J. Psychiatry 538 (1968). See also
Gillian Parker, Getting and Spending: Credit and Debt in Britain
(1990); David Caplovitz, Consumers in Trouble: A Study of Debtors in
Default (1974); M. Ryan, Social Work and Debt Problems (1996); E.
Kempson et al, Hard Times? How Poor Families Make Ends Meet (1994).
---------------------------------------------------------------------------
Owing a significant debt can be stressful on its own. The stress is
exacerbated, however, by a zealously pursued debt collection process.
While still in a hospital bed, a patient may receive a visit from a
hospital representative to discuss payment.24 Once home, the
patient may start to receive letters and phone calls proposing ways of
taking care of the bill. The calls will get pressing when the first
debt collector takes over,25 and get even more assertive if
the hospital enlists the services of a secondary debt
collector.26 Debt collectors will threaten to report the
patient's delinquency to credit bureaus and/or threaten to file a
lawsuit. If they follow through on the latter,27 the
litigation process itself can be intimidating. Although liability is
determined quickly in many cases, other cases--and the associated
stress and uncertainty--linger for years after the original
hospitalization.28
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\24\ See Rhonda L. Rundle & Paul Davies, Hospitals Start to Seek
Payment Upfront, Wall. St. J., June 2, 2004, at D1; Patrick Reilly,
Extracting Payment; Hospitals try collecting before patients leave ER,
Modern Healthcare, Nov. 17, 2003, at 8.
\25\ Healthcare collection is its own segment of the collection
industry. See, e.g., ACA International, The Association of Credit and
Collection Professionals, Collections Information, available at
www.acainternational.org (last updated 2/16/04); ACA International, The
Association of Credit and Collection Professionals, Healthcare
Collections (last updated 3/1/04). Hospitals mostly pay their
collectors on contingency. See id.; Tom Jajny, The What, Why and When
of Collecting Patient Balances, Medical Practice Management, July/Aug/
2003, at 33. Debt collectors of course are expected to act within the
limits permitted by the Fair Debt Collection Practices Act and related
laws. See, e.g., Federal Trade Commission Bureau of Consumer Protection
Opinion Letter to J. Russell Gibson, III (February 21, 1990) available
at www.ftc.gov/os/statutes/fdcpa/letters/gibson90.htm (opinion letter
on whether ``day 1'' ``pre-collection'' services for hospital fall
within FDCPA); Federal Trade Commission Bureau of Consumer Protection
Opinion Letter to Thomas Isgrigg (November 10, 1992) available at
www.ftc.gov/os/statutes/fdcpa/letters/isgrigg1.htm (opinion letter on
whether activities of agency with respect to delinquent medical
accounts fall within FDCPA).
\26\ Robert M. Frohlich, Effective reassignment of accounts can
decrease bad debt, Healthcare Financial Management 36, 37 (1994)
(describing use of subsequent collection agency placements, lawsuits,
and credit bureau reporting).
\27\ See, e.g., Champaign County Health Care Consumers Medical
Billing Task Force, How Medical Debt Affects Champaign County
Consumers; A Community Report on Medical Debt-Related Bankruptcies and
Small Claims Lawsuits (July 11, 2002) (in study of small claims court
records, finding 20% of plaintiffs were not-for-profit health
providers).
\28\ See, e.g., County of Santa Clara v. Vargas, 139 Cal. Rptr. 537
(Cal. App. 1977) (medical care given in 1969, payments made until 1974,
and this case report published in 1977); Mercy Hospital, Inc. v. Carr,
297 So.2d 598 (Fla. App. 1974) (published appeal in 1974 for debt
incurred in 1968); Orthopedic & Reconstructive Surgery, S.C. v.
Kezelis, 496 N.E.2d 1112 (Ill. App.1986) (reported decision in 1986 for
dispute over medical bill for services in 1978).
---------------------------------------------------------------------------
Whether or not the lawsuit results in a court judgment, concerns
about the magnitude of the hospital bill may increase if the patient's
liability includes court costs, execution costs, and perhaps even the
hospital's attorneys' fees. 29 Patients also understandably
fear what comes after a court judgment: a judgment entitles a creditor
to garnish wages, attach bank accounts, or direct a sheriff to levy on
property within limits imposed by state and federal exemption laws.
Even if a patient has property of little value, the prospects of loss
can be frightening and devastating.30
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\29\ See, e.g., Sholkoff v. Boca Raton Community Hospital, Inc.,
693 So.2d 1114 (Fla. App. 1997) (interpreting and upholding patient
authorization agreement imposing collection costs, attorneys' fees, and
interest at the ``highest rate permitted by law'' if patient does not
pay in full within 45 days). See generally William J. Woodward Jr.,
Enforcements of Money Judgments: Objectives and Restrictions, in 9
Debtor-Creditor Law 37-24 (Theodore Eisenberg, ed. 1990) (discussing
allocation of costs).
\30\ Even among the lowest income quintile, 40.6% of families owned
houses and 56.8% owned cars according to the 2001 Survey of Consumer
Finance. Arthur B. Kennickell et. al, Recent Changes in U.S. Family
Finances: Evidence from the 1998 and 2001 Survey of Consumer Finance,
Federal Reserve Bulletin 1, 19 (Jan. 2003).
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Aside from the health impact of stress, large medical debts can
dampen a patient's likelihood of receiving future medical care. Medical
providers may refuse to give non-emergency care, or patients indebted
for prior care may fear to seek more.31 This is especially
troubling for patients with chronic problems. Debt, therefore, may
exacerbate the health care access problems experienced by the uninsured
and underinsured.32 Large hospital debts and related
financial distress also make it harder to afford adequate food, safe
housing and other basic necessities.33
---------------------------------------------------------------------------
\31\ D. Andrulus et. al, Paying for Health Care When You're
Uninsured: How Much Support Does the Safety Net Offer?, The Access
Project (Jan. 2003); Bruce Jancin, Medical Bills Cited in 55% of U.S.
Bankruptcy Cases, Skin and Allergy News (Aug 2003); Elizabeth Warren &
Amelia Warren Tyagi, The Two-Income Trap; Why Middle-Class Mothers and
Fathers Are Going Broke (2003); D. Gurewich, R. Seifert, & J. Prottas,
The Consequences of Medical Debt: Evidence from Three Communities, The
Access Project (Feb. 2003); Carol Pryor & Deborah Gurewich, Getting
Care But Paying the Price; How Medical Debt Leaves Many in
Massachusetts Facing Tough Choices, The Access Project (Feb. 2004).
\32\ See, e.g., U.S. Census Bureau, Supplemental Measures of
Material Well-Being: Expenditures, Consumption, and Poverty 1998 and
2001, P23-201, 10 (Sept. 2003) (reporting on percentage of families who
needed to visit doctor or hospital but did not go); John Z. Ayanian et.
al, Unmet Health Needs of Uninsured Adults in the United States, 284 J.
Am. Med. Ass'n 2061 (2000) (nearly \2/5\ of long term uninsured adults
and 1/3 of short term uninsured adults reported not being able to see
physician when needed in the past year due to cost).
\33\ See generally Sara R. Collins et. al, The Affordability Crisis
in U.S. Healthcare: Findings from the Commonwealth Fund Biennial Health
Insurance Survey, The Commonwealth Fund Issue Brief #723 (March 2004);
Carol Pryor & Deborah Gurewich, Getting Care But Paying the Price; How
Medical Debt Leaves Many in Massachusetts Facing Tough Choices, The
Access Project (Feb. 2004). See also U.S. Census Bureau, Supplemental
Measures of Material Well-Being: Expenditures, Consumption, and Poverty
1998 and 2001, P23-201 (Sept. 2003) (reporting on households living
with inadequate food, in homes with leaky roofs, and in neighborhoods
with abandoned buildings, smoke or fumes, and where they are afraid to
walk at night).
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4. Large hospital debts and collection activity directly affect
patients' families
The financial and health effects of hospital bills and debt
collection are not limited to patients. They apply to their loved ones
as well. This is particularly true when hospitals seek to hold family
members liable for patients' care. As noted previously, hospitals
sometimes do so on the basis of signatures on admission forms. For
example, in one case, an eighty-year-old widow was mourning the death
of her husband, who had suffered several debilitating illnesses, when
the hospital sued her for more than $257,000 for his hospital bills
based on her signature.34 Other times, hospitals seek to
hold spouses liable on other grounds, such as the doctrine of
necessaries.35 Even if the spouse is ultimately is not held
liable, he or she has been placed through an additional ordeal at a
time of great emotional distress.
---------------------------------------------------------------------------
\34\ See Valley Hospital v. Kroll, 2003 WL 23416577 (N.J. Super.
April 17, 2003). Medicare and Medigap had paid the hospital hundreds of
thousands of dollars, but the hospital argued it could balance bill the
patient's widow for its full charge once Medicare Part A benefits had
been exhausted. Nearly three years later, the court granted partial
summary judgment in favor of the patient's widow on the balance billing
issue.
\35\ According to courts and commentators, hospitals have been the
principal users of the doctrine of necessaries, leading to the
conclusion that this doctrine is more of a hospital debt collection
device than a spousal support device. See Medical Center Hospital of
Vermont v. Lorrain, 675 A.2d 1326, 1329 (Vt 1996) (``virtually all
necessaries cases are hospitals seeking payment, often due to last
illness''); Shawn M. Willson, Comment, Abrogating the Doctrine of
Necessaries in Florida: The Future of Spousal Liablity for Necessary
Expenses After Connor v. Southwest Florida Regional Medical Center,
Inc., 24 Fla. St. U. L. Rev. 1031, 1043 (1997) (``In the last fifty
years, all of the Florida cases in which a party invoked the doctrine
involved unpaid medical expenses. In case after case, hospitals sought
to trap an unwilling spouse into making payment on a debt for which he
or she did not contract''). However, some state courts abolished the
doctrine of necessaries on constitutional grounds, leaving to the
legislatures whether to enact a gender-neutral statute. See, e.g.,
North Ottawa Community Hospital v. Kieft, 578 N.W.2d 267, 273 (Mich.
1998) (holding doctrine of necessaries no longer is part of Michigan's
common law, and thus ``neither husband nor a wife is liable, absent
express agreement, for necessaries supplied to the other'').
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5. Medical-related financial products are not necessarily the solution
Various studies have observed the use of third party credit for
medical bills.36 This shifts the burden of collection and
risk of non-payment away from the medical provider. Providers
understandably find this prospect attractive even though they incur
costs associated with processing credit card charges.37
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\36\ See, e.g., Sara R. Collins et. al, The Affordability Crisis in
U.S. Healthcare: Findings from the Commonwealth Fund Biennial Health
Insurance Survey, The Commonwealth Fund Issue Brief #723 (March 2004)
(among those with medical debt, approximately one fifth ran up credit
card debt or incurred debt secured by home); Glenn B. Canner et. al.,
Recent Developments In Home Equity Lending, 84 Federal Reserve Bulletin
241, 248 tbl.8 (1998) (increase in borrowers indicating medical
expenses as use for home equity lines of credit and loans); Peter J.
Brady et. al, The Effects of Recent Mortgage Refinancing, Federal
Reserve Bulletin 441, 446 (July 2000) (39% of 1998 and early 1999
refinancings used for consumer expenditures, which includes medical
expenses among a list of other things). This is not an entirely new
phenomenon, however. Even a study in the 1970s found medical costs a
major reason for consumers taking out personal loans. Thomas A. Durkin
& Gregory E. Eliehausen, 1977 Consumer Credit Survey, 80, table 15.1
(Washington DC Federal Reserve Board, 1978).
\37\ See, e.g., Julie A. Jacob, Credit to your practice: Letting
patients pay with plastic, American Medical News, July 29, 2002.
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Some health care providers and third parties are taking this to the
next level: they are joining forces to offer medical-specific credit
products to patients.38 Many of these products do not shift
the risk of non-payment entirely away from providers, but the risks and
burdens on the whole seem far lower for providers than those associated
with the traditional billing and collection process.
---------------------------------------------------------------------------
\38\ See, e.g., Tyler Chin, In the cards: Getting Paid with
Plastic; Innovations in the credit and debit card industry are giving
physicians new options for collecting bills, American Medical News,
Jan. 12, 2004; Mike Stobbe, Credit card agency cuts hospitals' losses,
The Charlotte Observer, July 11, 2003; www.accessonemedcard.com;
Michael Unger, Just What the Doctor Ordered; Schein's One-Stop Service
Ranges from Equipment to Personal Finance, Newsday, Dec. 30, 1996, at
C7 (discussing MedCash credit cards, with interest rates eventually
rising to 19%); News Release, PracticeXpert Launches Pxpert Medical
Credit Card Program (Sept. 4, 2003) (acquiring delinquent accounts from
physician and transferring balance to credit card, which can be used
for other purchases as patient re-pays); News Release, King Thomason
Group Enters into Agreement With Medical Capital Corporation to Market
KTG's TotalCare Medical Accounts Receivable Credit Card Program (April
23,2004); www.kgth.com/main/totalrecovery.htm (citing 95% approval rate
for private pay patients); Citibank Health Card Program,
www.citibank.com/us/cards/cardserv/healthcrd/cons--benefits.htm (card
for family health needs, offering 3 month interest free period with
rate of nearly 22% thereafter, and default interest rate of over 25%);
HELPCard, www.helpcard.com (interest rate of prime plus 11.9%);
www.healthEZ.com (encouraging employers to offer to employees as
supplement to health plans); DeeDee DePass, How HealthEZ Got Fit, Star
Tribune, www.carecredit.com.
---------------------------------------------------------------------------
These products have received little systematic attention at this
point and they raise a host of issues. According to a quote in the
American Medical News, the director of the American Medical Association
Institute for Ethics worries that these products may result in
``further commercialization of the patient-physician relationship,''
and that cards targeted toward those with poor credit histories ``are
in essence endorsing the idea that impoverished patients who have the
worst credit history should sign up for another credit card, which by
the way will pay [medical providers] off first.'' 39
---------------------------------------------------------------------------
\39\ Tyler Chin, In the cards: Getting Paid with Plastic;
Innovations in the credit and debit card industry are giving physicians
new options for collecting bills, American Medical News, Jan. 12, 2004.
---------------------------------------------------------------------------
For purposes of this hearing, however, it suffices to say that
these products do not seem to address the needs of uninsured hospital
patients. A $40,000 credit card bill is not much better than a $40,000
hospital bill, and may be worse. Some medical credit products offer
interest free installments for limited periods, but the interest rates
jump to 20% or higher thereafter. Even at a lower interest rate, the
patient may face a perpetual oppressive obligation.40 To the
extent lenders and providers encourage medical-specific home equity
products, it is worth noting that undiscounted hospital bills rolled
into home mortgage loans raise the stakes further; home equity loans
for large medical bills reduce retirement security through the loss of
equity, and may lead to home loss altogether.41
---------------------------------------------------------------------------
\40\ This essentially was the problem experienced by Quinton White
with respect to his hospital bill payment plan. See Lucette Lagnado,
Twenty Years and Still Paying; Jeanette White is Long Dead But Her
Hospital Bill Lives On; Interest Charges, Legal Fees, Wall St. J.,
March 13, 2003, at B1; Lucette Lagnado, Twenty Years--and He Isn't
Paying Any More, Wall St. J., April 1, 2003, at B1.
\41\ See, e.g., Federal Trade Commission, Facts for Consumers,
cNeed a Loan? Think Twice About Using Your Home as Collateral,
available at www.ftc.gov/bcp/conline/pubs/hoepa.htm (last accessed June
4, 2004).
---------------------------------------------------------------------------
In addition, one again needs to consider the credit report
implications. Credit cards and loans are trade accounts that have a
wider range of credit-rating effects than medical debts. Thus, in
addition to all of the previously discussed effects of medical debt,
the mere existence of a trade account can affect the patient's credit
score, particularly if the liability is large or if the patient
recently opened other accounts. In addition, the lender is likely to
regularly report any lateness in repayment, further affecting the
patient's credit rating. Given these risks, medical-specific credit
products are not likely to offer the solution to the problems being
discussed today.
Thank you again for the opportunity to participate in this
important hearing. I would be glad to help the Subcommittee however I
can.
Mr. Walden. Thank you for your testimony, we appreciate it.
Mr. Rukavina, we appreciate your being here today, and look
forward to your comments.
TESTIMONY OF MARK RUKAVINA
Mr. Rukavina. Thank you, and I would like to thank the
subcommittee for this opportunity today. I am the Executive
Director of The Access Project. We are a national resource
center working with local groups that are trying to expand
access to health care, and over the past few years we have
produced a number of reports on medical debt.
Medical debt is an enormous problem in this country. The
Commonwealth Fund recent survey identified that half of
Americans with no health insurance had problems related to
medical bills or accrued medical debt. And maybe surprising to
some here today, more than half of the uninsured experiencing
these problems used all or most of their savings to pay medical
bills.
I would like to make three main points, then offer some
recommendations. First, the uninsured are charged the highest
fees for care. They are given a raw deal when it comes to
hospital billing. Though many uninsured patients get the
necessary medical treatment that they need from hospitals, they
are charged the highest fees for that care. Paying for medical
care is a burden, it is crushing for the uninsured. People with
insurance pay a discounted rate, but uninsured patients pay
full charges.
The Wall Street Journal reported on a 25-year-old uninsured
woman from New York City, who was billed $14,000, not including
doctor's fee, for a 2-day appendectomy stay. Medicaid would
have paid about $5,000 for this procedure, and Medicare just
under $8,000. She was ineligible for either program and was
charged the full rate. This is wrong, and it is not isolated to
New York State.
For years, as we have heard, hospitals have blamed this
unfair practice on Federal Medicare rules and regulations. We
were pleased when earlier this year Secretary Thompson
clarified that hospitals could offer discounts to uninsured
patients. Hopefully this will bring an end to the practice of
price gouging uninsured patients, but discounting fees will not
be enough.
My second point is that the uninsured need help to pay for
their medical care, and to enroll in existing financial
assistance programs. Most uninsured patients are not able to
pay for their care in full. Fortunately, for some of the
uninsured, programs exist to help them, programs like Medicaid,
children's health insurance programs, and the hospital's own
charity care policies. But many uninsured patients are simply
unaware of these programs, and they need help in applying for
them. Too few hospitals provide such assistance, but it doesn't
have to be this way.
We found a very effective program at Cooley Dickinson
Hospital in Northampton, Massachusetts. Hospital case managers
visit each uninsured patient and review their individual health
care needs. They help patients complete program applications,
they refer them to a local network of physicians offering care
on a sliding fee scale, and they help them apply for hospital
charity care. They have enrolled hundreds of patients in
Medicaid and other programs. The hospitals gain needed
revenues, the patients avoid crushing debt, both are better
off.
The crucial point here is that case managers review payment
alternatives with patients at the front-end of the process, not
when bill collectors are pounding on their doors. Without such
help, many patients would be reluctant to go back to the
hospital.
My final point is that the uninsured are intimidated and
harmed by overly aggressive collection practices. Some
collection tactics used by hospitals are simply deplorable.
Aggressive practices have been well documented, we have heard
of some of them already today. Patients have been hounded by
collection agencies, sued and subsequently charged high
interest rates, have wages garnished, liens slapped on homes,
some have even been arrested and imprisoned for the bills that
they have incurred.
In Illinois, a woman who incurred just under $1700 in bills
due to a miscarriage, was briefly jailed after she missed two
court hearings on hospital bills.
I have five recommendations for American hospitals. One,
lower the fees charged to uninsured patients. Secretary
Thompson clarified this can be done, just do it and do it now.
No. 2, help the uninsured pay for care. Hospitals must
assist uninsured patients in applying for existing programs.
This would provide hospitals with reimbursement for services,
and help patients avoid this debt--the Cooley Dickinson example
is but one--we believe other hospitals could and should
implement such programs.
No. 3, stop the aggressive collection actions taken against
uninsured patients. American hospitals are the finest
institutions in the world. Unfortunately, the hospital billing
departments and collection agencies used by some hospitals do
harm patients, hauling low-income uninsured patients to court
is senseless. Hospitals spend money to do this, with little
financial gain, and such actions ruin the credit of uninsured
patients.
No. 4, we challenge the American Hospital Association to
demonstrate bold leadership and establish a financial
assistance initiative for uninsured patients. An essential
component of this program would be to work in partnership with
consumer and community advocacy organizations to ensure that
these policies are sensible and understood by the uninsured
patients in their community. It should be guided by one basic
principle, and that is ``do no harm.'' Hospitals must begin to
treat patients who owe them money with respect and dignity, and
hospitals should not ask Congress or the Administration for
additional resources until doing so.
My final point, we urge all hospitals to join uninsured
consumers in advocating for a comprehensive system of
affordable health care for all.
Thank you for the opportunity to speak before you today.
[The prepared statement of Mark Rukavina follow:]
Prepared Statement of Mark Rukavina, The Access Project
Thank you for inviting me to speak before this panel on the
important issue of hospital billing and collection practices with
respect to uninsured patients.
My name is Mark Rukavina, and I am the executive director of The
Access Project. The Access Project is a national resource center
providing support to local organizations seeking to improve access to
health care. The Access Project works in partnership with the Heller
School for Social Policy and Management at Brandeis University in
Massachusetts. In our work with local groups since 1998, we have
undertaken numerous research and policy analysis projects and produced
a series of reports on subjects relating to health care access
barriers. Over the last four years, our work has increasingly focused
on the problem of medical debt and its consequences. Through our
research, and that of others, we have learned that the problem is
widespread and its causes diverse. Hospitals practices around pricing,
billing and collections are prominent among the causes of medical debt.
The existence of medical debt on a large scale, and the consequences of
this debt, belies many prevalent misconceptions about the uninsured and
their ability to access health care. In my remarks, I would like to
clarify some of these basic misunderstandings.
(1) The first misconception is that uninsured patients can get the
care they need from safety-net institutions for free or at affordable
prices.
The Access Project documented the actual experiences of the
uninsured through a survey it conducted in 2000 of uninsured people who
had received care in local safety-net institutions. In the 24-site
survey of nearly 7,000 uninsured respondents, 60 percent said they
needed help paying for their medical care, and nearly half (46%) said
they owed money to the facility where they received care. For those who
received care in hospital emergency rooms, the percentages were even
higher.
These findings are reinforced by other national research. For
example, the Commonwealth Fund's recent report, The Affordability
Crisis in U.S. Health Care: Findings from the Commonwealth Fund
Biennial Health Insurance Survey (March 2004), found that two out of
five adults in 2003, and 6 out of 10 among those who lacked insurance,
had problems related to medical bills or accrued medical debt.
Moreover, medical debt has a direct effect on people's ability to
access health care. In our 24-site survey, among the respondents with
unpaid bills, almost a quarter said the debt would deter them from
seeking care at the facility in the future. In another Access Project
study, we interviewed low-income consumers with medical debts in three
communities. More than half said their medical debts made it harder for
them to get medical care. They reported that providers discouraged them
from seeking additional services by requiring cash payment upfront,
flatly refusing care, or encouraging them to seek new providers.
A 2000 study done by the National Association of Public Hospitals
and Health Systems found that even safety-net providers do not
automatically provide free care to uninsured patients. More than 80
percent of the public hospitals surveyed had implemented cost-sharing
plans and an increasing number implemented pharmacy co-payment plans.
Medical debt can erode not only individuals' access to care, but
also their overall financial security and that of their family. One
survey found that more than a quarter of families in which one or more
members were uninsured reported having to ``change their way of life
significantly'' to pay medical bills, a figure that rose to nearly 40
percent when all family members were uninsured. In the recent
Commonwealth Fund survey, among the uninsured respondents who had
medical bill problems or medical debt, almost 4 in 10 said they were
unable to pay for basic necessities such as food, heat or rent; over
half said they used all or most of their savings to pay medical bills;
and more than 2 in 10 said they had taken on large credit card debt or
loans against their homes to pay medical bills.
(2) Another misconception is that uninsured people expect to get
their care for free, or are simply unwilling to pay for it.
In fact, the uninsured do pay a significant portion of their bills.
As the Commonwealth Fund survey indicates, many exhaust their savings,
take out loans, or assume large credit card debt to pay their medical
bills. A recent report by the Kaiser Commission on Medicaid and the
Uninsured, The Cost of Care for the Uninsured: What Do We Spend, Who
Pays, and What Would Full Coverage Add to Medical Spending? (2004),
estimates that people who are uninsured for an entire year pay over a
third (35%) of their health care costs out-of-pocket, considerably more
than the 20 percent share paid by those with insurance. According to
the report, the uninsured can be expected to pay 32.6 billion dollars
for their care in 2004.
Our interviews with low-income people with medical debt found that
many respondents had a strong desire to pay off their debt and tried to
negotiate payment plans, but found that the terms of the plans
hospitals offered were difficult to maintain, given inflexible hospital
collection practices and their own tenuous financial circumstances.
Here are what some of our survey respondents told us.
``. . . they demanded I pay a certain amount bi-weekly. I
couldn't afford it. They didn't want to help. I was willing to
pay some money, as much as I could.''
``I (said) I couldn't pay $500, that I could pay $100, but
the person answered no, that it had to be $500.''
Moreover, not being able to pay their medical bills in full caused
many people tremendous anxiety and stress. Again, here is what some of
our respondents told us.
``I am constantly worrying about my medical debt . . . I feel
hopeless. I am a single mom and think that in the future I will
not be able to better my life.''
``Owing money affects every part of your life. You don't stop
worrying about it anytime.''
``I couldn't sleep . . . I just slept a few hours and it (the
debt) even took my appetite away.''
One factor that makes it especially difficult for uninsured people
to cover the entire cost of their care is that they are often expected
to pay more for the same services than other payers. Uninsured patients
don't have access to the discounts negotiated by insurers or set by the
government. Uninsured patients are expected to pay full charges or
``the rack rate.'' A Wall Street Journal article in March of 2003 told
the story of Rebekah Nix, a 25-year old uninsured woman in New York who
was billed $14,000--not including doctor's fees--for a two-day stay for
an appendectomy. The state's Medicaid program would have paid about
$5,000 for the procedure, and Medicare about $7,800.
In testimony before the House Ways and Means Committee this past
March, University of Southern California Professor Glenn Melnick showed
that nationally, hospitals increased their mark-ups--the amount charged
over and above the cost of care--from 159% in 1993 to 211% in 2003.
Average mark-ups across states ranged from 135% to 300%. Given this,
it's no surprise that the uninsured can't cover these costs.
Adding insult to injury, many hospitals enforce these payments
through aggressive billing and collections practices, a situation that
has been documented in the press and by various community groups.
Reports of hospital billing and collections practices in Connecticut,
New York and Illinois led to a series of articles in the Wall Street
Journal. The Journal articles, as well as articles in other newspapers
across the country, have detailed cases of the devastating effects of
harsh collections practices in which people were hounded by collection
agencies, charged high interest, had wages garnisheed and property
attached, had liens put on homes, and were even arrested as they
struggled to pay their bills. For example the Journal documented the
case of Quentin White, who had been paying Yale-New Haven Hospital for
over 20 years for the debt from his late wife's medical care. The
hospital charged 10 percent interest, placed a lien on the White's
home, and in 1996 nearly cleaned out Mr. White's bank account. Over the
years, Mr. White paid nearly $16,000 on what was originally a bill of
just less than $19,000. However, his outstanding balance had ballooned
to about $39,000 in 2003 because of the interest charges. In another
case in Champaign, Illinois, Marlin Bushman was arrested and jailed
after missing a court hearing on a $579 hospital bill. Kara Atteberry
was briefly jailed because she missed two court hearings on a $1,678
hospital bill incurred for a miscarriage.
Hospitals have used other tactics to improve their collection rate.
Some have arrangements with commercial banks to facilitate the
initiation of loans to cover medical expenses. Others have created
open-ended credit accounts that are marketed as Trouble-Free Payment
Plans but fail to disclose interest rates or other fees at the time of
application. We even know of a hospital that is issuing its own credit
card to patients.
Some hospitals take drastic measures through their collection
agents. Earlier this month, the Wall Street Journal reported on a
practice in New York where hospital collection agencies attach the bank
accounts of patients with hospital bills going back as far as 15 years.
Some hospitals had even written off some of these bills and had
received partial reimbursement from a state-run bad-debt pool.
There should be no place for such high-pressure tactics used
against low-income people who have the misfortune of getting sick.
Given recent attention on this issue, the financial community is
beginning to scrutinize hospital billing and collection practices. The
Health Capital Group provides an illustration. The Health Capital Group
offers services to hospitals and other medical providers relating to
mergers, acquisitions and investment banking, as well as an array of
other related ``transactional'' services including sophisticated
valuation services. They recently expressed concern that hospitals
failing to inform certain patients who might reasonably qualify for
financial assistance or ``charity care'' would be exposed to class
action lawsuits as well as the possibility of direct intervention from
state attorneys general. They fear that this could create enormous
contingent liabilities that could, in turn, significantly impair their
access to capital.
As a result The Health Capital Group announced that they will cease
issuing valuation opinions, validating bond ratings, rendering
creditworthiness opinions, certifying debt capacity, making
recommendations to bond funds or issuing compliance comfort letters and
related analyses unless a hospital or hospital system demonstrates that
it has written policies and procedures to inform patients of financial
assistance, pricing and collection policies and publicizes these
policies and procedures.
Just last week it was reported that a federal class action lawsuit
was filed in federal courts in eight states against nearly one dozen
non-profit hospital systems challenging whether tax exempt status
should be granted to these institutions. Clearly the billing and
collection practices of hospitals that have created problems for
uninsured patients are now creating problems for the entire hospital
industry.
(3) A third misconception is that the ``truly needy'' are not
billed or subject to aggressive collection actions because they qualify
either for public programs or for hospitals' indigent care programs.
While most hospitals do claim to have financial assistance programs
to assist people without the means to pay for their medical care,
research indicates that many who might qualify for these programs never
learn about them. In our 2000 survey of the uninsured, almost half
(48%) of those needing help paying for care said they were never
offered financial assistance, such as being informed about the
facilities' own charity care programs. Among those who received care in
urban or suburban hospital emergency rooms, 70 percent said they were
never offered assistance. This lack of information about available
financial assistance is consistent with findings from subsequent
research that The Access Project and others have done, and is a wholly
avoidable cause of medical debt. Again, here is a comment from one of
our survey respondents:
``I would like the hospital to make the help office, the one
that helps you pay the bill, more accessible to the people.
Because I have a lot of bills that could have been paid, had
they told me about that office sooner. Instead, my bills are
now in a collector's office when I qualified for financial
assistance, because they did not give me the necessary
information . . .''
In this regard, I would like to share with you The Access Project's
own experience trying to obtain hospitals' financial assistance
policies. Last December, the American Hospital Association issued
guidelines for its members recommending that all hospitals have written
financial assistance policies that they disseminate widely in their
communities. In 2003, both Tenet and HCA healthcare systems announced
with fanfare programs to help the uninsured with discounts and sliding
scales. Learning about the HCA program in the third quarter of 2003,
and unable to find information on their website, I contacted the
company to request a copy of the policy. I received no response. I made
another request a month later. Finally, in December, I was told that
while the policy had been implemented, HCA didn't want to post it until
they saw if it ``worked as intended'', probably around the beginning of
the new year. In February of this year, we invited HCA, along with
Tenet and other area hospitals, to meet with community leaders in
Florida to provide information about their financial assistance
policies. Unfortunately, both HCA and Tenet declined to attend.
Only in late April, more than six months after we first requested
information, did the hospitals provide us with their policies. The
Access Project is hopeful that working with these systems will be far
easier in the future. However, I share this story to point out that if
it takes the professional staff at a national health care resource
center over half a year to find out about the hospitals' financial
assistance program, one can imagine the difficulties faced by uninsured
people who try to do so, especially while they are ill and vulnerable.
It is possible for hospitals to inform uninsured patients of the
financial assistance programs that are available to them. However,
providing information is often not enough. Hospital can and must do
more than that. We recently identified a program at The Cooley
Dickinson Hospital in Northampton, Massachusetts. Cooley Dickinson case
managers visit each uninsured patient and review their individual
health care needs. They help patients complete program applications,
they refer them to a local network of physicians offering care on a
sliding fee scale and assist them in applying for hospital charity
care. By providing this assistance, they have enrolled hundreds of
patients in Medicaid and other programs. The hospital gains needed
revenues and the patients avoid crushing debt. The hospital and the
patient are both better off. The crucial point is that case managers
review payment alternatives with patients at the front end of the
process, not after the bills have been sent to collection. Without such
help, many patients would be reluctant to go back to the hospital.
(4) A final misconception is that hospitals and other healthcare
providers bear the full burden of providing care for the uninsured.
I have already discussed that the uninsured themselves in fact pay
a significant portion of the costs of their care. In addition, while
hospitals definitely do bear a portion of this burden, they also
receive funding from a variety of sources to help defray these costs.
As Secretary of Health and Human Services Tommy Thompson pointed out in
a letter to the American Hospital Association, ``Medicare and Medicaid
have a long history of doing their part to help the uninsured that
includes paying hospitals $22 billion each year through the
disproportionate share hospitals provisions to help hospitals bear the
cost of caring for the poor and uninsured.'' In addition, most states
and many counties and local communities have programs that help fund
care for the indigent and uninsured.
A word is warranted here about the ``uncompensated care'' that
hospitals provide. Most hospitals report their uncompensated care as a
combination of bad debt and charity care, without disaggregating the
two. While both types of uncompensated care similarly affect a
hospital's bottom line, their effects on patients are starkly
different. ``Bad debt,'' even after a hospital has written it off,
still burdens the patient. Collection efforts by outside collection
agents may continue indefinitely, and the debt may be a blot on a
consumer's credit record for years; it may hinder people from buying
homes, getting loans, or even affect their employment. So while from
the hospital's perspective the services are uncompensated (at least
that portion of the bill a patient is unable to pay), from the
patient's perspective the bad debt write-off is by no means
``charitable'' and should not be confused with the legitimate benefits
of a hospital's charity care program.
Recommendations
The widespread problem of medical debt is clearly a symptom of much
that is wrong with our fragmented health care system that leaves so
many people exposed to lack of access to care and to financial ruin.
While this situation cries out for systemic solutions, some steps can
be taken in the interim to reduce the burdens of unaffordable health
care costs on low-income uninsured people.
(1) Offer uninsured hospital patients discounts equivalent to those
extended to people with insurance.
The current situation reflects the lack of clout that uninsured
consumers have in the healthcare marketplace compared to all of the
other players--employers, insurers, and providers. Charging the highest
rates to those least able to pay is simply unfair, especially when it
comes to necessary medical care.
By itself, however, this is not sufficient. From the standpoint of
the low- or even middle-income consumer struggling to pay his medical
bills, the salient issue is not only the prices a hospital charges but
also the availability of financial assistance programs. Even with
changes in hospital pricing practices--the immediate concern of the
subcommittee--problems of medical debt will remain for those who
require medical treatment but are unable to pay the (albeit reduced)
fees for which they are responsible. For low-income people, or those
with very high bills relative to their income, even discounted prices
may not prevent devastating medical debt. For a family earning slightly
more than the federal poverty level, reducing a bill from $50,000 to
$25,000 does not provide enough help. For people at this income level,
a bill of a few thousand dollars, or even less, may simply be beyond
their means to pay.
(2) Screen uninsured hospital patients and provide assistance to
all patients who are eligible for public programs to ensure that they
are enrolled in them.
This is a win-win situation for the hospital and the uninsured
patient; it provides hospitals with some reimbursement for services
rendered, and it helps prevent people from being saddled with
unmanageable debt. We know of hospitals that have adopted very
proactive programs to ensure that all of their uninsured patients know
where to get help in applying for these programs. And they have
continued to fund these programs because they have found them to be
financially beneficial to the hospital as well as the patient.
(3) Have consistent and well publicized charity care policies for
hospital patients who are not eligible for public programs and stop
aggressive collection actions as an integral part of a hospital's
service to their communities.
In this regard, we are hopeful that the recent HHS guidance on
billing and collections practices, as well new guidelines from the AHA
and a number of state hospital associations, will help to reduce the
role hospitals play in imposing medical debt and its harsher
consequences. Hospitals must take a proactive role in informing their
patients of charity care and they must stop aggressive collection
actions against uninsured patients. Such actions cost hospitals money
and provide little financial return while ruining the credit of
uninsured patients.
(4) Establish clear rules of accountability for funds that
hospitals receive through the Medicaid DSH program and other sources to
help defray the costs of uncompensated care.
Disproportionate Share Hospital payments provide vital funding for
America's healthcare safety net. Hospital receiving DSH payments should
be required to provide details on how this funding is used to support
services to poor and uninsured patients.
(5) Build on the American Hospital Associations Guidelines and
Principles for Hospital Billing and Collection Practices by
establishing a Financial Assistance Initiative for Uninsured Patients.
We call on the AHA to create an initiative with the purpose of
providing financial assistance to patients with no insurance. An
essential part of this effort would be for hospitals to work in
partnership with community and consumer advocacy organizations that
work with, and represent, people with no health insurance. These
community and consumer advocacy organizations could assure that
hospitals have transparent policies that are understood and supported
by their uninsured patients. Hospitals participating in this initiative
would have clear, written policies governing their practice for
screening uninsured patients for financial assistance, as well as for
billing, charity care, and debt collection practices related to
uninsured patients. The AHA should enroll hospitals in this initiative
to bring clarity and decency to billing and collection practices. One
basic principle could drive the initiative--Do No Harm. Hospitals must
start treating their patients of limited resources with dignity,
respect and justice. If hospitals are unwilling to comply, legislation
might well be in order.
It is only after hospitals improve their billing and collection
systems, that they should seek additional funds to support the cost of
providing health care to uninsured patients.
(6) Create a system of affordable health care for all.
We recognize that hospital bills are only one component of medical
debt. As health care costs rise and employers and insurers shift more
of the costs on to consumers, medical debt from all sources is likely
to grow. While improved hospital financial assistance programs are an
important step in alleviating this problem, systemic efforts that
include all types of healthcare providers and significantly expand
coverage will ultimately be needed to address the underlying factors
that leave many patients--both uninsured and insured--with unmanageable
medical debt.
On behalf of the more than 43 million American with no health
insurance, thank you for the opportunity to testify today.
Mr. Greenwood. Thank you.
Dr. Collins.
TESTIMONY OF SARA R. COLLINS
Ms. Collins. Thank you, Mr. Chairman, for this invitation
to testify today. I am a Senior Program Officer of The
Commonwealth Fund. The recent reports of uninsured patients
struggling to pay exorbitant hospital bills have lent a human
face to a health care system under enormous strain. Growing
numbers of Americans are experiencing gaps in their insurance
coverage, gaps that expose them to the routine cost of
preventive care, as well as the catastrophic cost associated
with serious accidents and illnesses. The number of people
without health insurance climbed to 43.6 million in 2002,
nearly 4 million more than 2 years before. At the same time,
national health care spending grew at a rate of 9.3 percent,
the highest annual increase in a decade. Health insurance
premiums rose even more rapidly, increasing by 13.9 percent in
2003, the third consecutive year of double-digit inflation.
Employers are responding to rising premiums by sharing more of
their cost with employees and offering new insurance products
that shift more financial risk to their workers.
The Commonwealth Fund Biennial Health Insurance Survey, a
nationally representative survey of more than 4,000 adults,
interviewed people about the extent and quality of their health
insurance coverage in late 2003. The survey reveals growing
instability in insurance coverage, particularly among people
with low incomes and among minorities. More than half of adults
under age 65 in households earning less than $20,000 per year
were uninsured for some time during 2003. Nearly half of all
Hispanics experienced a time uninsured, and coverage for
African Americans has worsened considerably over the last 2
years.
The survey also found evidence of an erosion in the quality
of benefits received by people who have health insurance.
Nearly half of those who are insured all year through private
coverage said that they had experienced either an increase in
the amount that they pay for premiums, an increase in their
share of medical bills, or cutbacks or new limits in their
health benefits. Erosion in coverage appears to be impeding
Americans' ability to get health care. The share of people with
and without insurance coverage who reported problems getting
the health care that they needed because of cost climbed to 37
percent in 2003. Those problems included not filling a
prescription because of cost, and not going to a doctor when
they were sick.
In addition, the survey found high rates of medical bill
problems among the insured and uninsured alike. More than 70
million adults said that they had problems with their medical
bills in the last 12 months, or were paying off medical debt
accrued over the last 3 years. Problems included having
difficult paying or being unable to pay bills, being contacted
by a collection agency, or being forced to make significant
life changes. Medical bills are creating financial hardship
among many families. Among those who said they had a medical
bill problem, more than one-quarter reported that they had been
unable to pay for basic necessities like food, heat, or rent
because of their bills. More than two in five said that they
had used up all or most of their savings.
The recent conflict between uninsured patients and
hospitals over payment is a symptom of two underlying trends in
the U.S. health care system, growing instability in insurance
coverage and rapid growth in health care cost. The practice of
hospitals billing uninsured patients more than negotiated rates
with insurers is troublesome and will only increase access and
medical debt problems for uninsured families, and some
hospitals' methods to attempt to recover medical debt from
patients, charging high interest rates, having collection
agencies harass them, and placing liens on their homes are
simply deplorable. Developing policies that would discourage
hospitals from either practice is necessary but, in the
meantime, the pressures that gave rise to this conflict will
continue to grow apace. In the end, small policy changes will
need to be accompanied by broad policy solutions that address
the root cause of the affordability crisis in U.S. health care,
policies that would expand access to affordable health
insurance and reduce the rate of health care cost inflation.
Thank you very much.
[The prepared statement of Sara R. Collins follows:]
Prepared Statement of Sara R. Collins, Senior Program Officer, The
Commonwealth Fund
Thank you, Mr. Chairman, for this invitation to testify today on
the growing affordability crisis in the U.S. health care system. The
recent reports of uninsured patients struggling to pay exorbitant
hospital bills have lent a human face to a health care system under
enormous strain.1 Growing numbers of Americans are
experiencing gaps in their insurance coverage--gaps that expose them to
the routine costs of preventive care as well as the catastrophic costs
of serious accidents and illnesses. The number of people without health
insurance climbed to 43.6 million in 2002, nearly 4 million more than
were uninsured two years before (Chart 1).2 At the same
time, national health care spending grew at a rate of 9.3 percent in
2002, the highest annual increase in a decade (Chart 2).3
Health insurance premiums rose even more rapidly, increasing by 13.9
percent in 2003, the third consecutive year of double-digit inflation
(Chart 3).4 Employers are responding to rising premiums by
sharing more of their costs with employees and offering new insurance
products that shift more financial risk to workers (Chart
4).5 A severe fiscal crisis has led many state governments
to restrict eligibility in public programs such as Medicaid and the
Children's Health Insurance Program (CHIP)--a development that is
likely to increase the number of people without coverage.6
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\1\ R. Abelson and J.D. Glater, ``Nonprofit Hospitals Said to
Overcharge Uninsured,'' New York Times, June 17, 2004; L. Lagnado,
``Dunned for Old Bills, Poor Find Some Hospitals Never Forget,'' The
Wall Street Journal, June 8, 2004; C. Pryor et al., Unintended
Consequences: How Federal Regulations and Hospital Policies Can Leave
Patients in Debt (New York: The Commonwealth Fund, June 2003); C. Pryor
and B. Seifert, Unintended Consequences: An Update on Consumer Medical
Debt (New York: The Commonwealth Fund, June 2004).
\2\ R.J. Mills and S. Bandhari, Health Insurance Coverage in the
United States: 2002, Current Population Reports (Washington, D.C.: U.S.
Census Bureau, September 2003).
\3\ K. Levit et al., ``Health Spending Rebound Continues in 2002,''
Health Affairs 23 (January/February 2004): 147-59; K. Davis, Making
Health Care Affordable for All Americans, Invited testimony before the
Senate Committee on Health, Education, Labor, and Pensions hearing on
``What's Driving Health Care Costs and the Uninsured?'' January 28,
2004.
\4\ J. Gabel et al., ``Health Benefits in 2003: Premiums Reach
Thirteen-Year High as Employers Adopt New Forms of Cost Sharing,''
Health Affairs 22 (September/October 2003): 117-26.
\5\ J. Gabel et al.; S.R. Collins, C. Schoen, M.M.Doty, and A.L.
Holmgren, Job-Based Health Insurance in the Balance: Employer Views of
Coverage in the Workplace (New York: The Commonwealth Fund, March
2004).
\6\ M. Nathansan and L.Ku, Proposed State Medicaid Cuts Would
Jeopardize Health Insurance Coverage for 1.7 Million People: An Update
(Washington, D.C.: Center on Budget and Policy Priorities, March 21,
2003).
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The state of our nation's health care system is creating profound
conflicts between providers, whose mission it is to care for patients,
and patients, whose access to and trust in the health care system is
crucial to the maintenance of a vital and productive society. Private
and public health care providers spend an estimated $35 billion a year
on care for uninsured patients that goes uncompensated.7 At
the same time, evidence from the recent Commonwealth Fund Biennial
Health Insurance Survey shows that being uninsured or having gaps in
insurance coverage interferes with people's ability to get the health
care they need.8 The Institute of Medicine warns that
leaving more than 40 million people without insurance coverage costs
the U.S. economy an estimated $65 billion to $130 billion annually in
lost productivity.9
---------------------------------------------------------------------------
\7\ J. Hadley and J. Holahan, ``How Much Medical Care Do the
Uninsured Use, and Who Pays for It?'' Health Affairs Web Exclusive (12
February 2003): W3-66-W3-81.
\8\ S.R. Collins et al., The Affordability Crisis in U.S. Health
Care: Findings from the Commonwealth Fund Biennial Health Insurance
Survey (New York: The Commonwealth Fund, March 2004).
\9\ Institute of Medicine, Hidden Costs, Value Lost: Uninsurance in
America (Washington, D.C: National Academy Press, 2003).
---------------------------------------------------------------------------
Rising health care costs are also creating conflicts in the
workplace, as U.S. companies, for lack of other options, shift more
health care risk to employees in the form of increased deductibles,
greater premium sharing, and higher copayments. Yet, Americans already
pay more out-of-pocket for their medical care than people in any other
industrialized country.10 Higher cost-sharing thus raises
concerns that even people who have insurance coverage will forgo needed
medical care, face out-of-pocket costs that might consume substantial
shares of their income, or drop their coverage altogether.11
---------------------------------------------------------------------------
\10\ K. Davis, Making Health Care Affordable for All Americans,
Invited testimony before the Senate Committee on Health, Education,
Labor, and Pensions hearing on ``What's Driving Health Care Costs and
the Uninsured?, January 28, 2004.
\11\ S. Trude, Patient Cost-Sharing: How Much Is Too Much? Issue
Brief No. 72 (Washington, D.C.: Center for Studying Health System
Change, December 2003).
---------------------------------------------------------------------------
The Commonwealth Fund Biennial Health Insurance Survey, a
nationally representative survey of more than 4,000 adults, interviewed
people about the extent and quality of their health insurance coverage
in late 2003. The survey revealed growing instability in insurance
coverage, particularly among people with low incomes and minorities. In
addition, the survey found evidence of erosion in the quality of
benefits among people who have health insurance. Gaps in insurance
coverage and rising health care costs are preventing large shares of
both uninsured and insured Americans from getting the health care they
need. The survey also found high rates of medical bill problems among
uninsured and insured alike. Many families with medical debt face stark
trade-offs between life necessities like food and rent and paying down
their debt. Key findings from the survey and other recent reports are
discussed below.
INSURANCE COVERAGE IS BECOMING INCREASINGLY UNSTABLE
The Commonwealth Fund Biennial Health Insurance Survey shows that
health insurance coverage is becoming increasingly unstable. In the
survey, respondents were asked whether they were insured at the time of
the survey and whether they had lacked insurance at any time during the
previous 12 months. Twenty-six percent of adults ages 19 to 64 had
experienced at least some time uninsured in 2003: 17 percent were
uninsured at the time of the survey, and 9 percent had been uninsured
during part of the previous 12 months (Chart 5). In 2001, the last year
that the Commonwealth Fund survey was conducted, 24 percent of
respondents were uninsured for at least part of the year.12
---------------------------------------------------------------------------
\12\ Increase statistically significant at p < .05.
---------------------------------------------------------------------------
Insurance instability is particularly acute among people with low
incomes. More than half (52%) of adults ages 19 to 64 in households
earning less than $20,000 per year were uninsured for some time during
2003, up slightly from 49 percent in 2001.13 The erosion of
health insurance was most marked for families with incomes between
$20,000 and $35,000--35 percent were without coverage during the year,
up from 28 percent in 2001.14 Sixteen percent of adults in
households with incomes between $35,000 and $60,000 experienced a time
without health insurance in 2003.
---------------------------------------------------------------------------
\13\ Increase statistically significant at p < .05.
\14\ Increase statistically significant at p < .05.
---------------------------------------------------------------------------
Minorities experience similarly high rates of instability in
coverage. Nearly one-half (47%) of Hispanics were without health
insurance at some point during the year in 2003, with more than one-
third reporting that they were uninsured at the time of the survey
(Chart 6). African Americans experienced a significant loss of coverage
in the 2001-03 period: the share without coverage jumped from 27
percent in 2001 to 38 percent in 2003, with most of the increase
attributable to an increase in those who were uninsured at the time of
the survey (14% to 23%).15
---------------------------------------------------------------------------
\15\ Increase statistically significant at p < .05.
---------------------------------------------------------------------------
Other recent analyses of surveys that track people over time shows
that many low-income workers and minorities remain without coverage for
years at a time. Research by Pamela Farley Short and colleagues found
that from 1996 to 2000, 42 percent of children and adults under age 65
with incomes less than 200 percent of poverty had been uninsured for
more than one year, and nearly 3 of 10 (28%) were uninsured more than
two years.16 Michelle Doty and Alyssa Holmgren of The
Commonwealth Fund found that 37 percent of Hispanic workers with
incomes under 200 percent of poverty who had been employed full-time in
the 1996-2000 period were uninsured for the full four
years.17
---------------------------------------------------------------------------
\16\ P.F. Short and D.R. Graefe, ``Battery-Powered Health
Insurance? Stability in Coverage of the Uninsured,'' Health Affairs 22
(November/December 2003): 244-55; P.F. Short, D.R. Graefe, and C.
Schoen, Churn, Churn, Churn: How Instability of Health Insurance Shapes
America's Uninsured Problem (New York: The Commonwealth Fund, November
2003).
\17\ M.M. Doty and A.L. Holmgren, Unequal Access: Insurance
Instability Among Low-Income Workers and Minorities (New York: The
Commonwealth Fund, April 2004).
---------------------------------------------------------------------------
Insurance instability is also a serious problem among young adults
ages 19 to 29. In the Commonwealth Fund survey, 40 percent of young
adults said that they were without coverage at some point during the
year. This is nearly twice the rate found for those ages 30 to 64 who
experienced a time without coverage in 2003. Age 19 is a critical
turning point in insurance eligibility among both privately and
publicly insured young adults. Nearly 60 percent of employers who offer
health benefits stop covering dependent children at age 18 or 19 if
they do not go on to college.18 The Medicaid and CHIP
programs reclassify all children as adults at age 19, meaning that most
low-income young adults become ineligible for public coverage, since
eligibility for adults generally is restricted to very low income
parents or disabled adults. Jobs available to young adults are usually
low wage or temporary--the type that generally do not come with health
benefits. A recent Commonwealth Fund report found that more than half
of high school graduates who do not go on to college experience a time
uninsured in the year following graduation (Chart 7).19
Among those who do go on to college, graduation also marks a break in
coverage--nearly two of five college graduates experience a time
uninsured in the year following graduation.
---------------------------------------------------------------------------
\18\ S.R. Collins, C. Schoen, M.M. Doty, and A.L. Holmgren, Job-
Based Health Insurance in the Balance: Employer Views of Coverage in
the Workplace (New York: The Commonwealth Fund, March 2004).
\19\ S.R. Collins, C. Schoen, K. Tenney, M.M. Doty, and A. Ho, Rite
of Passage? Why Young Adults Become Uninsured and How New Policies Can
Help (New York: The Commonwealth Fund, May 2004).
---------------------------------------------------------------------------
Workers without insurance coverage are concentrated in small firms,
which face greater costs for coverage than do large employers and
higher financial risks from providing benefits to only a small pool of
workers.20 But the long-term shift away from manufacturing
in the U.S. economy, coupled with declines in the rate of unionization
in the workforce, has led to an increase in the share of uninsured
workers employed in large firms. A recent Commonwealth Fund report by
researchers Sherry Glied, Jeanne Lambrew, and Sarah Little found that
from 1987 to 2001, the proportion of uninsured workers who were
employed by firms with more that 500 employees grew from 25 percent to
32 percent (Chart 8).21
---------------------------------------------------------------------------
\20\ J. Gabel and J.D. Pickreign, Risky Business: When Mom and Pop
Buy Health Insurance for Their Employees (New York: The Commonwealth
Fund, April 2004).
\21\ S. Glied, J.M. Lambrew, and S. Little, The Growing Share of
Uninsured Workers Employed by Large Firms (New York: The Commonwealth
Fund, October 2003).
---------------------------------------------------------------------------
THE QUALITY OF HEALTH BENEFITS IS ERODING
In addition to declining insurance coverage, the Commonwealth Fund
Biennial Health Insurance Survey also finds evidence of erosion in the
quality of coverage among those with health insurance. Working-age
Americans reported that they were now paying more for their insurance
coverage and more for their medical care than they were one year ago.
Two of five (43%) adults under age 65 with private coverage who
contribute to their premiums said that the amount they pay for premiums
had increased by a moderate amount or a lot in the past year, with
nearly one of five (19%) saying the amount had increased a lot (Chart
9, Table 1). More than half (58%) of those with coverage in the
individual insurance market said that their premiums had risen by a
moderate amount or a lot, with a third (34%) saying that their premiums
had gone up a lot. More than a quarter (28%) of people with employer or
individual coverage said that their share of medical bills had risen by
a moderate amount or a lot.
In addition to paying more for their care, many privately insured
adults also reported that their health plans are cutting back or
placing new limits on covered benefits. The survey asked whether people
had experienced reductions in the benefits covered by their insurance
plans. Reductions could dropping coverage for prescription drugs,
dental care, vision care, or mental health, or placing limits on
benefits. About one-fifth (21%) of people with private coverage said
that their benefits had been curtailed.
Taken together, increased premium shares, increased cost-sharing,
and limits on benefits affected large percentages of the privately
insured. Nearly half of those (49%) insured all year with private
coverage said that they had experienced at least one of these erosions
in the quality of benefits. People with coverage through the individual
market were particularly hard-hit--61 percent reported a decrease in
the quality of their benefits (Table 1). Among adults with employer
coverage, erosion of health insurance benefits appeared to be most
common among those in the highest income category, with 56 percent of
those earning $60,000 or more reporting a decline in the quality of
their coverage.
MANY AMERICANS SPEND SUBSTANTIAL SHARES OF THEIR EARNINGS ON HEALTH
CARE
Depending on their insurance status or the particular provisions of
their health plans, Americans pay different amounts for their health
care and their insurance coverage. Most people with private insurance
(employer-sponsored or individual) contribute to their health insurance
premiums. According to the Commonwealth Fund survey, more than 75
percent of those with employer-sponsored coverage pay part of their
premiums, with 10 percent of single policy holders and a quarter (26%)
with family plans paying $2,500 or more annually (Table 2). Without an
employer to shoulder part of their premium costs, and without the
benefit of risk pooling in group plans, people with individual coverage
pay much more for their premiums. One-third (34%) of single policy
holders in the individual market pay $2,500 or more a year in premiums,
and 15 percent have annual premiums of $5,000 or more. More than half
(52%) of single policy holders in the individual market spend 5 percent
or more of their income on premiums, and a quarter (26%) spend more
than 10 percent.
Most (66%) adults with private insurance coverage have a
deductible. Of those with employer-sponsored coverage, 15 percent have
deductibles of $500 or more per year and 5 percent have deductibles of
$1,000 or more (Table 2). Three-quarters of adults with coverage in the
individual market pay a deductible: 44 percent have deductibles of $500
or more and 30 percent have deductibles of $1,000 or more.
Nearly everyone with private coverage pays something out-of-pocket
when they obtain health care services. The Commonwealth Fund survey
asks adults how much they had to pay out-of-pocket over the last 12
months, excluding premiums, for their own personal prescription
medicines, dental and vision care, and all other medical services,
including doctors, hospitals, and tests. Two of five (41%) adults with
employer-sponsored coverage pay less than $500 annually in out-of-
pocket costs, a third (36%) pay between $500 and $2,000 per year, 13
percent pay $2,000 or more per year, and 10 percent did not respond or
did not know (Table 3). People with coverage in the individual market
pay more than those with employer-sponsored coverage--23 percent have
annual out-of-pocket costs of $2,000 or more.
Adults with low or moderate incomes spend the greatest share of
their earnings on out-of-pocket health care costs. Of those with
private coverage who had annual incomes of less than $20,000, 29
percent spent 5 percent or more of their income on out-of-pocket costs
and 17 percent spent 10 percent or more (Chart 10). More than one-fifth
(23%) of those in the next income bracket ($20,000 to $34,999) spent 5
percent or more of their income on out-of-pocket costs. Among those
with annual incomes of $60,000 or more, just 2 percent spent that much
on out-of-pocket costs.
The out-of-pocket costs of those who experienced a time uninsured
are very different from those who were continuously insured by an
employer. Nearly a quarter (23%) of those who were uninsured at the
time of the survey had no out-of-pocket costs, while only 6 percent of
those with employer coverage had no out-of-pocket costs (Table 3). This
indicates that many of those without coverage did not access the health
system, or received care that was partly or wholly subsidized. Still,
for many of the uninsured, out-of-pocket payments account for a large
share of their income: a third had annual out-of-pocket costs
comprising 5 percent or more of their income, and 18 percent had costs
of 10 percent or more. Those who were insured at the time of the survey
but had experienced a time uninsured in the past year also spent large
shares of their incomes on out-of-pocket costs. Nearly a quarter (23%)
spent 5 percent or more of their income on out-of-pocket costs.
People who are insured by public insurance programs incur much
lower out-of-pocket costs than do those in private plans. A third (31%)
of those insured continuously by public insurance programs said they
had no out-of-pocket costs. Another third (34%) had costs amounting to
less than $500 per year. Yet, even low health care costs can figure
prominently as a share of a tight household budget. One-fifth (19%) of
those with public insurance coverage and household incomes under 200
percent of poverty spent 5 percent or more of their incomes on out-of-
pocket costs. Those with employer-sponsored coverage in that income
range fared somewhat worse: a quarter (26%) spent that much of their
income on out-of-pocket costs.
increasing shares of people with and without insurance report problems
GETTING NEEDED HEALTH CARE BECAUSE OF COST
The decline in the quality of private health benefits and the
increasing instability of coverage may be making it harder for people
to access health care. The Commonwealth Fund survey asked respondents
whether, in the last 12 months, they had not pursued medical care
because of cost. Respondents were asked if they had not filled a
prescription; had a medical problem but did not go to a doctor or
clinic; skipped a medical test, treatment, or follow-up visit
recommended by a doctor; or did not see a specialist when a doctor or
the respondent thought it was needed. The share of people who reported
any one of these problems increased from 29 percent in 2001 to 37
percent in 2003 (Chart 11). Those who were uninsured or who reported a
gap in coverage were most at risk of encountering these access problems
(Chart 12). Around 60 percent of this group reported that they did not
get the care they needed because of cost. But those with insurance
coverage also reported deteriorating access to care. Nearly three of 10
(29%) of those who were insured all year reported that they did not get
the care they needed because of cost, up from 21 percent in
2001.22
---------------------------------------------------------------------------
\22\ Increase statistically significant at p < .05.
---------------------------------------------------------------------------
Problems accessing the health care system also are related to
income, even among those with health coverage. Nearly two of five (39%)
adults who were insured all year with household incomes less than
$35,000 said that they did not get the care they needed over the last
12 months because of cost. Obtaining prescription drugs appeared to be
a particular problem in this income group (Table 4). But even a quarter
(24%) of people with coverage in higher income brackets reported that
they did not get needed health care because of cost.
MEDICAL BILLS AND LINGERING MEDICAL DEBT ARE UNDERMINING THE FINANCIAL
SECURITY OF AMERICAN FAMILIES
Out-of-pocket costs for health care are negatively affecting the
finances of those who have gaps in coverage as well as those who are
continuously insured. The Commonwealth Fund survey asked people about
their ability to pay their medical bills in the last 12 months,
including whether there were times when they had difficulty or were
unable to pay their bills, whether they had been contacted by a
collection agency concerning outstanding medical bills, or whether they
had to change their lives significantly in order to meet their
obligations. People who reported no medical bill problems in the last
12 months were asked if they were currently paying off medical debt
that they had incurred in the last three years.
The survey found that 41 percent of adults under age 65 either had
medical bill problems in the last 12 months or were paying off accrued
medical debt (Chart 13). The problem was most severe among those who
were uninsured at the time of the survey or had experienced a time
uninsured in the past year (Chart 14). Women were more likely to say
that they were coping with medical bills or debt than men--70 percent
of uninsured women reported medical bill problems or accrued debt
(Chart 15).
But even those adults who were insured continuously over the last
12 months cited problems. More than a third (35%) reported that they
had experienced problems with medical bills or were paying off accrued
debt (Table 4). Moreover, among those with bill problems or past debt,
three of five (62%) said the bills were incurred for themselves or a
family member who had been insured at the time.
Among those who had medical bill problems or outstanding debt, 27
percent reported that they had been unable to pay for basic
necessities, including food, heat, or rent because of medical bills
(Chart 16). Two of five (44%) said that they used all or most of their
savings in order to meet their obligations. One-fifth reported that
they had run up large debts on their credit cards or had taken out
loans against their homes in order to pay their bills. People who were
uninsured for a time and/or had low incomes were the most severely
affected (Table 4). More than half (51%) of those earning less than
$35,000 a year--regardless of insurance status--said that they had used
all or most of their savings to pay their bills. Forty-five percent of
those who were uninsured in that income category had been unable to pay
for basic living necessities.
CONCLUSION
The recent conflict between uninsured patients and hospitals over
payment is a symptom of two underlying trends in the U.S. health care
system: growing instability in health insurance coverage and rapid
growth in health care costs. Health insurance has become both less
available and more expensive to workers and their families, and health
care itself continues to become more expensive. Indeed, health care
cost growth is expected to outpace the growth rate in the economy by a
wide margin for the foreseeable future.23 Against this
backdrop, patients, providers, employers, workers, labor unions, and
federal, state and local governments are struggling to solve serious
problems that stem from a far greater crisis. The practice of hospitals
billing uninsured patients more than negotiated rates with insurers is
troublesome and will only increase access and medical debt problems
experienced by uninsured families.24 And some hospitals'
methods to attempt to recover medical debt from patients--charging high
interest rates, having collection agencies harass them, and placing
liens on their homes--are simply deplorable. Developing policies that
would discourage hospitals from either practice is necessary. But in
the meantime, the pressures that gave rise to this conflict will
continue to grow apace. In the end, small policy changes will need to
be accompanied by broad policy solutions that address the root cause of
the affordability crisis in U.S. health care--policies that would
expand access to affordable health insurance and reduce the rate of
health care cost inflation. Thank you for the opportunity to be here
today.
------
23 B.C. Strunk and P.B. Ginsburg, ``Tracking Health Care
Costs: Trends Turn Downward in 2003,'' Health Affairs Web Exclusive (9
June 2004): W4-354--W4-362.
24 R. Abelson and J.D. Glater, ``Nonprofit Hospitals
Said to Overcharge Uninsured,'' New York Times, June 17, 2004; L.
Lagnado, ``Dunned for Old Bills, Poor Find Some Hospitals Never
Forget,'' The Wall Street Journal, June 8, 2004; C. Pryor et al.,
Unintended Consequences: How Federal Regulations and Hospital Policies
Can Leave Patients in Debt (New York: The Commonwealth Fund, June
2003); C. Pryor and B. Seifert, Unintended Consequences: An Update on
Consumer Medical Debt (New York: The Commonwealth Fund, June 2004).
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Mr. Greenwood. Thank you, Dr. Collins.
The Chair would notify the subcommittee that we will do one
round with 10 minutes each for the members, and recognizes
himself for 10 minutes. And let me begin by making my own
personal stipulations about this issue.
No. 1, I believe that most hospitals treat most of the
uninsured fairly most of the time. I believe that many
hospitals treat many patients very unfairly many times. I would
stipulate that people who have financial obligations that they
can reasonably manage should be expected to meet those
obligations, and I would stipulate that we haven't solved the
issue of universal health coverage yet. We are not going to do
that today. No one in this Congress has figured out how to
develop an approach to that for which he or she can gain
consensus among the stakeholders. That is why we haven't solved
that problem yet.
Now, having said that, I have a question that I would like
to pose to each of the panels, and that is, is there any reason
for any hospital to charge any uninsured or self-pay patient
its charges, ever? Dr. Anderson.
Mr. Anderson. No, I don't think so. I think when you are
talking about the full-charge master file, which is anywhere
from two to four times what everybody else pays, I don't think
there is a reason to charge more than that.
Mr. Greenwood. More than----
Mr. Anderson. More than what the Medicare program, what the
highest amount that a commercial insurer pays. I think that--
and maybe just a little bit more than that.
Mr. Greenwood. Which seems to me to be a no-brainer.
Mr. Anderson. Exactly.
Mr. Greenwood. Seems to be obvious. Someone is already--
unless Donald Trump decides to go bare and walk into a hospital
and say, ``I can just cover the charges,'' fine, that is not
what we are talking about. We are talking about people who
don't have insurance because either they have never had it,
they can't afford it, they have lost it, that is what we are
talking about for the most part--or the young people who don't
think they need it, whatever the issue may be. But the fact of
the matter is, it seems to be quite obvious to me that those
people, they either go into the charity care portion, or the
hospital should give them a bill that reflects something like
what insurance companies pay.
Mr. Anderson. So, somebody who makes $50,000, $75,000, and
has a heart attack in Pennsylvania, is going to have a $30,000
bill, and I think Medicare would have a $10,000 bill, Medicaid
would have a $9,000 bill, Aetna might have an $11,000 bill.
That seems like a reasonable amount that person who makes
$50,000 or $75,000 should pay, not $30,000.
Mr. Greenwood. And to me, that is the whole point of this
investigation and this hearing, and it isn't rocket science.
Ms. Jacoby?
Ms. Jacoby. I have heard no such reason, but I do want to
state the limitation that I come to this from a very different
perspective from studying debt and bankruptcy, and therefore
will defer to my colleagues on that.
Mr. Greenwood. That is okay. You agree with me, so you are
probably right. Mr. Rukavina?
Mr. Rukavina. Well, we have concerns for uninsured, low-
income uninsured patients, and believe that the fees should be
set that they enjoy the benefits that insured patients do,
also.
Mr. Greenwood. Right. So you are agreeing with the
proposition that the uninsured shouldn't be charged
significantly more than the insured.
Mr. Rukavina. Absolutely.
Mr. Greenwood. Okay. Dr. Collins?
Ms. Collins. I definitely agree that the uninsured
shouldn't be charged more than the insured.
Mr. Greenwood. Next series of questions for everyone. How
widespread do you think, if we know--and I think this is a
difficult thing to get a handle on--is the practice by which
hospitals, in fact, do charge uninsured patients their full
charges?
Mr. Anderson. Well, I think they start out trying to get
full charges from everybody.
Mr. Greenwood. Now, let us put a point on this. When you
say ``they,'' you mean you think that is the widespread in most
hospitals?
Mr. Anderson. I think they, first of all, start out trying
to get full charges. Then what they do is they have a series of
discounts that they do if you are below a certain level of
income.
Mr. Greenwood. And this is very important because this is
our concern--and I don't know the answer to this question--and
that is, if an uninsured person is about to be discharged, and
in comes the billing clerk, I don't know whether most hospitals
say, ``Okay, you are uninsured, let us begin by seeing if you
fit into our charity category, or let us begin by taking a look
at what your earnings and assets are,'' or whether they usually
begin by saying, ``Do you have a VISA card?''
Mr. Anderson. I think it depends on the extent of the bill.
If it is $1,000, I think they will go for the VISA card. I
think if it is $30,000, they recognize that most people don't
have $30,000, except for Donald Trump and a few others, and
then they will start the negotiation process. But it is not
over their charges, it is over a discount that they will do for
charity care. But they will start with the charges, which are
very high.
Mr. Greenwood. And you said, I think, is that based on some
statistical evidence?
Mr. Anderson. We have looked at the hospital industry--and,
again, every hospital is different and every system is
different--but only about 1 in 20 people that walk out of the
hospital have negotiated a charge that is lower than the full
rack rate when they leave the hospital.
Mr. Greenwood. Does that include those that need to
negotiate because they weren't asked to pay it all?
Mr. Anderson. That would not include those individuals. So,
it is just the people that actually went through a negotiation
process.
Mr. Greenwood. So you are already excluding the charity
care.
Mr. Anderson. I am already excluding the people----
Mr. Greenwood. You are already excluding Medicaid/Medicare
insurance.
Mr. Anderson. Certainly I am doing that.
Mr. Greenwood. You are saying that the uninsured who
actually end up with some obligation because they are not
charity care, only 5 percent of those folks ever really have an
opportunity to negotiate.
Mr. Anderson. Only do negotiate.
Mr. Greenwood. Only do negotiate. Ms. Jacoby, do you feel
competent to respond to the question of how widespread this
problem is?
Ms. Jacoby. Well, I am under oath, so I should qualify that
the limited data or evidence that I have seen makes me very
concerned about the efforts to get money first and ask for
eligibility information later. The prophecies that I am
familiar with do seem to encourage charity care eligibility
considerations to come way later in the process, or at least
have the possibility of coming way later in the process, and
allowing collection to go forward on presumably the full charge
before considering that eligibility or having those two
prophesies wound up with each other, and of course that is a
very big concern to me.
Other data that I have seen suggests that most patients do
not even think to negotiate their bills with their health care
providers and especially at hospitals.
Mr. Greenwood. Mr. Rukavina?
Mr. Rukavina. Well, I would defer to the hospital panel in
terms of how widespread the issue is.
Mr. Greenwood. You will take their word for it, will you?
Mr. Rukavina. Well, I would hope that----
Mr. Greenwood. They will be under oath as well.
Mr. Rukavina. [continuing] they will be under oath as well.
But we do know, in working with groups across the country, that
this problem is experienced by individuals in communities in
many States across the country, and that hospitals appear to
acknowledge that they are charging higher rates, and oftentimes
stating--prior to Secretary Thompson's clarification,
certainly--stating that they need to do that because of Federal
Medicare rules and regulations.
Mr. Greenwood. Dr. Collins?
Ms. Collins. I can actually only point to anecdotal
evidence, too. I don't know how widespread the problem is.
Mr. Greenwood. Fair enough. Dr. Anderson, I think it was in
your opening statement that you made reference to--you were
describing why the charge masters exist to begin with, and you
talked about the Medicare formula, or formulae, that looked to
outliers, saw the outlier issue, and that it is advantageous
for them to have these higher charges when that calculation is
occurring.
Mr. Anderson. Correct.
Mr. Greenwood. That leads me to think that if that is the
only reason they have them--well, let me rephrase that. That
leads me to think that the outlier issue should be resolved
using a different number.
Mr. Anderson. I think it should, in fact, be, and it is
only----
Mr. Greenwood. And using a different number for the charge.
Let us say you told them to use the average of insurance
compensation rates. You could change the formula in a second
way so that they could still wind up with the same number of
dollars.
Mr. Anderson. You could do it that way, but it is one
reason why the reasons are so high, because the Medicare
program calculates outliers based upon full charges.
Mr. Greenwood. So, it would seem prudent to me to change
that situation so you would give the hospitals at least one
less reason to--so we wouldn't be skewing the system creating
an incentive, having the Federal Government and the Medicare
program create an incentive for hospitals to make up
mythological charges.
Mr. Anderson. I agree.
Mr. Greenwood. Anyone else want to comment on that point?
[No response.]
Final question for each of you. The time can now be sort of
demarked by as that before our investigation and before the
communication with the Hospital Association and the Secretary,
when there was this question about whether they were required
to do that, and then the point at which the hospitals have
taken, I think, some commendable steps to solving this problem.
Have you noticed or had the opportunity to observe any
difference?
Mr. Anderson. I have not.
Mr. Greenwood. Because it doesn't exist, or you just
haven't had the chance?
Mr. Anderson. I just have not had the opportunity. It is
just too recent to have a chance.
Mr. Greenwood. Anyone else want to comment on whether you
think the world has changed in this regard since the hospitals
have initiated their voluntary efforts?
Mr. Rukavina. I would like to comment, Mr. Chairman. I
think that there is an openness on the part of the Association
and many of the hospitals to try and address this problem. Many
of the groups that we work with unfortunately have expressed
some frustration with the lack of actual written policies that
do explain the discount, that do explain the collection
procedures used by the hospitals and, very importantly, a lack
of information on the process for informing patients of these
programs, the steps used to ask questions.
Mr. Greenwood. Do you think Congress should require that
patients be given some kind of information, that the hospital
give them some information upon admission, as to what their
options are for payment?
Mr. Rukavina. We would hope that that information would be
supplied to all self-pay patients, that the hospitals would in
fact work with those patients to ensure that the information is
given to them about existing programs, and assistance also
provided to them to enroll in those programs. Again, we think
it would be financially beneficial to the institutions, and
helpful to these patients.
Mr. Greenwood. Dr. Collins, anything to add on this
subject?
Ms. Collins. No. I do think that transparency would be very
helpful in terms of people having access to information.
Mr. Greenwood. Thank you. My time has expired. The
gentlelady from Colorado.
Ms. DeGette. Thank you, Mr. Chairman. First of all, let me
say that I agree with the chairman that charging the uninsured
exorbitant rates compared to, say, the insurance companies, I
disagree with that, too. But I want to explore with you how
much reducing these fees would really help solve the problem.
I believe, Dr. Anderson, you testified there are a range of
reasons why people are uninsured, but the primary reason people
are uninsured or underinsured is because they can't afford to
pay for insurance, correct?
Mr. Anderson. Correct.
Ms. DeGette. And most of those people tend to be lower-
income individuals, that is all the anecdotal evidence we have
read and testimony we have seen, is that correct?
Mr. Anderson. That is correct.
Ms. DeGette. Does anybody disagree with that?
[No response.]
So, here is my question. Let us say--and I don't believe
that the chairman or anyone in the Majority would pass
legislation like this, but let us say we passed a law that
required hospitals to charge only a certain amount above
Medicare or above their highest insurance rate, so we capped
it. Would that really solve the problem of the uninsured being
able to pay their hospital bill?
Mr. Anderson. I don't believe it would solve the problem,
but it would mean that the collections would go down because
instead of being responsible for a $30,000 bill, you would be
responsible for a $10,000 bill.
Ms. DeGette. Okay, I understand that, but for most of these
people--and I agree it should go down, but for most of these
individuals, some I read about in the excellent series in the
Wall Street Journal and other places, they can't even pay a
$1,000 bill, correct? So that is not going to help them, is it?
Mr. Anderson. No, but if you are getting a 50 percent
discount on $30,000, it is still $15,000. If you are getting a
50 percent discount on $10,000, now it is $5,000. We are
starting to get to a range where at least some of the more
affluent uninsured individuals can, in fact, pay.
Ms. DeGette. Do you have any statistics about how many more
would be able to pay in that circumstance?
Mr. Anderson. I do not, but I think somebody making $50,000
or $75,000 might be able to pay a $5,000----
Ms. DeGette. What percentage of the uninsured are making
$50,000, because you had just testified that most of the
uninsured are lower income individuals. So, how many of the
uninsured are the people that are making $50-75,000?
Mr. Anderson. About 10 percent.
Ms. DeGette. Ten percent. So the rest of them are making a
lot less, aren't they? Mr. Rukavina, what do you think about
that? I mean, again, I agree people shouldn't be charged these
exorbitant rates, but I am not sure that most uninsured could
even pay reduced rates.
Mr. Rukavina. I think that the discounts--we believe they
are necessary, though not sufficient. It is a fairness issue in
terms of the discounts being offered.
Ms. DeGette. Exactly right.
Mr. Rukavina. Many of the uninsured that we have
interviewed--SEIU is here today, and they have interviewed a
number of uninsured individuals, a lot of the groups we work
with across the country--the uninsured are actually interested
in paying something for their care. And it isn't until they
actually receive the bills, that are oftentimes quite
eyepopping, that they kind of throw their arms up in despair.
Ms. DeGette. And that is where we get back to the other
component, that the hospitals should really work with folks
from the front end to establish payment plans and to explain,
so that some poor person is not sitting there recovering in
their home and they get a $30,000 bill.
Mr. Rukavina. We believe that would be the fiscally prudent
approach for both the hospital and the uninsured patient.
Ms. DeGette. Now, Edith just told me that half of the
uninsured are below 200 percent of the poverty rate, does
anybody disagree with that?
[No response.]
Okay. And my second question is that a lot of people think
that the solution to this problem are the health savings
accounts, that if we let people have a health savings accounts
which would have high deductibles, that might solve the
problem. What do you think about that, Dr. Anderson?
Mr. Anderson. I am not a fan of health savings accounts
because I don't think that the American public--two things: One
can frequently negotiate with doctors, with hospitals,
whatever, one-on-one. You have got Aetna and everybody else
negotiating hundreds on one, thousands on one, why should an
individual be able to negotiate?
The second thing is, I think patients don't have the
clinical information to make decisions as well, quite often.
And so they are not the best informed, especially the Medicaid
and Medicare recipient are not the best informed individuals to
make a lot of their decisions.
Ms. DeGette. Anyone else have an opinion on the health
savings accounts? Mr. Rukavina?
Mr. Rukavina. Well, we think that more exposure will not
help the problem, that if people are more financially exposed--
--
Ms. DeGette. You mean if they have to pay, say, $1,000?
Mr. Rukavina. $1,000, $2500, that, in fact, it will be
harmful to the individual, and also to the hospital.
Ms. DeGette. It will be much harder to collect and it makes
the problem a lot bigger because you are not just trying to
collect from a small percentage of uninsured.
Mr. Rukavina. Again, I was asked the question earlier about
the hospitals and changes since earlier this year when some of
this has come to the fore. We hope to work with some of the
hospitals to better understand this problem as it affects
insured patients, and actually are looking at the increase in
these high deductible policies and whether they do contribute
to the medical debt problem, and the uncompensated care
problems of the hospitals in the country.
Ms. DeGette. Dr. Collins, what do you think about that?
Ms. Collins. I just wanted to cite some research by the
Center for Study in Health System Change that found if all
Americans had a $1,000 deductible health plan, a third would
spend more than 10 percent of their income on their health care
in the event that they were hospitalized. So, you are still
looking at charges that could exceed large shares of people's
income, particularly at the lower level income ladder.
Ms. DeGette. Even for some of those people, it might send
them into bankruptcy and cause other severe financial problems
just trying to pay their deductible, correct?
Ms. Collins. Yes.
Ms. DeGette. I didn't get to you with my last question. I
am wondering if you think that the solutions which we all can
agree are important short-term bandaid type fixes--charity care
and discounting for the uninsured--are going to solve the
financial problems with health care of the uninsured in
America.
Ms. Collins. I think that they are short-term solves to
this problem. They certainly will not solve the problem in the
long-run, and there is no question that with the growing cost
in health care, that employers are going to continue to have to
shift more of their burden to their workers, raising the
concerns that workers will become more underinsured or drop
their coverage all together. So, now I think that there really
needs to be a broader policy solution to increase coverage of
the uninsured.
Ms. DeGette. Now, in your study, in fact, that you cited
today, it seemed to me like everything is getting worse. There
is more uninsured. Insurance is more expensive, it covers less.
Public health care systems are being cut back, and people can't
pay their medical bills. Do you see anything reversing those
trends in the next 5 years?
Ms. Collins. Improving economy will certainly help, but
research by Paul Ginsberg just recently on health care costs
predicts that health care costs will continue to outpace the
growth rate in the economy for the foreseeable future.
Ms. DeGette. One of the things I noticed also in your study
was that the largest companies, the ones that employ 500 people
or more, the ones who should be providing excellent insurance,
now have 32 percent of their workers uninsured. This compares
to the medium size companies which actually had a small
decrease in the number of uninsured. What is happening with
those larger employers, are they following sort of the Wal-Mart
method of having temporary or part-time employees, or what is
going on?
Ms. Collins. What really reflects broader changes in the
economy away from manufacturing and toward the service industry
is the larger firms are now firms that are like Wal-Mart that
tend not to offer insurance coverage to all of their employees,
or not any of their employees, so looking more like small
employers. Small employers certainly--workers in small firms
currently make up the largest share of the uninsured, but it
certainly is growing in the large firm sector.
Ms. DeGette. Ms. Jacoby, getting to you with the questions
I was asking, do you think that instituting this charity care
and discounting are really going to help the uninsured that you
looked at in your research?
Ms. Jacoby. I think that--do you mean in terms of discounts
to a lower amount----
Ms. DeGette. Because of the population we are talking about
here, is it really practically going to make them not have to
take bankruptcy if they have the lower bills, and can you
quantify how many people?
Ms. Jacoby. I am concerned that even smaller bills can be a
big problem for the families that we are talking about. I think
if we look at the bankruptcy data, credit report data, and even
the published case law of hospital lawsuits against patients,
we are finding a real range of bills.
Ms. DeGette. What are some of the average medical bills in
these bankruptcies?
Ms. Jacoby. Well, in the average medical bills in
bankruptcies, some of the latest data would suggest that they
are well over $10,000, on average, since illness onset, at the
time of filing. We need to be careful because that may not
include amounts that are included on credit cards. I know that
The Access Project has done other work on this finding that
nearly half of all bankruptcy filers have medical debt in their
bankruptcy files, and that is in addition to people who may
have mortgages on their homes already from medical debt, who
may have used credit cards and have higher interest payments on
those as well. So, I do think there is a range of bill sizes,
but the average is actually fairly high for families with the
incomes that we are talking about.
Ms. DeGette. Thank you.
Mr. Greenwood. The time of the gentlelady has expired. The
gentleman from Oregon, Mr. Walden, is recognized for 10
minutes.
Mr. Walden. Thank you very much, Mr. Chairman. I want to go
to a comment you made, Dr. Collins, regarding insurance and the
$1,000 deductible portion because I will tell you what I hear,
having been a small employer for 18 years now, and we provide
insurance for our employees, health insurance. As I talk to
small employers in my district and around, it is the price of
the premium that is driving them away from providing insurance.
The annual increase is sometimes 30 or 40 percent. And they are
having to make some really difficult and unwanted choices. And
with the advent of the health savings accounts, I am finding a
renewed interest and a new availability of policies where you
could actually insure a family for catastrophic care at, say,
$300 a month. Now, albeit the deductible can be high, but the
employer can contribute to that, which then goes into the HSA.
And they are saying, ``Gee, maybe I can continue to provide
health insurance for a while longer.'' Some are adding it for
the first time.
And I am wondering in terms of your studies and others on
the panel, do you look at that and what that means because, if
I am a moderate to low-income person and my small employer--
which is where most of us work and get our insurance--if they
are able to continue to insure, they are preventing a
catastrophic loss--because when you have a heart attack and you
are on a gurney, you are not negotiating price at the door of
the hospital, and it may be the only hospital within 20 miles.
So, do you look at those data as well? Would the loss be higher
if you are uninsured than if you have a catastrophic stop-loss?
Ms. Collins. Well, certainly, if you had a catastrophic
stop-loss, your losses would be less if you had a catastrophic
event. The problem is that you are going to be so underinsured
for first-dollar event, so the preventive care. And so people
are going to have similar access to care that the uninsured
have simply because those dollars, preventive care dollars, are
not available to them.
Mr. Walden. Right. But it seems to me that if I have got,
let us say, a $1,000 deductible HSA policy, health savings
account policy, I am out $1,000 up front, certainly. I may be
out some form of co-payment--and I don't know what that would
be, 80-20, 90, whatever, to a stop-loss period--but once I am
out that, then I am covered, right? So my heart attack that may
be $11,000, I am paying $1,000. Without any insurance, I am
getting hit for not $11,000, but $30,000, according to Dr.
Anderson, which is outrageous.
So, I am looking at this--and I have worked on this issues
as an employer, on a small community hospital board, in the
State Legislature, I chaired the committees after my first
session that implemented the Oregon Health Plan and expanded
the high-risk pool, and did all these things. I haven't found a
silver bullet yet that solves this problem, but what I find is
there are a bunch of little things you can do that fit
different pieces, and we try and get more people covered.
And so I look at HSAs and say, maybe this is one piece that
works for a certain segment that can insure the uninsured that
otherwise would be walking away from the table today, and are.
Ms. Collins. Yes. The concern, of course, is whether or not
people have a comprehensive benefit package that leaves them
covered when they need it. It gives them good access to the
health care system and not underinsured. And whether or not
there are other options for small employers buying into large
group pools, for example, that might provide more affordable
care for their employees.
Mr. Walden. Right.
Mr. Anderson. When people have first-dollar coverage, the
things that they don't do are preventive services, so the women
do not get mammograms, they do not get pap smears because they
can defer those things until the next year and the year after
that. Those are the things, when we have this lack of first-
dollar coverage, are the things that we go without. I mean,
that is just----
Mr. Walden. Right, but if your alternative is you have no
coverage, how are you any better?
Mr. Anderson. You are clearly better off having coverage
than no coverage, but the whole idea behind managed care, the
whole idea behind----
Mr. Walden. Prevention.
Mr. Anderson. [continuing] is prevention.
Mr. Walden. Sure, and that was the whole idea behind the
Oregon Health Plan, which for the Medicaid population said ``we
can immunize for preventive work for thousands where we can do
one high-risk procedure for an 80, 90-year-old that wanted a
liver transplant, is an alcoholic, diabetic, whatever.
Mr. Anderson. And that is what the health savings accounts
will still pay for.
Mr. Walden. I understand that, but there is a certain
amount of personal responsibility when it comes to health care,
and people do make decisions about whether or not they have
satellite TV and a new car. I mean, there are other financial
decisions. I am sure you see it in your bankruptcy work, don't
you? Half of it is medical, certainly, and those are those out-
of-the-blue charges like you are saying, $30,000 that shouldn't
be $30,000, but there are other--and I guess that is what I
wrestled with on the hospital board because we looked at the
list of people who owed us money, and as community leaders we
knew some of them. And you would say, ``Wait a minute, I just
saw them buying a new whatever, and they are driving in town,
or they are in a business or something,'' and they should pay
and they should be held accountable.
Mr. Anderson. But if they are being asked to pay $30,000
for something you know everybody else is buying for $10,000----
Mr. Walden. I don't disagree with that. But the issue, too,
is, don't those who are insured--don't the insurance companies
bring some efficiencies to the hospital? I mean, just like--
well, in theory, Medicare does, but I think it just brings more
regulation and cost, frankly--but, in theory, there is an
advantage to having a third-party payer handle that, whether
you are a doctor or a hospital. So, I can see a reason to be
able to negotiate--have to have some room to negotiate some
reductions for that opportunity, right?
Mr. Anderson. Sure. And the savings occur mostly in the
billing and administrative side, they don't--once you get on
the surgical table, it doesn't matter who is insuring you.
Mr. Walden. And it seems to me that part of the problem
with this market is--I look again at my district, I have got 20
counties, three of whom don't have doctors or hospitals, and
you drive 100 or 150 miles to the first one, literally. And so
if you walk in with chest pains, you are not going to say,
``Well, I am going to go to the Dow, it is 19 miles away, and I
can get it for 100 bucks less.'' So, it isn't really a market
process where you can negotiate that kind of price.
Mr. Anderson. Certainly if you just had a heart attack.
Mr. Walden. Right. Now, if you are doing cosmetic surgery
or something--our colleague, Greg Ganske, used to talk about
people got three prices before they came and made their
decision. You look at lasik eye surgery and things, it is
advertised based on price, and I am not sure I want the
cheapest one, but--but it is a voluntary choice in that case.
And what you are looking at is emergency care and others.
Mr. Anderson. Correct.
Mr. Walden. But does it make sense to, in effect, get into
a price setting, say, 25 percent above Medicare. Does that work
everywhere, and is that--what are they collecting now off the
charge master?
Mr. Anderson. Most of them are collecting very little off
the charge master.
Mr. Walden. So it raises the issue, why do we have a charge
master?
Mr. Anderson. Exactly. Well, we had a charge master from
1900 on because people originally paid charges, and in 1960,
1965, and 1990, the charge master meant something. After about
1990, the charge master has no market forces to determine it at
all, it is just raised two, three times faster than health care
costs have risen.
Mr. Walden. How much of that is because of cost shift from
lower, like Medicare and Medicaid, that don't always pay the
full freight, and how much of that is just that those final
folks left have no negotiator?
Mr. Anderson. I would say that it is mostly that those
final folks have no negotiator.
Mr. Walden. And it seems to me, too, on debt--and maybe,
Ms. Jacoby, you can address this--as a small business owner,
when I have a client that is behind 30, 60, 90 days, I am much
better off to sit down and cut a deal because I am never going
to see anything--even if I go through bankruptcy, the
opportunity to collect is pretty slim.
Ms. Jacoby. I think that is what has struck some of us on
the debtor/creditor side about the situation about attempts to
collect through the formal process, that it is a little unusual
as compared to what institutional lenders are doing and how
they are handling the situation.
Mr. Walden. It is not very effective. Okay. Then where in
the process do you make this work? I am in the radio business,
so I can negotiate a sales price when we go in the door and out
the other side and all that. But if I am a patient coming into
the hospital in need of emergency care, I don't want to wait
around, I want somebody to look at me. Where do you make this
thing work? Where should these hospitals make it fit?
Ms. Jacoby. Well, this is a big concern, as I tell my
contract students, this is very different from even the other
standard form contracts that patients and consumers enter into
every day, that there really is no opportunity for negotiation
when they need the care, and often their family members are
signing agreements that have terms in them that they barely are
reading because they have very important things on their mind
and would sign them in any event. It is a very difficult
situation to find the right time when people aren't involved in
regular care. If they are involved in more regular and
preventive care, they might have a better----
Mr. Walden. That is a different issue. One final point,
because the census data I have here somewhere indicated that I
think the figure was 43.3 percent of those who have no
insurance for an entire year are not citizens of the United
States. That means--and we saw it in our hospital, we have a
very high Hispanic population. A lot of them are not legal
citizens of the United States. How do we cope with that because
they are not going to want to give data, and you know why. I
mean, they don't want a free ride back to their country where
they are citizens.
Ms. Jacoby. Even those who are citizens may not have the
data that are necessary in order to process their charitable
care eligibility in terms of pay stubs and the like, if that is
what you are referring to.
Mr. Walden. Well, but when you are talking about signing up
for charity care in this environment, some of them won't. Well,
that means they are probably not paying taxes because you could
always turn in a copy of your tax return, I would think. So,
where do you help the hospitals here who are saying, ``Okay, I
do have a charity program, but you have got to work with me.
You have got to give me some data here``. How do we address--
what do you recommend? You are the certified smart lawyer here,
I am not.
Ms. Jacoby. Well, I will wear that hat then today. I don't
see a magic bullet to the situation, and I hope I was clear
that I don't see the hospitals as being fully responsible for
the situation. I think at every level of our legal system, from
the county level to the State to the level to the Federal
level, we do have a system where the charges are not known to
the patient often until afterwards, and that we treat patients
as debtors through our whole legal system and our whole health
care system. And I think just as that has developed over a very
long period of time, I don't think it can be solved overnight.
Mr. Walden. Okay. I have overrun my time here. Your
comments have been very helpful, thank you very much.
Mr. Greenwood. The Chair thanks the gentleman and
recognizes the gentlelady from Chicago, Ms. Schakowsky, for 10
minutes.
Ms. Schakowsky. Thank you, Mr. Chairman, and thank you,
panel. This has been a very interesting conversation that we
have been having. As someone who supports some kind of
universal health care plan, I would like to see a national
health care plan. One consensus that seems to be here is that
the market doesn't work. People are talking about whether the
uninsured should get the same rate as people who are insured,
so we start talking about price setting and that kind of thing.
The market in health care and in hospital care seems to have
absolutely failed us.
I want to talk a little bit about people with insurance
because I am looking at something from one of the hospitals,
Quality Health Care For Those in Need, and the guidelines that
they have. It begins with the charity care program, and
basically it deals with people who are uninsured.
So I want to ask the witnesses to talk a little bit more
about people who have insurance with very high deductibles,
about what is happening to them in terms of their financial
fragility.
Ms. Jacoby. Well, many medical bankruptcy filers have some
insurers in their families at least at some point. One study
that I was involved with originally found that 80 percent of
bankruptcy filers with medical problems had some insurance at
the time of filing.
Ms. Schakowsky. I want to underscore that because I think
it is really important. When we think of these problems with
medical bills, very often we talk about people who find
themselves uninsured. But you are saying that bankruptcies due
to medical bills involve people, 80 percent of whom are at
least partially insured. That is a serious problem.
Ms. Jacoby. I agree. Follow-up research is trying to dig a
little bit deeper and see what those numbers mean, and I think
what we are finding is that many of those people have had gaps
in coverage in the past, so they may have incurred some of
these debts while they are insured at least for some family
members. It also could go the other way, they are insured at
the onset of their illness and later become uninsured, and then
are facing some of these problems. So, I think it is more
complex than just the label of insured or not insured, it is
the quality of their coverage, but also the continuity of their
coverage that is showing up in bankruptcy.
Ms. Schakowsky. I wonder, Dr. Collins, if you could comment
on that as well?
Ms. Collins. Yes. The survey conducted The Commonwealth
Fund asked people about their medical debt, and 35 percent of
people who were continuously insured said that they had had a
medical bill problem or had accrued medical debt. Forty-five
percent of those who were continuously insured, who earned less
than $35,000 a year, said that they had had a medical bill
problem or accrued medical debt. So, we are clearly seeing that
people who are insured continuously are having problems paying
their bills. In fact, when we asked people whether when the
bill was incurred, if they had a medical bill problem or debt
problem, if they were insured at the time of the bill problem
or the time of the event, 60 percent said that they had been
insured at the time. So, we are clearly seeing this is a
problem of underinsurance as well as uninsurance.
Ms. Schakowsky. I don't know if anyone else----
Mr. Rukavina. I would like to comment on this as well. We
worked with a nonprofit consumer credit counseling service and
found similar figures. About 40 percent of the people seeking
the services of this consumer credit counseling service were
there because of a medical incident, and nearly I think it was
70 percent of those people that were there because of a medical
incident were insured at the time of the medical incident.
Mr. Anderson. We also know the characteristics of these
individuals, generally. A few of them have a catastrophic thing
that was unexpected, but most of these people that have these
debts are people with chronic conditions, with multiple chronic
conditions. They are somebody who is going to the doctor
repeatedly. They are going to the hospital repeatedly, year in
and year out, and they are the ones that find--and the health
system and the health insurance system doesn't cover them
adequately. If you have got an acute care problem, the
insurance takes care of it, generally. If you have a chronic
problem, the health care system doesn't cover you as well, and
you are the ones having most of the expenditures.
Ms. Schakowsky. The other thing about that is that it may
be an accumulated debt over a period of time where the
individual charges may seem manageable but, in fact, over time,
are not.
Mr. Anderson. If you have diabetes and congestive heart
failure and three other things wrong with you, you are seeing a
lot of different doctors and you are incurring a lot of bills,
and you are doing that not just 1 year, but year in and year
out. And so those medical bills pile up. And a lot of times,
with co-insurance and other things, you are paying 20 percent
of the doctor bill, a portion of the hospital bill, and with 30
doctor visits and 50 prescriptions and all sorts of things that
you fill in a year, that is a lot of money.
Ms. Schakowsky. I think it is important for us to paint a
picture of the people who are facing this problem as most often
having jobs, working, and in many, many cases, also have
insurance. In fact, it sounds like in some cases having a job
can be--I am looking at a document, ``Collection Practices
Prohibit Legal Action Against Unemployed Individuals.'' Well,
if you are employed and still can't pay, then that doesn't
apply to you. It prohibits liens on a patient's residence if it
is the sole real asset. Well, what if you don't have a house
and you are a renter? So, you are employed, you have insurance,
and you are a renter, then your wages could still be garnished
and you can't pay your rent. It seems to me that there are just
so many, many holes in here.
I am concerned about the women who traveled here from
Chicago to talk about their situation. We hear about charity
care being offered. The hospital did work to help her apply
under the Victims Assistance Fund, but she was denied, and then
she was sued.
If charity care doesn't work, do they then just turn these
over to collection agencies? When do they start suing?
Ms. Jacoby. I guess we should let the next panel answer
that in some measure, but my belief is that turning medical
accounts over to collection is quite a routine matter, and it
is happening earlier and earlier, perhaps earlier than it would
happen with other types of debts that consumers and patients
face.
Ms. Schakowsky. Then do the hospitals claim to no longer
have--I guess we could ask the next panel.
Ms. Jacoby. Again, I stand to be corrected, but my
understanding is that they are mostly not selling the debt
outright, but assigning it to a primary and then perhaps a
secondary collector, and therefore are taking the
responsibility for overseeing that process.
Ms. Schakowsky. Is the rate of lawsuits increasing?
Ms. Jacoby. I don't have a way to measure that.
Ms. Schakowsky. Does anybody know if there are more
lawsuits? Both of these instances ended up in a lawsuit. Even
in the case of Ms. Perez working out a payment plan and with
payments being made on time, she was sued. So my concern is
that, after all is said and done, if you can't even work out a
payment plan without getting sued, this sounds like an
intractable problem. I don't know if anyone wants to comment on
where we need to go with this.
Ms. Jacoby. Just looking at the trends in the health care
system right now, rising costs, rising numbers of uninsured,
there is no question that this problem will continue to grow.
We probably will continue to see lawsuits and growing numbers
of lawsuits, just because of the drivers in the system right
now.
Ms. Schakowsky. My concern is the problem that the
uninsured pay this premium price. It is also true, by the way,
in the cost of prescription drugs where those who have a
prescription drug plan that has been negotiated by their HMO or
their insurance company pay less, and the people who can't
afford it end up paying the premium price. Mr. Waxman's studies
have shown that. So, that is one problem that the hospitals are
charging premium prices. Nonetheless, hospitals need to recover
some costs as well. We are not asking them to do complete
charity care.
At some point, Mr. Chairman, it just seems to me that we
need to get to the core issue. You said we are not going to
solve the issue of universal health care today, but I just feel
that we keep marching around the edges here. At some point we
are going to have to jump right into the middle and deal with
the core problem. I thank the witnesses.
Mr. Greenwood. The Chair thanks the gentlelady. The
gentleman from New Hampshire, Mr. Bass, is recognized for 10
minutes.
Mr. Bass. I am going to pass, Mr. Chairman.
Mr. Greenwood. The gentleman from Michigan, Mr. Ferguson.
Mr. Rogers. Rogers.
Mr. Greenwood. Rogers--I am sorry.
Mr. Rogers. Wow. Has it been that long since I have been in
committee, Mr. Chairman?
I do appreciate it. Thank you, Mr. Chairman, and I
appreciate the panelists today, and I am adamantly opposed to
national health care. We see it just north of our border. They
ration, they have very few choices on prescriptions, and many
places in the system they stop people from getting care
determined by age and illness and other things that I just
think is un-American.
I was curious, Dr. Anderson, something struck me that you
said about the lack of first-dollar coverage would stop people
from getting preventative care. Have you done any study on any
of the new folks who have embraced HSAs--and I know it is a
relatively new phenomenon, people are just getting into the
system and getting started--but do you have any studies on the
folks who have actually signed up within the last few months
and are participating in these programs?
Mr. Anderson. I do not, but if you look at programs like
the Rand Health Insurance experiment that ran in the 1970's and
early 1980's. they in fact did have something very similar to
the HSA type of thing. The services that people chose not to
get were the preventive services. So we have a large national
experiment that was done in the 1970's and 1980's, and maybe
people are different now, but I don't think so.
Mr. Rogers. You don't think people may be more price
sensitive today than in the 1970's? Let me tell you why I ask
you this. There was a group--and I am just trying to figure out
if you are right or they are right--but there was a group of
about 18 to 20 small businesses, under 500, who had gone to
HSAs, and we assembled them in a room and said, ``Tell us the
good and the bad and the ugly about these things, are they
working or are they not?''
And they had some interesting percentages on the people
that were involved in those programs--and they could have been
an anomaly, I suppose--but 45 percent of the membership in
these agencies were brand new. They had never had health care
before, which I thought was pretty staggering. And what they
found is that they were 30 percent more likely to go into
preventative care than the folks in the old system that had
first-dollar coverage. And they were certainly more price
sensitive, and most of them--and I forget the percentage--had
engaged in negotiations for things like annual physicals where
they went into the doctor and said, ``I don't care what you are
charging, this is what I am going to pay. Do you still want me
as a patient?''
And to some degree I thought that was very encouraging
news. That may have reverse in the trend, and if there is
finally--and one of the things I think is broken about our
health care system is the consumer is really never in charge. I
am told what to do by everybody else--third-party
administrators, your employers, the hospital gets their say. At
the end of the day, I end up with a collection agency, and I am
not really sure what in the heck happened.
My theory is that if we had this sense of price
sensitivity, maybe the $9 aspirin would have gone away a long
time ago. Somebody would have said, ``Hey, wait a minute, I am
not paying nine bucks for this.'' I am encouraged by it, and I
was just curious.
Mr. Anderson. Well, I think what you have got to look at is
the 43 million uninsured who do have an incentive to negotiate
with their hospital, negotiate with their physician, negotiate
with anybody they can negotiate with over price, and very few
of them are able to do it, and certainly cannot negotiate rates
that are comparable to what Aetna can do, or what anybody else
can do when they walk into a hospital.
Mr. Rogers. Of course, under an HSA, you have leverage. If
I have absolutely no insurance and nowhere to go, I have no
leverage. At least I know I have got some money to pay, No. 1,
and I have catastrophic coverage, No. 2, so I have got some
leverage. You and I can work together because I have got some
money to give you.
Mr. Anderson. Right. And the other thing is that many of
the HSAs--not all of them, but many of the HSAs, in fact,
negotiate for you, so that if the HSA is run by Aetna or is run
by somebody else, they are actually negotiating the rates on
your behalf, and you are essentially piggybacking on those
rates.
Now, maybe you can even negotiate a better rate than Aetna
is going to do for you, but I doubt it.
Mr. Rogers. Interesting. I am actually fairly hopeful for
it, so I hope you will get involved in some of those studies in
the future with actual participants, and maybe we can see where
those numbers--I was encouraged by that first batch of folks
coming in.
This is a very difficult issue, in some cases very
difficult to understand about what care is compensated and
isn't, and I have a feeling at the end of the day we are going
to find that there are several people that at fault for the
problems that we found in the system, and one of those problem-
makers is policymakers. The way we develop policy for
uncompensated care creates some kind of really anomalies in the
system that makes very compassionate, kindhearted people do
some kind of things we all look at and scratch our head and
say, ``Why would we do that?''
So, I hope that through this that we can fix those kind of
things. And I guess, Mr. Rukavina, I would ask, there are five
systems joining us today, and they said--at least have told
us--that they have taken steps to enhance and revisit their
billing system. Have you found that to be true and, if so, what
has that done for the patients?
Mr. Rukavina. Well, we are talking to several of those
systems. They are, in fact, taking steps to address some of the
problems that have been highlighted, and I think that frankly
it is too early to tell.
I received a call from an attorney recently that had a
patient in one of these systems that will be here today. We
have addressed it with the system directly. A patient was
identified as possibly having another source of payment, an
uninsured patient possibly having a source of payment. There
were some problems, probably problems resulting from actions
the hospital took and actions the patient took, but the end
result was that the bill was sent to collection after 30 days,
and the first call that this patient received after being
released from the hospital was from a collection agent that she
felt was fairly intimidating. And, again, we are hopeful. I
think it is too early to tell. And I think that it has been
raised earlier by others asking the question, the details of
how these programs are implemented will be of utmost
importance. How people are informed of the program, the kind of
information that is actually shared with patients, when it is
shared, and the whole series of questions that get asked
regarding patients and their ability to pay will be very
crucial, and we hope that these systems and others and the
American Hospital Association and State associations will work
hand-in-hand with community and consumer groups that we believe
are resources that could help the hospitals and patients solve
some of these problems.
Mr. Anderson. One of the problems is the charge master
file. A charge master file has about 10,000 different items on
it. You walk into the hospital, even in a nonemergency
situation, you don't know which of these 10,000 items you
should negotiate on the basis of. So, you can negotiate
afterwards and try to lower your rates on a certain set of
things, but you don't know a priori when you walk in what
services you are going to need. Are you going to need an x-ray?
How many x-rays are you going to need? What type? Are you going
to need an MRI? What type are you going to need? Ten thousand
items, you can't negotiate on that. You have got to have
something for somebody that you can, in fact, negotiate on, and
that is probably what is your day rate, what is your DRG rate,
what is something simple that somebody can negotiate on, not
10,000 items, of which probably 9,950 of them you will never
use.
Mr. Rogers. Interesting. I know this problem is complex. I
appreciate all you being involved in it. I hope we don't give
up on probably one of the better health systems in the world--
and it is not perfect. It has got bumps and bruises and warts
and it is ugly, but if we want to remove compassion and care
from a system, nationalize it. Ask the Canadians, ask the
British, they are all having problems with the weight of these
large, unmanageable, uncaring--intentions are great, the
outcomes are awful, and I just don't think we ought to really
hinder the innovation of our health care system that does
miraculously well for a pretty unhealthy population, quite
frankly, and that is America as a whole. Thank you, Mr.
Chairman, I yield back.
Mr. Greenwood. The Chair thanks the gentleman. The
gentleman from Maine is recognized.
Mr. Allen. Thank you, Mr. Chairman. Dr. Anderson, I would
like to pursue some of this. I have a different view than my
friend from Michigan, about how the Canadian health care system
works. I think every country has its own unique system, and we
are not going to adopt any other country's system, but whenever
elections are held in Canada, it is pretty clear how the
Canadians feel about their health care system. They know it has
problems, but substantial majorities are very positive about
it. In fact, all the polling shows the Canadians like their
health care system better than Americans like ours.
I was intrigued by one of your comments, and you were just
pursuing it with Mr. Rogers. This notion of bargaining for your
health care makes some sense to me when you are part of a very
large group, which is essentially what happens with our
insurance companies. They negotiate rates on behalf of their
members, their beneficiaries, and then, without even knowing
it, the beneficiaries get the benefit of that negotiated rate
for a whole range of services, but they can do it simply
because they are pooled in a large group. But I was struck by
your testimony, your written testimony, about the constraints
on the bargaining power of the uninsured.
You say perhaps the most important constraint on their
bargaining power, however, is that they do not know what
services they will ultimately need. They do not know how long
they will remain in the hospital, what x-rays or lab tests they
will need, and therefore they cannot know in advance what
services they will require and which of the 10,000 prices they
should negotiate. And if they could negotiate those prices, you
would still have an individual trying to negotiate with a
hospital, which doesn't work very well, except it works, as the
testimony has shown, after the services have been rendered in
terms of how much you are going to pay on a bill that has been
rendered.
And so that point seems to me to be particularly compelling
in terms of our expectations about what we really expect here.
I don't know if you want to elaborate on that anymore, you
already commented to the gentleman from Michigan, but do you
have anything further you would like to say on that?
Mr. Anderson. I think to allow the marketplace to work,
people have to have good information. And one of the key things
you have got to know is what services are you going to need.
Mr. Allen. You touched on how to move ahead, and I was
struck by your DRG+25 percent. Probably doesn't stand much of a
chance in Congress because we prefer complexity to simplicity
here, at least that is the trend. Give us as much complexity as
we possibly can have, and I offer the Medicare law as the prime
example. But it does seem to me that it highlights the tradeoff
that we have here. If you are going to have stability and
predictability and equity, and you come to this particular
problem--and I take the testimony of the panel as a whole to be
saying essentially we are really going to operate in the
margins here. We are not going to fix the problem of the
uninsured, we are trying to deal with what started out being
the subject of this hearing, which is the fact that some people
are charged way more--way more--than others, and that looks
unfair. That looks abusive. But if you have--I guess this is
probably for the other panelists.
You could say Medicare+25 percent, you could say
Medicare+35 percent, you could say Medicare+10 percent. You
could say almost anything. But if you did that system, it would
be a simple system. You wouldn't be trying to figure out what
insurers for a particular hospital get reimbursed or are
charged for their beneficiaries.
So, if we remove--for all the other panelists--if you
remove the element of how much above Medicare the reimbursement
is--and Medicare is often under-reimbursed--how would you react
to, say, DRG-10 percent as opposed to DRG+--do you catch my
drift--DRG+10 instead of DRG+25 percent? Is the concept of
having a simpler system one that makes sense to the rest of
you? I know it does to you, Dr. Anderson.
Ms. Jacoby. Well, I think simplicity would assist patients,
and that could be done in a lot of different ways. But I think
that one problem that they are experiencing is trying to figure
out what they owe, if it is owed right away, if it is owed over
installments, what their legal situation is. So, I am certainly
in favor of simplicity. I don't have an opinion on any
particular way to make the system more simplified, but from the
patient's perspective, they already aren't--if they are not
negotiating the rates in their care very much, then that is one
way to at least let them know how they can handle their
financial affairs.
Mr. Rukavina. I think that clearly a more simpler billing
system would be helpful. Transparency would be helpful all
around. Hospitals, as Secretary Thompson pointed out, are
reimbursed by the Federal Government $22 billion per year to
pay for the care of poor and uninsured patients. I think that
it is oftentimes confusing to figure out what the gap is in
terms of the services provided, the cost of those services, and
what providers, hospital and other providers, are actually
reimbursed for the cost of that care, reimbursed from the self-
pay patient and from the various subsidies that come from
Federal, State, and oftentimes local governments. So, clearly
transparency would help. But, again, a system that is caring
and compassionate on the finance side we believe would benefit
the providers and the patient.
Mr. Allen. Dr. Collins?
Ms. Collins. I certainly think that that would be an
improvement over the current situation. In the long-term, it
might be helpful if people without insurance coverage could
actually buy into a group insurance program like the Medicare
program, so that could be sort of a long-term goal and this
being a step to fixing the current problem on the way to
getting to that.
Mr. Allen. We are doing an experiment in Maine, we call it
Derigo Health. The State government is essentially contracting
with an insurance company to cover a pool of people who are
essentially working for small businesses and most likely be
uninsured. That is another whole speech.
I want to ask one other question, maybe primarily for you,
Dr. Anderson. Put yourself in the position of a hospital CFO.
The change is needed. But any change that is made can easily
lead to an increased cost-shifting. Unless we do something
about Medicaid reimbursement, Medicaid and Medicare--unless we
do something about those reimbursement systems, any loss of
revenue anywhere in the system for a particular hospital can
lead to more cost-shifting to the commercial side, and at least
in my State, the small business community in particular, but
even large businesses are really struggling.
Any thoughts about how to deal with that particular
problem, if we basically laid down some ground rules for what
hospitals could do with respect to the uninsured in terms of
how they charge and how they collect from the uninsured? Any
thoughts on how we deal with the other side, the potential loss
of revenue and the risk of more cost-shifting to commercial
insurers?
Mr. Anderson. Well, essentially, most of the uninsured have
difficulty paying these bills, most of them do not pay the
bills. Only about 3, 4 percent of hospital revenue actually
comes from the uninsured. So it is not a big number that we are
talking about here in terms of loss of revenue for the hospital
industry because many of these people don't pay.
So, as a result, I don't think that it is going to have a
whopping big impact on the bottom line, and Medicaid and
Medicare could do it more substantially by increasing the rates
by 1 percent than all the hospitals tripling the rates on the
uninsured. It would have a much bigger impact on the hospital's
bottom line.
Mr. Allen. Thank you. Anyone else? I have 30 seconds left.
[No response.]
Thank you, Mr. Chairman, I yield back.
Mr. Greenwood. The Chair thanks the gentleman, and the
Chair thanks our panel of witnesses for your help this
afternoon. Happy birthday, Dr. Anderson, go and enjoy your
birthday dinner. You are excused.
The Chair calls forward our second panel consisting of
Anthony R. Tersigni, Chief Operating Officer and Interim CEO of
Ascension Health; Kevin Lofton, President and Chief Executive
Officer of Catholic Health Initiatives; Jack O. Bovender, Jr.,
Chairman and Chief Executive Officer, HCA, Nashville; Herbert
Pardes, M.D., President and Chief Executive Officer, New York
Presbyterian Hospital; and Mr. Trevor Fetter, President and
Chief Executive Officer of the Tenet Healthcare Corporation.
Gentlemen, we welcome you, and let me begin by thanking all
of you for being here. I know how difficult it was to arrange
your schedule so that you could be with us this afternoon, and
that is appreciated.
It is the practice of this committee to take testimony
under oath, and so I need to ask if any of you gentlemen have
objections to giving your testimony under oath this afternoon?
[No response.]
Seeing no such objection, I would advise you that under the
rules of this committee and the House of Representatives, you
are entitled to be represented by counsel. Do any of you wish
to be represented by counsel this afternoon?
Mr. Tersigni. No.
Mr. Greenwood. Dr. Tersigni says no. Mr. Lofton, you are
represented by counsel? Would you identify your attorney by
name?
Mr. Lofton. Mr. Paul Newman is seated directly behind me.
Mr. Greenwood. Mr. Bovender, are you represented by an
attorney?
Mr. Bovender. No.
Mr. Greenwood. Dr. Pardes, are you represented by attorney?
Dr. Pardes. No.
Mr. Greenwood. Mr. Fetter?
Mr. Fetter. No.
Mr. Greenwood. Okay. Then I would ask if you would please
stand and raise your right hands.
[Witnesses sworn.]
Mr. Greenwood. You are under oath and, Dr. Tersigni, we
will begin with you. Again, welcome, and you are recognized for
your opening statement, sir.
TESTIMONY OF ANTHONY R. TERSIGNI, FASCHE, CHIEF OPERATING
OFFICER AND INTERIM CEO, ASCENSION HEALTH; KEVIN E. LOFTON,
PRESIDENT AND CHIEF EXECUTIVE OFFICER, CATHOLIC HEALTH
INITIATIVES; JACK O. BOVENDER, JR., CHAIRMAN AND CHIEF
EXECUTIVE OFFICER, HCA; HERBERT PARDES, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, NEW YORK PRESBYTERIAN HOSPITAL; AND TREVOR
FETTER, PRESIDENT AND CHIEF EXECUTIVE OFFICER, TENET HEALTHCARE
CORPORATION
Mr. Tersigni. Thank you. Mr. Chairman and members of the
subcommittee, thank you for the opportunity to appear this
afternoon. I am Anthony Tersigni, the new President and CEO of
Ascension Health. This is my fourth day on the job, and I am
pleased to be here.
Mr. Greenwood. You are under oath, Dr. Tersigni.
Mr. Tersigni. Ascension Health was formed just four and a
half years ago when the Sisters of St. Joseph of Nazareth and
four provinces of the Daughters of Charity united their health
ministries to continue their ministries as one. I am grateful
that three of our sponsors have joined me here today, and I ask
that they stand to be recognized--Sister Bernice Corell, Sister
Maureen McGuire, and Sister Mary Kate Terrell.
They are here today because we are as concerned as the
subcommittee about the issues brought forth today. Ascension
Health carries on our sponsors' strong commitment, which has
been in place for over 400 years, to the healing ministry of
Jesus. It is central to our mission to serve those who are poor
and vulnerable. In 2003 alone, Ascension Health provided more
than $500 million dollars in charity care and community
benefits. In other words, for every dollar we made from our
operations, we spent nearly $4 on charity care and community
benefits.
Each day our hospitals--or as we call them, our health
ministries--save the lives and relieve the suffering of
hundreds of people without insurance. We receive letters every
day from patients, thanking us for the care they received. I
have several sample letters with me today, and there are
thousands of stories just like them that go untold. I would
respectfully request that these letters be made part of the
record.
That Ascension Health gets many things right is not to say
we get everything right. We are still a young system in the
process of integrating many management and information systems.
As a part of this effort, which began in early 2003, we re-
examined our billing and collection policies and identified
several areas for improvement. The subcommittee's work also
prompted us to further review our policies more carefully.
We determined that, because Ascension seeks out the poor in
our communities, we need more clarity and consistency in this
area. Last December, our System Board approved a system-wide
billing and collection policy for all uninsured patients. I
call your attention to the chart above, which is Attachment 3
of my statement, describing the minimum guidelines which are
clear and simple, and must be posted in our hospitals for
patients to see. ``We will write-off your bill if you are at or
below the poverty line; we will provide you a sliding scale
payment plan if you are financially needy; we will give you a
discount based on our best paying payers regardless of your
income if you have no insurance.''
Under our policy, extended payment options must be offered
to all uninsured patients. Every one of our CEOs, CFOs, and BPs
of mission have committed in writing to carry out the letter
and spirit of the policy. I respectfully ask that a sample be
entered into the record.
Mr. Greenwood. Without objection, it will, sir.
Mr. Tersigni. Ascension Health will not take action to
cause bench warrants. For those who qualify for charity care or
financial assistance, we will not seek liens on personal
residences, we will not authorize a collection effort that will
result in a bankruptcy, we will require collection agencies to
follow our system-wide policy for billing and collection. While
we believe these limits generally were being followed in our
Health Ministries, our new policy is unequivocal.
Let me address the claim that hospitals make money on
uninsured care. Our mission is to care for the poor, not to
make money on their suffering. As shown in our submission to
the subcommittee, we collect between 5 and 10 percent of the
total charges for uninsured patients. Each health ministry
reported losses on uncompensated services to the uninsured. In
the aggregate, Ascension Health lost $222 million on
uncompensated care in 2003.
Mr. Chairman, Ascension Health does all it can to respond
to the needs of the poor. We have committed 350 financial
counselors and 1500 registrars to identify and assist those in
financial need. Our Call to Action commits us to work for 100
percent access to healthcare in the communities we serve.
We urge Congress to support our efforts and those of many
others to achieve access for all Americans.
I thank you, and I look forward to answering any questions.
[The prepared statement of Anthony R. Tersigni follows:]
Prepared Statement of Anthony R. Tersigni, President and Chief
Executive Officer, Ascension Health
Mr. Chairman and Members of the Subcommittee: Thank you for the
opportunity to appear before you. Ascension Health commends the
Subcommittee on Oversight and Investigations for its interest in
uninsured patients.
I am Anthony R. Tersigni, Ed.D., FACHE, President and Chief
Executive Officer of Ascension Health, one of the nation's largest
nonprofit Catholic health systems. Ascension Health was formed in 1999
when sponsors of two Catholic hospital systems that shared a centuries-
old commitment to care for the poor--the Sisters of St. Joseph of
Nazareth and four provinces of the Daughters of Charity--agreed to
unite their health systems and continue their ministries as one.
Today, Ascension Health carries on our sponsors' strong commitment
to care for the poor and the uninsured. It continues to be central to
our mission--and the work of the Catholic sponsors that remain active
in the leadership and operation of Ascension Health. It is reflected in
the principles and strategies that guide our operations [See attachment
1]. In 2003 alone, Ascension Health provided more than half a billion
dollars in charity care and community benefits. In other words, for
every dollar we made from our operations, we spent nearly four dollars
on charity care and community benefits.
Because of our tradition of caring for the most vulnerable among
us, our hospitals and clinics--or, as we call them, our health
ministries--play a unique and extremely important role in our society,
serving as a healthcare safety net for millions of uninsured Americans.
For the thousands of religious and lay persons who work in our
hospitals, this is a calling. It is humbling to lead an organization
whose origin, as well as its Mission moving forward, is due to women
who have dedicated not just their careers, but their lives, to
providing care to people who are poor.
Today, I want to address three points:
What we do right
How in the past we fell short in some areas and what we're doing to
address these issues
Our response to the Subcommittee's request for information
Later on in my statement I will also lay out in greater detail our
Call to Action initiative. It is perhaps the best expression of our
Mission, Vision and Values. Our Call to Action has as its goals the
achievement of 100 percent access to healthcare for every person who
lives in the communities we serve--certainly an ambitious goal, but one
that speaks to our compassion for the poor and vulnerable.
What We Do Right
Every one of our health ministries has had charity care policies in
place for years, if not decades. We publish and post our charity
policies throughout our health ministries. Our financial counselors are
dedicated professionals who share our values and who strive to do the
right thing. They answer patient questions over the phone about our
charges. They seek out patients who may be in need before they go home
and make attempts to contact patients later on to discuss how their
financial obligations could be eased. They help patients qualify for
financial assistance so they can get the healthcare they need.
In addition, the men and women who work in our health ministries
every day save the lives or relieve the suffering of hundreds of people
who do not have health insurance. The Subcommittee need not take our
word for it. Our patients are our toughest judges, and it is in their
words that our success is revealed [See attachment 2].
For example, we received a letter from a woman who was a patient at
SETON Southwest Healthcare Center in Austin, Texas:
I am writing . . . today to tell you how thankful I am that
your organization was able to assist me on 100% of the hospital
bill I accumulated while a patient at Seton SW . . .
Earlier this year, my world fell apart. I lost my job and my
health insurance. Shortly there after, my fiance left me for
someone else. I lost my home and--pretty much the life that I
had planned on. It was at that point, I thought I had lost
everything and then I lost my health. Once that was gone, I
grasped on to all that I had left which was my family, friends
and faith . . . Being that sick, was one of the most humbling
experiences of my life. I was unable to work and very worried
about how I would pay my hospital bill. Stress doesn't help my
medical condition at all. Please know that it was a wonderful
surprise to hear that my bill was taken to a zero balance.
It is said that everything happens for a reason. I would like
you to know that I had a wonderful experience while in Seton.
The nursing staff was excellent and they inspired me. I have
decided that I want to be a nurse. I am feeling better now and
plan to enroll in nursing school next year. I hope that I can
offer the same compassion and inspiration to someone else in
their time of pain and illness . . .
From another letter we received from a patient:
I recently had an operation to remove my gall-bladder. The
operation went well, and I am now in recovery. I don't know how
to thank you. Words cannot express my gratitude. The cost of
the operation had been a big burden to me. I had just started a
new life in America and was financially unstable; in addition,
I had no medical insurance.
Thankfully, you heard of my situation . . . and funded my
operation. Because of you, I was able to have the operation
safely. I believe that all of this is due to your organization,
which truly personifies the love and spirit of Christ. I thank
you . . . with all my heart. I do not know how I will ever be
able to repay you for all your help. Right now, all I can do is
pray, and I will pray for you and your hospital continuously
and diligently. I will also do my best to follow your example
and help others with the love of Christ. Again, I thank you for
the love you have shown me. I will always be praying for your
hospital and your mission.
Mr. Chairman, for every letter like those two, there are hundreds,
maybe thousands, of positive stories just like it that are not told. I
have additional representative letters from patients from across the
nation. I request that these letters be made a part of the record
[Attachment 2]. Each one is a very personal story, and each one thanks
the health ministry that provided care--in some cases, life-saving
emergency care. Each person expresses heartfelt gratitude to Ascension
Health for reducing or eliminating his or her hospital bill or
eliminating it entirely.
How We Fell Short in Some Areas and What We're Doing to Address These
Issues
That Ascension Health gets many things right is not to say we get
everything right. Formed just four and a half years ago, Ascension
Health is a young system that is still in the process of integrating
the many management and information systems used by our health
ministries. As a part of that effort, which began in early 2003, we
reviewed the billing and collection policies that existed throughout
our system and determined that we, as a system, needed more clarity and
consistency in this important area. The Subcommittee's work also
prompted us to examine our policies more carefully, which led to our
identifying a number of opportunities for improvement.
We learned, for example, that our policies were not always explicit
and each health ministry did things a little differently. Consequently,
we could not speak to an Ascension Health system-wide billing and
collection policy. Nor did we have a process that could measure the
effectiveness of our health ministries' charity care programs in
reaching those in need. Our billing and collection practices were not
receiving the level of attention or oversight by our senior management
team that, in retrospect, they should have received. And we had no
system-wide policy that addressed the level of charges for uninsured
patients.
As a result, we believe too many patients, even if only one, had
come to our emergency rooms and, in spite of the charity care and
financial assistance programs our health ministries have had in place
for years, they had returned home fearful and anxious about the bills
they could not pay. Unfortunately, there are times when patients do not
respond to our communications and their needs are not fully met.
Regrettably, it has on occasion become necessary for hospitals,
even those such as ours that are dedicated to the poor, to refer cases
to collection agencies. And the truth is, we have not wanted to be in
the business of bill collecting. We have learned through this
investigation that there have been instances, and I believe they are
rare, when collection agencies have been more aggressive in their
practices than our values would support. That there may only be a few
instances does not excuse us.
We concluded from this review that the experience the poor and
uninsured have when they come to us for care is too important to allow
completely local variation. Although Ascension Health is newly formed
and somewhat decentralized, we determined that we needed a level of
consistency throughout Ascension Health regarding the care and billing
of the uninsured. As a system, we needed assurances that our charity
and financial assistance programs were meeting certain minimum
standards and reflecting our values.
In December 2003, a single, system-wide policy was approved by our
Board of Trustees, subject to approval by the Centers for Medicare and
Medicaid Services (CMS). It is important to point out that this policy
is a ``floor''--it is the least that we require of our health
ministries, many of which have been and will continue to be more
generous in their care for the poor and uninsured than this new floor
requires.
Ascension Health Policy Regarding Care for the Poor and Uninsured
The Ascension Health policy is premised on several core values and
principles, including our commitment to, and reverence for, human
dignity and the common good; our special concern for, and solidarity
with, poor and vulnerable persons; and our dedication to distributive
justice and stewardship.
The Ascension Health policy establishes minimum guidelines relating
to the level of charges, if any, that would apply to an uninsured
patient, depending upon his or her particular circumstances: those who
are poor based on poverty guidelines; those who face special
circumstances; and those who are determined or presumed (by not
applying for financial assistance) to have the means to pay [See
attachment 3]. The policy is as follows:
Charity Care. For the poorest patients, Ascension Health covers 100
percent of their hospital bills. To qualify, a patient must have
household income at or below the federal poverty level (FPL). Those
with household incomes between 101 and 200 percent of FPL will have
their charges reduced on a sliding-scale basis. The poverty limits will
be adjusted at each health ministry based on area wages.
Financial Assistance. Income is not the only determinant of need.
So our Financial Assistance program considers a broader picture of a
patient's financial resources and circumstances. Each health ministry
must have a written policy that considers income as well as the
patient's assets, size of the medical bill and other financial
obligations (e.g., for housing, transportation and childcare). For
example, a married adult male with annual income of $14,500 a year is
making 120 percent of FPL and, therefore, would be entitled to a
sliding scale adjustment of his hospital bill, leaving him responsible
for, say, 20 percent of it. However, if the bill is $30,000, he would
still owe $6,000. If he had no assets or had other obligations, he
could have problems paying his medical bill.
Finally, because of the complexity and subjectivity of its
guidelines, our health ministries are required to have review boards
that consider patient appeals of adverse determinations.
Uninsured Patients with Means to Pay. Not all uninsured patients
are poor and even those who are don't always apply for financial
assistance (out of reluctance to fully disclose finances, fear or
embarrassment, or other reasons). In the interests of fairness and
clarity, these patients are charged a rate comparable to the discounted
rate each local health ministry has negotiated with its ``best paying''
insurers. This portion of the policy is subject to approval of CMS.
(The commercial payers whose rates are used as the benchmark must
account for at least 3 percent of that particular health ministry's
patient volume.)
Mr. Chairman, I would like to reiterate that this policy represents
the floor. It represents the least any of our health ministries will
do. We are a system that believes in distributed leadership. Local
health providers know more about local needs than those at the home
office, so if an Ascension Health ministry wants to go above and beyond
the policy I just explained to the Subcommittee, it may. In fact, many
of our health ministries currently are going above and beyond what is
required in our new policy.
The Ascension Health policy on discounts for the uninsured also
addresses billing and collection practices. The policy requires that
employees and agents of each health ministry treat patients and their
families with dignity, respect and compassion. Patients must be
provided prompt access to charge information and be advised of
applicable policies, including charity care and financial assistance,
in easily understood terms and in the language common to the community.
Policies must also be posted in hospital reception and registration
areas.
Patients qualifying for financial assistance are to be provided
with both extended payment options that are appropriate for their
financial status and access to financial counseling. Outstanding
balances on accounts are to be pursued fairly and consistently.
With respect to collection practices, the system-wide policy adopts
several key principles:
Ascension Health will not take action to cause bench warrants to be
issued.
Liens on personal residences will not be sought against individuals
who qualify for charity or financial assistance.
Ascension Health will not authorize a collection effort that will
result in a bankruptcy.
Interest may only be charged to patients not qualifying for charity
or financial assistance, and only if they are not complying
with payment arrangements.
Collection agencies must follow Ascension Health's system-wide policy
for billing and collection.
Ascension Health's Response Highlights Our Charity Care & Values
In October of 2003, Ascension Health complied with a request from
this Subcommittee for detailed information regarding four key areas:
billing and collection policies and practices for the uninsured;
collections from uninsured patients; operating incomes overall and from
uninsured patients; and mark-ups for services. Ascension Health worked
diligently with 44 health ministries to assemble the requested
information at a cost of over $400,000 [See attachments 4 and 5]. A
brief outline of our submission follows:
Each of these health ministries has a billing and collection policy
for the uninsured. Furthermore, all of our health ministries
reported offering charity care to the poor, and all reported
providing assistance to patients for enrolling in public
health-insurance programs.
The aggregate data collected from the 44 Ascension Health ministries
shows that uninsured collections as a percent of uninsured
charges ranged from only 5 to 10.0 percent for the various
periods reported [See attachment 4, p. 14-17]. In fact, our
health ministries lost $222 million on uncompensated services
to the uninsured in 2003.
Services provided to the uninsured had a negative impact on margins
at every health ministry during the periods reported. Let me
reiterate that point, because the claim has been made by some
that hospitals ``make money'' from these services: every
Ascension Health hospital lost money on the services provided
to the uninsured.
Mr. Chairman, I direct the Subcommittee's particular attention to
the attached chart, entitled ``Charges, Costs and Collections on a Per
Equivalent Patient Day Basis'' [Attachment 6]. As you can see, the
collections from the uninsured represent the smallest portion of
collected services. As I mentioned, some have suggested that hospitals
are somehow ``making money'' by providing these services. However, we
provide them because it is our mission to serve those most in need, and
we are unsure, as experienced healthcare administrators, exactly how
anyone could recoup 100 percent or more of the aggregate costs of
services for uninsured patients.
Moving Forward: ``Healthcare That Leaves No One Behind''
Although the purpose of this statement is to address issues raised
by the Subcommittee relating to billing and collection practices, we
believe a full understanding of our fundamental operating principles
and some system-wide achievements in serving the uninsured will help
inform the work of the Subcommittee. I will now describe several
important and representative activities.
Our Mission, Vision and Values are reflected every day in our
ministry to care for the poor and uninsured. Their best expression is
found in our Call to Action, a strategic initiative that dedicates
Ascension Health to achieving ``Healthcare That Works; Healthcare That
Is Safe; and Healthcare That Leaves No One Behind.''
Our Call to Action's last component has as its goal 100 percent
access to healthcare for everyone in the communities we serve. In
furtherance of 100 percent access, Ascension Health is providing
leadership at the national level to sustain and strengthen the safety
net for the poor and uninsured throughout the United States. Ascension
Health worked closely with Congress to help craft the Healthy
Communities Access Program that provides infrastructure dollars to
local communities to strengthen the local safety net. Ascension Health
was then the only organization in the country that made a commitment to
match first-year federal funds for expanding access.
Ultimately, Ascension Health contributed over $7 million, which was
used to catalyze local leadership in eight communities to achieve 100
percent access. Dollars were invested to design and implement
information systems to link all safety-net providers, hire case
managers, screen uninsured individuals for insurance eligibility,
design disease management programs for the uninsured, and facilitate a
number of other critical activities to bring health services to
uninsured persons. With four years of experience and results, we are
now designing model programs that other communities can replicate in
their efforts to achieve 100 percent access to healthcare.
For example, in Tawas City, Michigan this year, Ascension Health
ministry leadership brought together all of the local safety-net
providers in a public-private partnership that now provides healthcare
to the uninsured. This safety net coalition has received close to $1
million of federal funding.
In Austin, Texas, our SETON Healthcare Network recently joined with
the Travis County Medical Society in an effort to have every private
primary care physician in the city voluntarily take ten uninsured
patients into his or her practice, and every private specialist take 20
uninsured patients. Although still in its early stages, this combined,
community-wide program has already provided ``medical homes'' to 250
individuals without insurance and has set its sights on doing the same
for all of Austin's uninsured.
In Detroit, Michigan, a coalition of the city's three major health
systems (Ascension Health's St. John Health, Henry Ford Health System
and the Detroit Medical Center) are working in partnership with the
Detroit Health Department and three local federally qualified health
centers to enroll uninsured patients into a ``virtual HMO'' that case
manages their care across multiple providers. The program also
collaborates with several other safety net healthcare providers in the
city.
In New Orleans, Louisiana, the Ascension Health primary clinic for
the poor has joined forces with the public hospital and all other
safety-net providers to expand access to healthcare. In some parishes,
the number of uninsured exceeds 80 percent of the population. In
Nashville, Tennessee, the health department is working with our Saint
Thomas Health Services to provide free pharmaceuticals to the
uninsured.
Our five-year goal for the ``Healthcare That Leaves No One Behind''
initiative is to achieve 100 percent access to healthcare in the
communities we serve. Each of our hospital chief executive officers is
charged with the responsibility to work towards 100 percent access
within his or her own community and is held accountable for these
efforts by me and our board.
In addition to our hospitals, Ascension Health owns and operates
dozens of clinics for the uninsured throughout the country. Ascension
Health is currently leading an effort by the nation's major Catholic
health systems to work with the federal government on ways to expand
these services to the uninsured.
In furtherance of our Call to Action, Ascension Health was the only
health system in the country last year to have 100 percent
participation in ``Cover the Uninsured Week,'' which was sponsored by
numerous national organizations to raise awareness of the plight of the
uninsured. At every Ascension Health hospital, activities were held
during the week, enrolling thousands of eligible poor persons into
insurance assistance programs offered by states and the federal
government. Today, these thousands carry an insurance card when they
seek healthcare services, thanks to the collective work of Ascension
Health ministries.
Finally, our ministry to the poor extends beyond healthcare. The
commitment our hospitals have made to pay a ``living wage'' is just one
example. We believe that the people who work in our health ministries
should have a decent standard of living and be able to live within our
communities.
Conclusion
Mr. Chairman, Ascension Health and our original sponsors take our
tradition and commitment to care for the poor and uninsured very
seriously. For us it is both a social and solemn obligation. I have
described for the Subcommittee how the men and women who staff our
hospitals and clinics work tirelessly to care for individuals who are
poor and uninsured. I have also presented the numerous efforts across
the country in which Ascension Health employees, working closely with
public and private partners, are striving to increase access to
healthcare for everyone in their communities.
It is true that, throughout the nation, Ascension Health is
responding to the needs of the poor and vulnerable. Our new billing
policy will prevent some of the problems the uninsured have faced in
the past. But the work of ten Ascension Health systems or 100 or 1,000
would still fall short and leave many of the health needs of the poor
unmet. We as a nation can do better.
We therefore urge Congress to adopt policies and provide adequate
funding to achieve universal healthcare access for all Americans. The
change that is necessary to address the needs of the nation's 44
million uninsured will take a much greater collective effort than any
one hospital system can undertake.
Thank you, Mr. Chairman. I look forward to answering any questions
the Subcommittee may have.
Mr. Greenwood. Thank you, sir.
Mr. Lofton, you are recognized for 5 minutes for your
opening statement. Welcome.
TESTIMONY OF KEVIN E. LOFTON
Mr. Lofton. Thank you, Mr. Chairman and members of the
subcommittee. Thank you for inviting Catholic Health
Initiatives to participate in today's hearing. My name is Kevin
Lofton, and I am President and CEO of Catholic Health
Initiatives. I have committed my entire career to serving the
needs of the poor, uninsured, and underinsured. I joined
Catholic Health Initiatives in 1998, and became President and
CEO last August.
I also want to acknowledge and ask to stand, Sister
Elizabeth Windo, a Sister Charity who is a member of the CHI
Board of Stewardship Trustees.
CHI hospitals take care of patients in need, regardless of
ability to pay. We are proud of our policies and practices. I
am pleased to update you on our improved billing and collection
practices. These improvements are important, but they will not
substitute for long-overdue structural reform in health care
delivery and financing.
Catholic Health Initiatives believes the solution is
universal health care coverage. The CHI health system includes
68 hospitals and 44 facilities offering health-related services
such as long-term care. We serve 19 States, 68 rural and urban
communities, and employ more than 67,000 dedicated men and
women.
Care for the poor, uninsured, and underinsured has been the
mission and tradition of CHI hospitals for more than 100 years.
Last year, CHI's total measurable benefit for the poor and
broader community was $644, or 10.6 percent of our total
revenue. Community benefit includes things such as free clinic
grants and mobile medical vans. CHI hospitals provided $108
million in direct charity care.
CHI does not consider its $326 million in bad debt expense
as part of our community benefit or charity care commitment. In
the last 3 years, our hospitals committed $1.9 billion to
improve the overall health of our communities.
Chairman Greenwood, I commend you, the subcommittee and
staff for your attention to hospital billing and collection
issues. It prompted CHI to examine our billing and collection
practices, and to aggressively seek clarification and guidance
from HHS to ensure we were doing the right thing. As a result,
we are proactively reforming our billing and collection
policies.
All CHI hospitals have amended contracts with third-party
collection agencies, to include the following standards: First,
no collection agency will request bench or arrest warrants.
Second, no collection agency will seek liens requiring the sale
or foreclosure of a primary residence. And, third, no
collection agency will seek court action without hospital
approval. Several collection agencies refused these new
standards, and the hospital terminated these contracts.
We also require collection agencies to be trained on our
mission, core values, and standards of conduct, to make sure
that all patients are treated with proper dignity and respect.
Mr. Chairman, we all share in the heartbreak of people who
suffer under the current system of hospital billing and
collection. However, we must acknowledge that hospitals have an
obligation to seek payment so they can continue to provide
services to the community.
The goal of providing fair and compassionate health care
financial services requires that healers, policymakers,
administrators, and regulators truly understand the complexity
of hospital pricing.
Recent guidance from HHS allows greater flexibility in
discounting for individuals in the case of medical indigence.
As a result, our hospitals are expanding their definition of
who qualifies for charity care so even more people qualify.
We met with Secretary Thompson and various representatives
from HHS and CMS over the course of three meetings, to discuss
other improvements and services to the uninsured such as
presumptive eligibility. These changes will bring some overdue
rationality to a small corner of the problems of the uninsured.
I respectfully suggest that it is impossible for any one
hospital to solve the complex issue of financing care for the
uninsured and underinsured. We must address it as a country. We
must rationalize and simplify our payment system.
Our hospitals can provide charity care and discounted
services and improve financial services, yet the biggest
problem remains unsolved. There are too many people who are
uninsured. There are too many people without access to health
care in an appropriate setting. The system is clearly broken.
The solution is universal health care coverage.
Catholic Health Initiatives wants to work with Congress and
other policymakers to achieve comprehensive reform. If coverage
for all cannot be achieved immediately, we should adopt a
phase-in plan, one that begins with coverage of the most
vulnerable members of our society.
Mr. Chairman, we pledge our cooperation, and thank you for
allowing us to testify today.
[The prepared statement of Kevin E. Lofton follow:]
Prepared Statement of Kevin E. Lofton, President and Chief Executive
Officer, Catholic Health Initiatives
Chairman Greenwood and members of the Subcommittee, thank you.
My name is Kevin Lofton. I am the President and Chief Executive
Officer of Catholic Health Initiatives. Thank you for inviting us to
join you today to discuss how we may all work together to achieve
quality health care services AND fair, efficient and compassionate
health care financing for all Americans, particularly persons who are
poor, uninsured and underinsured.
Catholic Health Initiatives hospitals take care of patients in
need, regardless of ability to pay. Providing charity and discounted
care to persons who are poor, uninsured and underinsured is core to our
mission. In that regard, we appreciate the opportunity to respond to
the Subcommittee's invitation to testify on the subject of hospital
billing and collection practices. I am proud of our policies and
practices, and am pleased to provide you with an update on our improved
billing and collections procedures. Further, we appreciate the
assistance of these valuable hearings and the increased guidance from
the Department of Health and Human Services (HHS).
Improved billing and collection practices--while important--will
not substitute for the long-overdue structural reforms in health care
delivery and financing. Catholic Health Initiatives is a strong
advocate for universal health care coverage, and urges the Congress to
consider meaningful expansion of health care coverage to all Americans.
That view is not only the view of Catholic Health Initiatives; it
is my view as well. I have committed my entire professional career to
working with public, inner city and faith-based health care
organizations, all of which have been dedicated to serving the needs of
poor, uninsured and underinsured persons. I joined Catholic Health
Initiatives in 1998 as a Group President and was later promoted to
Chief Operating Officer and Executive Vice President. In August 2003, I
was appointed President and Chief Executive Officer.
Prior to joining Catholic Health Initiatives, I was Chief Executive
Officer of the University of Alabama Hospital in Birmingham, a 908-bed
university teaching hospital. I have also served as the Chief Executive
Officer of Howard University Hospital in Washington, D.C., and Chief
Operating Officer at the University Medical Center, the urban campus of
the University of Florida Health Science Center in Jacksonville,
Florida.
I received a master of health administration degree from Georgia
State University in Atlanta and a bachelor of science degree in
management from Boston University. A copy of my curriculum vitae is
attached to this testimony.
Catholic Health Initiatives is a national non-profit corporation
based in Denver, Colorado. The CHI health system, which is comprised of
affiliated non-profit corporations located in 19 states, includes 68
hospitals, 44 long-term care, assisted and independent living and
residential facilities and five community-based health organizations
serving 68 rural and urban communities. CHI hospitals, facilities and
community health organizations are non-profit health corporations in
the states in which they operate and have fiduciary boards of
directors, although Catholic Health Initiatives has some approval
rights over these other non-profit entities. Collectively, these health
providers employ more than 67,000 dedicated men and women. All of us
are bound together by a common mission and vision.
Catholic Health Initiatives was formed to advance and strengthen
the Catholic health ministry into the 21st century and is unique among
health care systems in the United States. During the last decade,
religious sponsors of Catholic health care ministries recognized that
the changing health care environment meant greater resources would be
needed to develop programs, structures and services in the next
century. In early 1995, a group of visionary leaders in Catholic health
care began to explore ways to preserve and strengthen the health
ministry for the future. They envisioned a national Catholic health
care organization, sponsored by multiple congregations of women
religious and governed by a religious-lay partnership whose mission was
to transform health care delivery and create new ministries to promote
healthy communities. The result was the formation of Catholic Health
Initiatives through the consolidation of Catholic Health Corporation,
Omaha, Nebraska; Franciscan Health System, Aston, Pennsylvania; the
Sisters of Charity Health Care Systems, Cincinnati, Ohio; the Sisters
of Charity of Nazareth Health System, Bardstown, Kentucky; and the
Sisters of St. Francis of the Immaculate Health of Mary, Hankinson,
North Dakota.
Catholic Health Initiatives is committed to creating new models of
health care, based on collaborative relationships and partnerships with
community groups, agencies and other health care organizations. Since
1997, the Catholic Health Initiatives Mission and Ministry Fund has
awarded 123 grants, totaling more than $11 million, to improve the
health of communities served by its facilities. Through this national
healthy communities commitment, hospitals and health services
throughout the organization are developing unique programs to address
the root causes of serious social and health issues, such as domestic
violence and the inability to access basic health care services, so we
can create solutions for the long term.
In our testimony, we hope to provide a better understanding of how
the Catholic Health Initiatives mission and vision motivates our deep
commitment to charity and discounted health care services to persons
who are poor, uninsured and underinsured; our resolve to proactively
improve collections and billing for patients; and our strong advocacy
commitment to national health care reform.
CATHOLIC HEALTH INITIATIVES: A COMMITMENT TO CHARITY AND DISCOUNTED
HEALTH CARE FOR THE POOR, THE UNINSURED AND THE UNDERINSURED.
First and foremost, Catholic Health Initiatives cares for and cares
about poor, uninsured and underinsured persons. Catholic Health
Initiatives has designed charity care standards to meet the needs of
the uninsured and the underinsured. This has been the mission and
tradition of Catholic Health Initiatives hospitals for more than 100
years. As part of this commitment to persons who are poor, alienated
and underserved, Catholic Health Initiatives uses financial resources
to emphasize human dignity, social justice and the promotion of healthy
communities. Several examples of CHI's commitment to the poor and
underserved include: free clinics at many CHI hospitals; $24 million in
direct community investments, which are no- or low-cost loans to
institutions or projects that promote access to jobs, affordable
housing, child care, education, environmental protection and health
care for low-income and minority communities; and $11 million in
Mission and Ministry grants.
When determining eligibility for charity and discounted health
services, Catholic Health Initiatives facilities have considered
income, family size, available assets and extenuating circumstances.
CHI facilities use the Department of Housing and Urban Development
(HUD) income guidelines because they are more inclusive than other
poverty guidelines and more accurately reflect the economic differences
of the 68 urban and rural communities in 19 states served by CHI
hospitals and health care facilities. In 26 of those communities, a CHI
hospital is the only hospital serving that community.
In an effort to be inclusive, CHI hospitals provide charity and
discounted health care services on a sliding scale. For example, at St.
Anthony Hospital in Denver, the community in which I live, a family of
four with an income of up to $74,000 would qualify for assistance.
With the recent guidance from the Department of Health and Human
Services, Catholic Health Initiatives hospitals are revising their
charity care policies. For example, the policies will now cover more
people and will further simplify the application process. If a patient
is unable or unwilling to provide financial information, but that
person has other evidence of indigence, such as a person who is
homeless, he or she will be covered by the charity care policy.
Catholic Health Initiatives and its hospitals are responding to the
needs of the poor and underserved and the broader community in very
direct ways. In fiscal year 2003, CHI's total measurable benefit for
the poor and the broader community was $644 million, which includes
grants, free clinics, mobile medical and dental vans and educational
programs. That was 10.6 percent of our total revenues.
As part of that, CHI hospitals provided $108 million in direct
subsidization of charity care. This is the estimated cost of providing
the care, not what was charged. Over the last three years, Catholic
Health Initiatives-sponsored hospitals provided $1.9 billion in
measurable benefits to improve the overall health of our communities.
Let me give you a few examples:
Good Samaritan Hospital in Kearney, Nebraska, has lowered the rate
of mortality from heart disease by 34 percent in its rural Nebraska and
Kansas communities through a program to make advanced cardiac care
available and accessible to the people in these farming communities.
Good Samaritan staff members have driven more than a half million miles
to outreach sites since the program began.
St. Elizabeth Health Services in Baker City, Oregon, is a critical
access hospital in an isolated, rural community in eastern Oregon. St.
Elizabeth's provides prescription medications to persons who do not
have the means to purchase them. These medications help the recipients
recover more quickly from their illnesses, better manage chronic
conditions and avoid costly hospitalizations and interventions.
St. Joseph Medical Center in Towson, Maryland, provides free or
low-cost health care services to underserved residents of the greater
Baltimore community through a mobile medical van staffed with bi-
lingual health care providers. The van regularly stops at a soup
kitchen, and the staff serves clients who face homelessness, mental
illness and drug addiction.
Our Lady of the Way Hospital in Martin, Kentucky, handles more than
18,000 emergency department and urgent care visits each year. Nearly 60
percent of the 42,000 people living in Floyd County have a family
income below 200 percent of the federal poverty level and nearly half
of the adults in the county have less than a high school education. The
hospital's outreach program provides care for more than 25,000 people.
To combat the county's high teenage pregnancy rate, Our Lady of the Way
Hospital initiated the RESPECT Program for girls in grades six through
eight. RESPECT is a nine-week program designed to build self-esteem,
develop career skills and encourage young teenage girls to postpone
sexual activity. More than 400 girls have completed the program and
there have been only three teen pregnancies among program participants.
Finally, Lakewood Health Center in Baudette, Minnesota, is a
founding partner of Communities Caring for Children, a program
involving 13 counties in northwestern Minnesota, that offers free care
to pregnant women and children up to age five. The goals are to
encourage healthy deliveries and to increase the number of children who
receive well-child exams and immunizations.
CATHOLIC HEALTH INITIATIVES: PROACTIVELY IMPROVING BILLING AND
COLLECTIONS
Chairman Greenwood, I would like to commend you, the Subcommittee
and staff for your attention to this issue. It prompted Catholic Health
Initiatives to examine our own billing and collections practices more
closely, and to aggressively seek clarification and guidance from the
Department of Health and Human Services to ensure we are doing what is
right. As a result, Catholic Health Initiatives is proactively
reforming its own billing and collection policies. Let me be specific:
All Catholic Health Initiatives hospitals have been asked to amend
the contracts they hold with third party collection agencies to include
the following standards: neither CHI hospitals nor their collection
agencies will request bench or arrest warrants; neither CHI hospitals
nor their collection agencies will seek liens that would require a sale
or foreclosure of a primary residence; and no collection agency may
seek court action without hospital approval. Several collection
agencies refused to agree to these new standards and the hospitals
terminated their contracts.
As of June 30, 2004, we will require that collection agencies be
trained on the Catholic Health Initiatives Mission, Core Values and
Standards of Conduct to make sure all patients are treated with dignity
and respect. Catholic Health Initiatives will continue to work with the
hospitals so that all patient financial services staff show respect for
the individual, regardless of the source of payment for care.
Improving billing and collections--what we charge and how we
collect--are important. Catholic Health Initiatives is committed to
fair, efficient and compassionate billing and collection policies and
practices.
To be fair to the community, patients in a hospital have an
obligation to pay if they can or, if they cannot, to provide
information so they can seek to be qualified for government or charity
programs. Hospitals have an obligation to seek payment so they can
continue to provide services to people in the community.
Some of our patients qualify for charity care and discounts based
on income levels, but many others fall outside the charity care
guidelines and cannot afford adequate insurance. It is for those
uninsured and underinsured patients that we must do better as health
care providers, as policy makers and as a nation.
However, the goal of providing fair and compassionate health care
financial services requires that healers, policy makers, administrators
and regulators truly understand the complexity of hospital pricing.
Catholic Health Initiatives appreciates the guidance given by the
federal government regarding charges and discounting to better serve
the community, including people who are uninsured and underinsured.
This guidance, provided by Secretary Tommy Thompson and HHS, allows
greater flexibility in discounting for individuals in the case of
medical indigency, and as a result, Catholic Health Initiatives
hospitals are expanding their definition of who qualifies for charity
care.
We have also been meeting with the Centers for Medicare and
Medicaid Services to discuss other improvements to the provision of
services to the uninsured, such as presumptive eligibility, so that
people in any of several situations, such as those living in subsidized
housing or migrant farm workers living in transient housing, are
presumed to be eligible for charity care. I am convinced that these
changes will bring some overdue rationality to at least a small corner
of the problems of the uninsured.
But as CEO of Catholic Health Initiatives, I respectfully suggest
that it is impossible for any hospital to solve the complex issue of
financing care for persons who are uninsured and underinsured. We must
address it as a country from the standpoint of day-to-day regulatory
and operating reality.
We need to rationalize and simplify our payment systems. These
systems are well-past complex and have evolved so that list prices
(charges)--which are used in the formula for Medicare reimbursement,
workers compensation plans and private insurance discounts--may or may
not have a relationship to the actual cost of providing services--and
also have nothing to do with what most hospitals are actually paid. An
indirect and unintended consequence of these forces is that they have
created hardship for uninsured patients. The system is clearly broken.
At Catholic Health Initiatives, we believe that quality health care
and fair, efficient, compassionate billing and collection policies
should not, and cannot, be separated.
Information about hospital charges may be useful in helping
patients ask better questions. However, obtaining accurate charge
information in advance is made difficult by the many uncertainties
involved in predicting the course of treatment for any one individual.
No two patients, diseases or injuries are alike.
Average charge information may be useful for a simple procedure--
such as an x-ray--or for diagnoses that are common and have a great
deal of standardization--such as the normal delivery of a baby.
However, the average charge would be misleading for patients when the
diagnosis is unclear--and so diagnostic tests are needed--or where
there are greater ranges of possible treatments.
Charges will depend on the specific items and services ordered by
the patient's physician and on complicating diseases the patient may
have such as diabetes or hypertension. For example, in Colorado where
charges are publicly available, the average statewide charge for
hospitalization for simple pneumonia is about $6,000 for a patient
without complications and more than $31,000 for a patient with extreme
complications. One might question if publishing the overall average
charge of $12,000 for pneumonia provides any useful information to a
patient.
In the end, however, the bottom line for Catholic Health
Initiatives is social justice. All Americans should have access to
affordable care. The number of uninsured persons continues to grow. St.
Anthony Hospital in Denver has seen the number of self-pay patients
(who are typically uninsured) in the emergency department grow from 21
percent to 33 percent in two years.
Catholic Health Initiatives can provide charity care and discounted
services and improve patient financial services. Yet, the biggest
problem remains unsolved: too many uninsured people, too many persons
without access to health care in an appropriate setting. Again, the
system is broken.
The solution is universal health care coverage.
CATHOLIC HEALTH INITIATIVES: STRONG ADVOCACY COMMITMENT TO NATIONAL
HEALTH CARE REFORM.
While incremental change that benefits patients is good . . . it is
not the solution.
Catholic Health Initiatives believes all Americans should have
health care coverage. All Americans should have access to quality
health care services: the right care, at the right time, at the right
place.
Uninsured Americans are up to three times more likely to have poor
health outcomes. Studies show nearly 40 percent of uninsured adults
skipped a recommended medical test and 20 percent say they have needed
but have not gotten care because they did not have insurance. The
Institute of Medicine recommends that the problems caused by
uninsurance in the United States require a national and coherent
strategy aimed at covering the entire population.
Further, as a matter of social justice, it is important that all
people have access to routine, consistent primary care in accessible
settings that will be less costly. Many persons without insurance come
to the hospital through the emergency department. Often, an uninsured
person does not have a primary care physician and as a result will have
had no routine or preventive care. The emergency department does not
have the medical background or history and physical from a primary care
physician that an insured patient with access to primary care will
have. More clinical and diagnostic tests are needed, and they must be
done in this more expensive setting.
In addition, a patient without access to a primary care physician
is more likely to have chronic diseases that have been untreated--
diseases like diabetes and hypertension. The Institute of Medicine has
found that people without health insurance have diminished health,
poorer outcomes and are less likely to get preventive services or the
care they need for chronic conditions. Simply put, patients least able
and least likely to pay may be among the most expensive to treat.
Catholic Health Initiatives wants to work with Congress and other
policy makers to achieve comprehensive reform. And, if coverage for all
cannot be immediately achieved due to current budget and political
constraints, we should adopt a phased-in plan that begins with coverage
of the most vulnerable members of our society, including women and
children.
We encourage Congress to start by enacting legislation that:
removes the prohibition on legal immigrant children and pregnant women
receiving Medicaid/SCHIP coverage during their first five years in this
country; expands Medicaid/SCHIP programs to cover additional uninsured
children from low-income families; and provides Medicaid/SCHIP coverage
for family members of children covered by these programs.
Mr. Chairman, we pledge our cooperation. Thank you.
Mr. Greenwood. Thank you very much, sir.
Mr. Bovender, welcome.
TESTIMONY OF JACK O. BOVENDER, JR.
Mr. Bovender. Thank you, Mr. Chairman. My name is Jack
Bovender, and I am the Chairman and CEO of the Hospital
Corporation of America. We own and operate 190 hospitals and 82
outpatient surgery centers in 23 States and two foreign
countries, with about 190,000 employees. Last year, we treated
over 14 million patients in our facilities.
I appreciate this opportunity to share our company's
insight into the issues surrounding the uninsured, hospital
pricing and collection policies, our escalating bad debt
problems and, in particular, our charity care discount policy,
which has been used as a model by many other hospitals and
hospital systems in the country.
In my 34 years in hospital administration, I have never
seen another time in which the level of uninsured using
hospital emergency departments has been as great, or the
amounts we are writing off to bad debts and charity care have
risen so high. The numbers are staggering.
Families, USA recently reported that nearly 82 million
people went without health insurance at some point during the
last 2 years. Specific to HCA, we have seen our bad debt
expense rise from 8.5 percent of net revenue to about 11.7
percent. Put another way, HCA hospitals provided free or
discounted care to over 1 million patients. For HCA, the cost--
the cost, not charges--of providing this unreimbursed care was
over half a billion dollars last year.
Hospitals in this country have become virtually the only
safety net for the uninsured needing health care. The
pharmaceutical companies do not give us free of charge their
expensive anti-thrombolytic drugs for use with the uninsured
heart patient. The medical device companies are not giving away
free of charge the expensive cardiac stints we implant in the
uninsured patients. And the managed care companies are
certainly not coming into our communities offering free or
significantly discounted insurance policies to the uninsured.
This unshared burden has driven hospital margins in this
country down to 3.5 percent. These are historic lows, so low
that even the short-term viability of many hospitals is now
threatened. Compare this 3.5 percent margin to those in the
pharmaceutical and medical device industries, which range
between 13 and 15 percent.
While hospitals have been castigated recently in the press
for charging and collection practices related to the uninsured,
and in many cases with great justification, hospitals are not
the problem. They are merely the symptom of a much bigger
problem. The problem is how are we as a society going to
guarantee that every American has some form of health
insurance, health insurance that adequately reimburses
hospitals and doctors for the health care they render?
Before I discuss HCA's charity discount policy, I would
like to spend a minute on hospital charges. The charge master
system on which hospitals rely to set pricing and billing codes
have a 40-year history of changes that have distorted the
relationship between price and cost. It grew out of a time when
decreasing Medicare reimbursement prompted cost-shifting to the
private sector, and this was exacerbated in the 1990's by
aggressive managed care discounting. I am not here to try to
justify this, and it really needs to be fixed.
HCA has focused on developing a pricing structure for the
uninsured that more closely mirrors pricing to managed care. We
believe recent pronouncements by CMS allow us to do this
without as much reliance on complicated indigence tests. In the
interim, we believe our charity care and financial discount
policy provides necessary relief to those in financial need.
Our charity care program offers free or discounted
nonelective care for those not covered by private insurance or
government health assistance programs. For individuals with
income up to 200 percent of the Federal poverty level, care is
free. For those between 200 and 400 percent of the Federal
poverty level, a sliding scale of discounts is applied.
To give you an idea of who benefits from these discounts, a
family of four with a gross income of $37,700 receives free
care. At 400 percent above the poverty level, a family of four
with a gross income of up to $75,400 would qualify for a
discount as high as 65 percent. Such a discount places the
pricing into the same zone as those negotiated with some of the
Nation's largest health insurance providers.
Now, I will be the first to admit that we are not perfect.
We have been criticized for the effectiveness of our
implementation, and assertions have been made that every HCA
patient who is eligible is not receiving free or discounted
care. That is undoubtedly the case, but I assure you it is not
for either a lack of effort or a lack of intent. We are making
every effort to provide financial relief to those individuals
who qualify. While we and other hospitals can improve pricing
and collection practices, this will not solve the mushrooming
problem of the uninsured. We need a comprehensive strategy that
guarantees coverage for all Americans.
The problem is that we as a nation are actually going in
the other direction. More and more businesses are dropping
health insurance coverage, or shifting more and more of the
burden to the employee with higher premium sharing and higher
co-pays and deductibles. Many are pushing higher levels of
part-time employment, thereby avoiding coverage of ever-larger
segments of employees. About 60 percent of the uninsured are
employed.
I believe we need to move to a system of employer-mandated
health insurance in this country, a system that would require
all businesses above a certain size to provide health
insurance. Limits on premium-sharing, deductibles and co-pays
should be defined, thereby leveling the playing field with
regards to benefits across all businesses.
Small businesses should be allowed to form purchasing
consortia, as has been advocated by the National Federation of
Independent Businesses, in order to receive the best insurance
rates.
Finally, some form of Federal and/or State coverage must be
provided for the unemployed. This population needs regular
access to routine and preventive care to reduce health care
crises necessitating hospitalizations. Hospitals cannot long
continue to incur ever greater increases in bad debt and
charity. We need help from other segments of the health care
industry. More importantly, we need a new paradigm that
provides a reasonable level of health insurance coverage for
all Americans. We will continue to do our part, but we cannot
do this alone.
Thank you.
[The prepared statement of Jack O. Bovender, Jr. follows:]
Prepared Statement of Jack O. Bovender, Jr., Chairman and Chief
Executive Officer, Hospital Corporation of America
INTRODUCTION
Mr. Chairman, members of the Committee and staff--good morning. My
name is Jack Bovender. I come before you today as a 34-year veteran of
the healthcare industry and current Chairman and Chief Executive
Officer of the Hospital Corporation of America (``HCA'').
I grew up in hospitals, and I have spent my life around healthcare
professionals. My mother was a nurse. My wife was a nurse. My first
civilian job was in a hospital, and I began my career in hospital
administration in the Navy, at the Naval Regional Medical Center in
Portsmouth, Virginia. So I feel qualified to say the issue of the
uninsured is one the healthcare industry has always faced--it has been
with us for as long as I can remember, but at no other time in my life
has this challenge been of the magnitude it is today.
The cost of providing healthcare services to the uninsured is the
most significant issue currently facing hospitals and, I believe, one
of the most important domestic concerns for our country. And the issue
of the uninsured is the responsibility of every one of us--the business
community, the government, and the individual, not just hospitals. We
must all play a role if this situation is to be ameliorated.
I appreciate this opportunity to share my personal experience, and
the experiences of HCA, working on behalf of this vulnerable and
growing population. We welcome the invitation to work with members of
the Congress to find a real solution to this escalating problem, and we
are hopeful that with this Committee's help, Congress will reach beyond
today's hearing to engage those groups and individuals who can also
play a role in this process.
Let me tell you a little bit about our company and what we are
doing to address this critical issue. Headquartered in Nashville,
Tennessee, HCA affiliates operate nearly two-hundred hospitals and
eighty-two outpatient surgery centers in twenty-three states, England,
and Switzerland. Our facilities currently employ some 190,000 people.
Certainly no organization has a greater interest in addressing the
present crisis in health insurance coverage. In many cases and for
many, many people, we are the nation's safety net for the uninsured.
Last year alone, our hospitals provided healthcare services to over one
million uninsured patients--let me repeat that number--one million
uninsured patients. Add to that the 1.6 million Medicaid patients we
served last year, and you have an idea of the magnitude of the care we
provide for the underserved.
Our hospitals are dedicated to delivering healthcare services to
meet the needs of all Americans, regardless of whether they are or
aren't the beneficiary of health insurance. The costs of providing
medical services to the uninsured fall disproportionately upon the
hospital industry, whose emergency rooms routinely function as the
primary (and largely uncompensated) point of access to healthcare for
this vulnerable population.
My testimony today will detail HCA's charity care plan and discount
policy for uninsured patients receiving treatment at any of our
hospitals nationwide, as well as recommendations for improved
coordination of resources to decrease the number of uninsured
Americans.
CARING FOR THE UNINSURED
While hospital management and medical personnel certainly can't
solve the root causes for the vast numbers of uninsured individuals,
every day our people are on the front lines in the struggle to care for
this population's health and well-being. The Committee is undoubtedly
aware that hospitals equipped with emergency rooms must provide medical
evaluation and required treatment to everyone, regardless of their
ability to pay. This burden has grown even heavier in recent years,
with the advent of physician-owned limited-care hospitals, which skim
profitable service areas for low-risk patients, and leave larger, full-
service facilities the task of handling uninsured patients within their
community.
In addition, the uninsured cannot visit a pharmacy and expect to
receive free or discounted drugs; they cannot visit a physician's
office and expect to receive free or discounted medical services; they
cannot visit a physical therapist and expect to receive free or
discounted rehabilitation treatment; nor can they go to an insurance
company and expect to receive a free or discounted insurance policy.
But in every HCA hospital's emergency room, they are assured of
receiving the critical medical care they need, without consideration
for their financial condition or health insurance coverage.
America's hospital emergency rooms have become our de facto public
healthcare system, the primary point of access to quality healthcare
services for the nation's uninsured. For HCA hospitals, medical
treatment of the uninsured has represented a substantial and growing
segment of the patient population.
And contrary to a prevailing myth, the treatment of the uninsured
is far from a profit center for hospitals. Last year, the one million
uninsured patients we treated contributed less than one percent to our
net revenues. On average, we received about $200 in payments from each
of the one million uninsured patients we cared for, and many paid
nothing at all. Said another way, we lost a staggering half billion
dollars in un-reimbursed expenses for treating the uninsured. Again, I
am not talking about un-reimbursed charges, I'm talking about real
costs we incurred for which we were not paid. Our hospitals incur both
the internal costs generated by the hospitals' own medical services,
such as nursing salaries and utilities charges, and costs from outside
vendors, like prescription drugs, over the counter medications, medical
devices, and other supplies necessary for the patient's care and
treatment.
In many instances, these goods and services are being provided to
individuals whose needs are less acute and who would, were it not for
their inability to pay, seek treatment at a physician's office. The
cost of ensuring healthcare coverage of this nature is straining both
the physical and financial capacity of the hospital industry; it cannot
continue to be borne solely by hospitals, or medical services may not
be available when Americans need them. The responsibility for the
uninsured must be shared by all sectors of the healthcare industry, and
by society at large.
The financial pressures facing hospitals today, including the
growing non-reimbursed costs of providing care for the uninsured, are
illustrated in declining hospital profit margins (See Chart I). It is
this margin that makes capital available to insure hospitals will be
here to serve future generations. It is this margin that provides
funding to cover our wage increases for our nurses and other
caregivers. The most recent estimates from the American Hospital
Association show U.S. hospital margins at approximately 3.5%. Over the
last five years, the net profit margins for U.S. hospital companies
have been substantially below margins of both pharmaceutical and
medical device companies, and in 2003, margins of health insurance
companies were more than double that of public hospital companies (See
Chart II). For the most recent year (2003), public hospital company
margins were 1.5%, while health insurance company margins were 4.3%,
pharmaceutical companies margins were 13.8% and medical device
companies margins were 15.6%.
The lower margins for hospitals reflect the disproportionate
uninsured burden carried solely by hospitals. As illustrated in Chart
III, hospitals' bad debt (primarily arising from uninsured) totaled
9.9% of net revenues in 2003, compared to bad debt levels of 0.1% for
insurance companies and 0.3% for pharmaceutical and medical device
companies. Further, the percentage growth in spending for hospital care
between 1991 and 2002 was substantially below the growth in spending
for prescription drugs (three times the growth in hospital spending)
and private health insurance (two times the growth in hospital
spending) (See Chart IV).
THE HCA CHARITY CARE AND DISCOUNT POLICY
Charity care has always been a part of our mission at HCA, and part
of the service provided at our nearly two hundred hospitals nationwide.
However, in order to respond to the recent growth of the uninsured
population, last year we developed an enhanced, system-wide charity
care and financial discount policy. In March 2003, we submitted our
proposed discount program for uninsured patients to CMS for approval.
In June 2003, we received a letter from CMS advising us while they
``applauded HCA's efforts to improve access to quality healthcare to
financially needy patients,'' we still needed to ``pursue our
proposal'' with our (five) fiscal intermediaries (FI's) before
implementation. After discussions with our FI's in the fall, we
initiated our new policy nationwide, effective October 1, 2003.
Our standardized charity care programs offer free or discounted
medical care to patients in financial need who come to our emergency
rooms and are not covered under any private health insurance policy,
and cannot qualify for any state or federal health payer assistance
programs. For individuals whose income is up to two hundred percent of
the federal poverty level, care is free; for those who make between two
hundred and four hundred percent of the federal poverty level, a
sliding scale of discounts is applied. To give you an idea of who
benefits from these discounts, a family of four with a gross income of
$37,700 receives free care. At four hundred percent above the federal
poverty level, a family of four with a gross income of up to $75,400
would qualify for a discount as high as sixty-five percent. These
uninsured individuals benefit from a pricing structure competitive with
the reduced rates negotiated by the nation's largest health insurance
providers.
Eligibility for charity care relates only to the patient's or
responsible party's gross income and family size; the potential value
of other available family assets and resources are not considered when
determining the appropriate rate of reduction in hospital charges.
Moreover, free or discounted benefits are available under these
programs at any time after care is rendered and the account is in the
process of being settled. This permits write-offs of outstanding
charges or restructuring of payment plans for patients who lose their
insurance or suffer a substantial change of income. In addition,
patients may request consideration under the charity and discount
programs for costs associated with previous hospital visits. Each of
our hospitals employs a team of patient representatives available to
discuss an individual's particular situation and develop an appropriate
solution.
HCA's assistance is not just limited to providing medical care. We
are also committed to helping patients who are eligible to receive the
full range of government benefits. To that end, our hospitals employ a
full-time staff of specially trained benefits counselors who are
responsible for educating and enrolling patients in Medicaid or other
state health benefit programs. Once enrolled in these federal and state
medical benefit programs, patients can access physicians and other
healthcare providers for critical preventive and follow-up care. Last
year, HCA facilitated the enrollment in Medicaid of one in five of the
uninsured patients who presented at our hospitals.
In summary, our philosophy is clear and simple. When a patient
arrives at one of our hospitals in need of emergent care, we provide
that care regardless of whether or not they are insured. And if they
tell us they cannot afford to pay for that care, we will write off
those costs or discount the charges. While these programs cannot be a
long-term substitute for private health insurance or government health
assistance programs, they may for now be the only recourse for a
patient lacking insurance and unable to afford essential medical care.
HCA'S HOSPITAL BILLING AND COLLECTIONS PRACTICES
Like all hospitals, HCA relies upon a chargemaster as the central
repository of charges and associated coding information used to develop
claims. These charges are determined on a local hospital-by-hospital
basis. To put it simply, the chargemaster system on which hospitals
rely to set pricing and billing codes has a forty-year history of
changes that has distorted the relationship between price and cost. It
grew out of a time in our industry's history, during the advent of
managed care, when the inadequate level of Medicare reimbursement
prompted cost-shifting. Therefore, HCA is now seeking to develop a
pricing structure for the uninsured that is more reflective of the
actual cost of providing the care, and which will provide prices
comparable to managed care pricing for all aspects of uninsured care.
In the interim, we believe our charity care and financial discount
policy provides necessary relief for those individuals who are in
financial need.
With regard to collections, we have worked hard to develop a policy
that strikes a careful balance between our fundamental belief that
people who receive medical care should pay a fair price for those
services, and an understanding that many in our nation lack the
financial ability to do so. But despite the substantial reduction of an
individual's medical expenses through the discount policy, HCA
appreciates that many patients will lack the readily available
financial resources needed to meet what are often unanticipated health
care costs. Medical debt is, and is likely to remain, a difficult issue
for hospitals and patients across the country, and I believe will
become an increasing concern for this nation as a whole. As a medical
services provider, HCA recognizes its fundamental obligation to be a
steward of public health in its local communities. The HCA charity care
and discount policy ensure compassion and consideration for those among
us who simply cannot afford to pay hospital bills.
We feel the process we have in place is one that seeks to help
patients who are needy and willing to work with us to resolve their
debt with our facilities. HCA hospitals will provide individuals with
payment plans that are interest-free and tailored to each patient's
distinct needs and financial ability. One of our challenges in making
these options available, however, is in communication with the patients
themselves. We find some patients do not answer our phone calls and
letters, discuss their financial status, talk about payment plans,
receive assistance with public benefits coverage, or apply for a
reduction under the charity care or discount policy. It is difficult to
effect assistance or financial relief if a patient is unable, or in
many cases, unwilling to give us information.
HCA does employ a collections process, but even then we do our best
to work with our patients as individuals, with sensitivity to their
personal and financial circumstances. If we receive no response to our
phone calls and letters, we eventually place the account with an
external collection agency, which continues to attempt to contact the
patient to work out a reasonable and workable payment plan. In some
instances, this collection effort still yields no response from the
patient, and litigation is the remaining alternative to resolve the
debt; however, we have no desire to compel payment from patients who
have no ability to pay.
We believe our collection policies are reasonable and reflect an
understanding of individual circumstances. Unfortunately, patients who
are financially able yet choose not to pay affect the cost and
availability of healthcare resources to the entire population. When an
individual who is able to pay for medical care refuses to do so, the
resulting debt is a cost of doing business that must be absorbed by the
hospital; and, as with any business, that cost is partially passed on
to the consumer. More importantly, the drain on hospital resources
compromises its ability to continue providing everyone in the community
with quality, affordable care. This situation is magnified at HCA,
because we have nearly two hundred hospitals, but through our
experience we know that every day, in cities all across America,
hospitals are struggling to balance a community's healthcare needs with
a way to pay for care given when the recipients either cannot or will
not contribute financially to the effort.
SUMMARY AND RECOMMENDATIONS
As previously indicated, the cost of ensuring healthcare coverage
for everyone cannot be borne solely by hospitals. I believe Congress,
the Administration, the nation's employers, and all sectors of the
healthcare industry--hospitals, pharmaceutical companies, medical
device manufacturers, insurance carriers, and the physician community--
must work cooperatively and with equal participation to solve this
enormous problem. And if every participant in the process were to play
a meaningful role--as hospitals already do--think how much greater the
potential would be for finding a real solution.
Specifically, I recommend examination of appropriate discounts from
all healthcare industry participants, not unlike the charity care
discounts being provided by hospitals. And I strongly suggest working
with the insurance industry to develop more affordable coverage for the
self-employed, and for small business owners and their employees. We
advocate small business health plans or association health plans.
Let us not forget the individual as well. This country has been
very good to me and to my family, and I believe in its strength and
fundamental fairness; but I also believe each individual plays a part
in his or her destiny. So whatever solution is devised, it must include
an accountability for individuals to take part in the management of and
payment for their healthcare needs. Ultimately, I believe all employers
should be required to provide coverage for their employees.
Finally, I believe some universal healthcare coverage must be
provided for the unemployed. Since the implementation of our charity
care and financial discount policy, our statistics show that over 95%
of those who qualify fall in the vastly lower income levels, and many,
though ineligible for Medicaid, live just above the poverty level.
These people must be given a means by which to receive regular and
preventive medical care.
The bottom line is this: hospitals cannot continue to absorb more
bad debt as they strive to maintain a quality healthcare system for
Americans. As more insurance plans shift a greater burden of the cost
of care to individuals, through higher co-pays and deductibles, the
situation will only get worse. This financial picture will not improve
without the intervention and support of other sectors of the healthcare
industry, the greater business community, the assistance of the
government, and the leadership of individuals such as the membership of
this Committee.
Thank you, Mr. Chairman and members of the Committee for your time
and attention. I will be happy to respond to your questions.
Mr. Greenwood. Thank you.
Dr. Pardes.
TESTIMONY OF HERBERT PARDES
Mr. Pardes. Mr. Chairman, distinguished members of the
committee, and staff, good afternoon. Thank you for convening
this hearing on hospital billing and collection practices
related to the uninsured. The committee's inquiry into these
matters has raised public awareness regarding a serious problem
facing millions of Americans--the lack of health insurance
coverage and ability to pay for necessary medical treatment.
There are more than 43 million Americans living without health
insurance, and millions of others lack coverage for
catastrophic health care expenses. As a result, U.S. hospitals
treat millions of patients each year who can make only minimal
payment, or no payment at all for the medical services they
receive.
My name is Dr. Herbert Pardes, President and Chief
Executive Officer of the New York Presbyterian Hospital. I have
served there for 4 years as CEO, and appreciate the opportunity
to testify and share my insight into and experience with New
York Presbyterian's charity care and collection policies. New
York Presbyterian has always strived to treat each patient
fairly when it comes to how charity care is provided and how
uninsured patients are billed. Through my testimony, I hope to
convey New York Presbyterian's commitment to these important
issues.
After providing a brief description of the New York
Presbyterian Hospital and the community it serves, my testimony
will focus on our charity care efforts as well as our
collection policies and charges.
New York Presbyterian Hospital is the largest single
hospital and academic medical center in the New York
Metropolitan Area. It is comprised of four separate campuses,
collectively serving a large geographic area with many diverse
communities. The vast majority of communities served by New
York Presbyterian are ethnically diverse and economically
distressed, with a large percentage of Medicaid-eligible,
uninsured and underinsured individuals and families, so we
treat a high percentage of Medicaid and uninsured patients.
As a nonprofit, New York Presbyterian maintains strong and
long-standing commitment to meeting the diverse medical and
social needs of the communities it serves. It is especially
committed to our obligation to provide care both to the
uninsured and underinsured in our service area. Each year, we
forego some $70 million in charity care, write off an
additional $70 million in bad debt. We also expend significant
resources in support of very expensive community benefit
programs. Many of our initiatives are directed to the uninsured
and underinsured populations, including a facilitated Medicaid
enrollment program, prenatal assistance program, community
outreach program, and a number of others.
New York Presbyterian is committed to enrolling patients
who are eligible into Medicaid and other government programs We
routinely screen patients for Medicaid eligibility, and assist
them with the enrollment process. For those patients ineligible
for Medicaid and otherwise not insured, we offer charity care
and other financial aid.
New York Presbyterian has implemented a charity care policy
that applies across its campuses. Under this policy, New York
Presbyterian provides charity care and financial aid to
patients with incomes up to 300 percent of the Federal poverty
level, which equates to some $56,550 for a family of four. In
addition, New York Presbyterian routinely assesses patients'
eligibility for assistance from a philanthropic fund. The
philanthropic fund is supported by private donations and used
to pay the medical bills of patients experiencing financial
hardship. To the extent that a patient is ineligible for either
charity care or the philanthropic fund, New York Presbyterian
makes every attempt to establish flexible payment arrangements
based on the patient's individual circumstances. On average, we
collect only 12 to 13 percent of the charges for services to
uninsured patients. After making reasonable efforts to collect
the balances, we must frequently write off some, if not all, of
the uninsured patients' balances, and these write-offs approach
nearly $70 million per year.
New York Presbyterian works to ensure the fair collection
of outstanding patient debts. We have internal policies and
procedures as well as written agreements with our outside
collection agencies. Our collection agencies do not pursue
income executions on a patient's spouse, and we do not permit
foreclosure on a patient's primary residence.
New York Presbyterian must establish charges for thousands
of different items and services. We review our charges
periodically to ensure that they cover costs and are in line
with charges in the New York Metropolitan Area. Inevitably,
increases in health care costs lead to increases in charges.
The increase in health care cost in recent years can be
attributed to a variety of factors, including increased cost of
technology, research, pharmaceuticals, employees, insurance,
and facility expansion and improvement.
Third-party payers are frequently able to negotiate
discounts on these charges based on factors such as volume of
service providers, reduced transaction cost, assurance of
timely payment. New York Presbyterian understands that
uninsured patients do not have the benefit of negotiated group
rates, and so we offer free or reduced-charge care to uninsured
and underinsured patients, and are flexible in establishing
payment arrangements based on patient's individual
circumstances.
At the end of the day, New York Presbyterian stands
committed to meeting the medical and social needs of the
communities we serve. We are also committed to the promotion of
meaningful industry-wide change in how charity care is provided
and the uninsured are billed. We welcome this opportunity to
discuss our charity care and collection policies, and we will
continue to buildupon them to further our commitment to
patients' needs.
Thank you.
[The prepared statement of Herbert Pardes follows:]
Prepared Statement of Herbert Pardes, New York Presbyterian Hospital
Mr. Chairman, distinguished members of the Committee and staff--
good morning, and thank you for convening this hearing on hospital
billing and collection practices related to the uninsured. The
Committee's inquiry into these matters has raised public awareness
regarding a serious problem facing millions of Americans--the lack of
health insurance coverage and ability to pay for necessary medical
treatment. There are more than 43 million Americans living without
health insurance, and millions of others lack coverage for catastrophic
healthcare costs. As a result, U.S. hospitals treat millions of
patients each year who can make only minimal payment, or no payment at
all for the medical services they receive.
My name is Dr. Herbert Pardes, and I am the President and Chief
Executive Officer (``CEO'') of the New York Presbyterian Hospital
(``NYPH'' or ``NYP''). I have served as the CEO of NYPH for four years.
I appreciate the opportunity to testify and share my insight into and
experience with NYPH's charity care and collection policies. NYPH has
worked to promote change in how charity care is provided and how
uninsured patients are billed. Through my testimony, I hope to convey
NYPH's commitment to these important issues.
I. OVERVIEW
New York Presbyterian Hospital (``NYPH'') is the largest, single
hospital and academic medical center in the New York Metropolitan area.
NYPH is comprised of four separate campuses, which collectively serve a
large geographic region with many diverse communities. The vast
majority of communities served by NYPH are ethnically diverse and
economically distressed, with a large percentage of Medicaid-eligible,
uninsured and underinsured individuals and families. As a result, NYPH
treats a high percentage of Medicaid and uninsured patients.
As a non-profit institution, NYPH maintains a sincere and
longstanding commitment to meeting the diverse medical and social needs
of the communities it serves. NYPH is especially committed to its
obligation to provide care to both the uninsured and underinsured in
its service areas. Each year, NYPH spends nearly $70 million in charity
care, and writes off an additional $70 million in bad debt resulting
from the unpaid balances of self-pay patients. NYPH also expends
significant resources in support of its Community Benefit Initiatives,
many of which are directed at the uninsured and underinsured
populations.
NYPH is committed to enrolling eligible patients into Medicaid and
other government programs. NYPH routinely screens patients for Medicaid
eligibility and assists eligible patients with the enrollment process.
For those patients who are ineligible for Medicaid and who are not
otherwise insured, NYPH offers charity care and other financial aid.
NYPH has implemented a charity care policy that applies across all of
its campuses. Under this policy, NYPH provides charity care/financial
aid for patients with incomes up to 300% of the federal poverty level,
or $56,550 for a family of four. In addition, NYPH routinely assesses
patients' eligibility for assistance from the Philanthropic Fund, a
fund which is used to pay the medical bills of patients experiencing
financial hardship. To the extent that a patient is ineligible for
either charity care/financial aid or the Philanthropic Fund, NYPH makes
every attempt to establish flexible payment arrangements based on the
patient's individual circumstances.
NYPH also works to ensure the fair collection of outstanding
patient debt. NYPH has internal policies and procedures, as well as
written agreements with its outside collection agencies. NYPH's
collection agencies do not pursue income executions on a patient's
spouse, and do not force a foreclosure on a patient's primary
residence. On average, NYPH collects only 12-13% of the charges for
services to self-pay patients. After making reasonable efforts to
collect the outstanding monies, NYPH must frequently write off some, if
not all, of the uninsured balances. As noted above, these write-offs
approach nearly $70 million per year. While a portion of this is
reimbursed to NYPH through the New York State Bad Debt and Charity Care
Pool, the write off of bad debt is still a substantial burden on NYPH.
II. NYPH'S CHARGES
NYPH recognizes that rising health care costs are a significant and
growing concern. Increases in health care costs lead to increases in
our charges. The increase in health care costs in recent years can be
attributed to a variety of factors, including the increased costs of
technology, research, pharmaceuticals, employees, insurance, and
facility expansion and improvements. NYPH must absorb these increased
costs, and must update its chargemaster accordingly. Generally
speaking, NYPH's charge increases in recent years have been due to an
overall increase in these types of operational expenses.
NYPH understands that uninsured patients do not have the benefit of
negotiated group rates. As such, NYPH has been and remains committed to
providing free or reduced charge services that are medically necessary
to persons who are determined to be unable to pay for their care, in
whole or in part, based on their financial situation. A description of
NYPH's charity care efforts is set forth below.
III. NYPH'S PROVISION OF CHARITY CARE
As the largest hospital in the New York metropolitan area, NYPH is
serious about its commitment to provide medical care to both the
uninsured and underinsured in its community. NYPH is continually
modifying and improving its charity care policies to meet the three-
fold challenge of surviving in the face of burgeoning costs and
cumbersome federal and state regulation, continuing to provide high-
quality, innovative medical care, and serving the needs of the
uninsured and underinsured patients in its community. To this end, NYPH
has recently revised its charity care guidelines in order to implement
a new Charity Care/Financial Aid Policy (``Charity Care Policy'')
across all four of its campuses. NYPH's Charity Care Policy allows NYPH
staff to consistently and fairly assess each patient's ability to pay
for medical services, and provides a level of assistance commensurate
with their resources.
NYPH's provision of charity care/financial aid is not intended to
be a substitute for existing government entitlement or other assistance
programs. Based on the individual circumstances of each patient, NYPH
makes every reasonable effort to explore appropriate, alternative
sources of payment and coverage through Medicaid or other public and
private programs. Eligibility for charity care/financial aid will be
determined only after eligibility for Medicaid and other public and
private programs has been assessed. This allows NYPH to provide charity
care/financial aid to those patients that are most in need of
assistance.
A. Charity Care/Financial Aid Policy
1. Eligibility and Application Process
NYPH's Charity Care Policy defines charity care/financial aid as
``the provision of free or reduced charge services that are medically
necessary to persons who are determined to be unable to pay for their
care in whole or in part, based on their financial situation.'' While
charity care/financial aid is aimed at NYPH's uninsured population,
insured patients who face extraordinary medical costs, not covered by a
third party payer, may be eligible for assistance. As a general rule,
other than cases of medical emergency, NYPH offers charity care/
financial aid to individuals who reside within the communities it
serves.
In assessing a patient's eligibility for charity care/financial
aid, NYPH asks applicants to provide certain information and/or
documentation related to their financial resources. NYPH asks
applicants to submit the following:
Household income for the most recent three months;
Household income for the most recent twelve-month period;
Number of persons in the household and their relationship to the
applicant;
Net assets (e.g., value of personal and real property, insurance
policies, bank accounts, and other investment accounts); and/or
Form 1040 (U.S. Individual Income Tax Return) or, in the absence of a
Form 1040, any other documentation that can be used to
substantiate household income.
NYPH reviews the application and documentation in making a decision
regarding the patient's ability to pay for the services provided, and
eligibility for charity care/financial aid. NYPH will provide free or
reduced care to uninsured applicants with incomes below 300% of the
federal poverty level (i.e., $56,550 for a family of four), and who
have no significant assets other than their primary residence. The
federal poverty level is listed in the Federal Poverty Guidelines for
Non-Farm Income, which is published on an annual basis. Exceptions to
the income levels may be authorized by a designated hospital executive.
If a patient is found to be ineligible for charity care/financial aid
based on their available assets and income, the patient's eligibility
may be re-evaluated at a later date. Regardless, NYPH attempts to
establish flexible payment arrangements based on the patient's
individual circumstances.
2. Communication of NYPH's Charity Care Policy to the Community
NYPH has made an effort to disseminate information about its
Charity Care Policy to the communities it serves. NYPH has shared
information about the policy with various community health agencies and
other local organizations that assist individuals in financial need.
NYPH also provides information about its charity care/financial aid
programs in the Emergency and Admitting Departments of each of its
facilities. In so doing, NYPH provides the information in the primary
language spoken by the patients served by that facility. Finally, NYPH
has trained the personnel who come in contact with uninsured and
underinsured patients so they may educate such patients about the
availability of, and process for obtaining charity care/financial aid.
B. The Philanthropic Fund
NYPH's Philanthropic Fund is used to provide aid to patients
experiencing financial hardship. The Philanthropic Fund, which is
supported by private donations, contains approximately three million
dollars in available funding on an annual basis.
Both insured and uninsured patients may apply for financial aid
from the Philanthropic Fund. In order to receive monies from the Fund,
the patient must submit a letter of hardship which details their
financial circumstances, and explains why the patient is unable to pay
his or her medical bills. The patient may also be required to submit
financial documentation, such as W-2 forms, Form 1040s and mortgage
statements. Upon receipt of the patient's letter and documentation,
NYPH will make a determination as to the eligibility of the patient. If
the patient is deemed to be eligible, NYPH will forgive the patient's
entire balance due to the hospital, subject to the availability of
funds. Monies from the Philanthropic Fund are allocated on a first-
come, first-served basis.
IV. NYPH'S COMMUNITY BENEFIT INITIATIVES
In addition to providing nearly $70 million in charity care per
year, NYPH expends significant resources in support of its Community
Benefit Initiatives. Through these initiatives, NYPH collaborates with
various local health agencies to ascertain and respond to the myriad of
health care needs of its communities. NYPH incorporates the outcome of
these assessments into its strategic and program planning process in an
effort to target needed services to residents of its communities. NYPH
currently funds approximately twenty Community Benefit Initiatives. The
following initiatives are directed at the uninsured and underinsured
populations:
NYPH's Facilitated Medicaid Enrollment Program is aimed at
enrolling the uninsured in the Medicaid Program. NYPH funds community-
based organizations, throughout its five targeted neighborhoods, which
hire bi-lingual community-based staff to serve as liaisons. These
liaisons seek out the uninsured by visiting public housing, homeless
shelters, churches, schools, health fairs and other community events.
The liaisons pre-screen uninsured individuals to determine if they are
eligible for Medicaid, assist them in completing the application and
gathering required documentation, and provide referrals to Medicaid
application offices located throughout the City. As a result of these
efforts, approximately 6,500 uninsured individuals have been enrolled
in the Medicaid Program in a single year.
NYPH's Pharmacy Assistance Program makes affordable pharmaceuticals
available to the uninsured and underinsured patients who do not have a
prescription drug benefit. The Pharmacy Assistance Program currently
works with over 130 pharmaceutical manufacturers to offer more than
1100 legend drugs to eligible patients. Under this Program, patients
pay a $5 co-payment for a three-month supply of medicine. Since its
inception in August 2002, the Pharmacy Assistance Program has assisted
many uninsured and Medicare patients to obtain the prescriptions they
need at an affordable cost.
NYPH's Prenatal Care Assistance Program seeks to enroll low-income
pregnant women into the Medicaid Program. NYPH Medicaid counselors, at
both the Columbia Presbyterian and Cornell campuses, pre-screen female
outpatients in an effort to determine if they are eligible for
participation in the Prenatal Care Assistance Program. The Prenatal
Care Assistance Program is a State-sponsored initiative that expands
the Medicaid eligibility criteria to include pregnant and postpartum
women. NYPH maintains an electronic Medicaid application program that
allows eligible pregnant women to receive Medicaid numbers within 48
hours.
In 1998, the Columbia University School of Dental and Oral Surgery,
in partnership with NYPH, the Mailman School of Public Health, Harlem
Hospital, and Alianza Dominicana, became one of thirteen sites
nationwide to be awarded a Community Voices Health Care for the
Underserved Initiative grant by the W.K. Kellogg Foundation. This led
to the formation of Northern Manhattan Community Voices Collaborative
(``NMCVC''). NMCVC is a partnership of over 35 community-based
organizations, faith-based groups, health care providers, and
institutions working to address the health care needs of the Central
Harlem and Washington Heights/Inwood communities. Under the NMCVC
Program, NYPH has worked collaboratively with its partners to increase
Medicaid and Child Health Insurance Plus (``CHIP'') enrollment in the
targeted communities.
NYPH's Community Outreach Program is also aimed at enrolling the
uninsured into health insurance programs. NYPH substantially expanded
its Community Outreach Program in 2001, when the number of Outreach
staff grew from 12 to 36. The increase in staffing allowed NYPH to
develop a grassroots strategy aimed at the uninsured members of the
community. Outreach staff approach individuals in schools, day care
centers, supermarkets, check cashing centers, Department of Labor
sites, consulates and many other community locations. The staff members
educate the patients about health insurance options and attempt to
enroll them into CHIP, Family Health Plus and Medicaid plans.
NYPH's Breast Cancer Screening Partnership is a program, directed
by Columbia Presbyterian Hospital, which provides free breast and
cervical cancer screening to uninsured and underinsured women. To be
eligible for the program, a woman must be over the age of 40, and have
either no insurance coverage or insurance that does not cover medical
screenings. The Partnership conducts outreach, which includes education
and recruitment of women, through community-based and faith-based
institutions. The Partnership provides ease of access through its two
mobile mammography units, and through formal referral linkages with
Harlem Hospital and the Union Health Center.
The Community Benefit Initiatives, described above, clearly
demonstrate NYPH's strong commitment to the economically disadvantaged
communities that it serves. NYPH makes every effort to obtain health
insurance for the uninsured and underinsured, as evidenced by the
Facilitated Medicaid Enrollment Program, the Prenatal Care Assistance
Program and the Community Outreach Program. To the extent that patients
are not eligible for Medicaid programs, NYPH provides low cost
prescription drugs and free preventative services through several of
its Community Benefit Programs.
V. NYPH'S COLLECTION POLICIES
NYPH works to ensure the fair collection of all outstanding patient
debt. NYPH's handling of outstanding patient bills differs depending on
a variety of factors, including the amount of the balance, whether the
services were performed in the outpatient or inpatient setting, and the
age of the account. For example, outpatient balances under $1,000 are
handled by NYPH's Patient Financial Services Department.
Representatives in the Patient Financial Services Department may take
varying approaches based on the particular patient's needs and
circumstances. The patient representative may assess a patient's
eligibility for Medicaid, settle the account for less than the full
balance, negotiate flexible payment arrangements, or assess the
patient's eligibility for charity care from the Philanthropic Fund. The
patient representative's goal is to tailor the arrangement to the
individual patient's ability to pay.
NYPH has internal policies and procedures, as well as written
agreements with its outside collection agencies and law firms
(hereinafter ``outside collectors''). NYPH's outside collectors do not
pursue income executions on a patient's spouse, and do not foreclose on
a patient's primary residence. NYPH's outside collectors routinely
assess patients' eligibility for Medicaid and other government
programs. To the extent the patients are ineligible, the outside
collectors provide the patient with multiple opportunities to pay on
the account. NYPH's outside collectors are expected to negotiate
flexible payment arrangements based on the patient's individual
circumstances, and to settle accounts for a percentage of the balance.
On average, NYPH collects only 12-13% of the charges for services
to uninsured patients. After making reasonable efforts to collect the
outstanding monies, as required under the Medicare program, NYPH must
frequently write off some, if not all, of the uninsured or self-pay
balances. NYPH's bad debt expense approaches nearly $70 million per
year.
Mr. Greenwood. Thank you.
Mr. Fetter.
TESTIMONY OF TREVOR FETTER
Mr. Fetter. Thank you, Mr. Chairman. I appreciate this
opportunity to address the subcommittee.
My name is Trevor Fetter. Last September, I was named Chief
Executive Officer of Tenet Healthcare Corporation. Prior to
that, I had served since November 2002 as President of Tenet. I
have spent nearly 9 years as an executive in the health care
field.
Tenet is America's second largest investor-owned hospital
company. Last year, we treated more than 9.5 million patients
at our 99 hospitals in 14 States across the Nation. We employ
more than 100,000 people in our hospitals. Every one of us at
Tent is very familiar with the growing uninsured crisis in our
country. We deal with it every single day, and the burden is
rapidly increasing.
Tenet, like most hospital operators, has always provided
charity care to those truly indigent patients with no ability
to pay. But in recent years, we have been forced to absorb the
sharply rising cost of treating uninsured patients who are not
indigent, but for a variety of reasons can't or won't pay for
the services that we provide.
It is important to note that the uninsured crisis is
definitely not confined just to the unemployed and to the
indigent. In some communities that we serve, as many as a third
of the uninsured patients have jobs, but no health insurance.
We estimate that the number of uninsured patients in Tenet
hospitals has now risen to more than 500,000 per year. This has
an enormous cost. So far this year, Tenet has incurred about
$20 million a month in cost to provide care to uninsured
patients. It costs us an additional $15 million per month to
provide charity care to people whom we believe cannot afford to
pay us anything.
As hospitals continue to absorb costs of that magnitude to
provide free care to uninsured and indigent patients, their
ability to invest in capital improvements, expanded services,
and new technology becomes limited. My greatest objective is to
improve the quality of care that is provided by our hospitals,
but my greatest concern is that the uninsured crisis may
compromise our ability to reinvest appropriately in our
hospitals.
We know that Tenet alone cannot fix the uninsured problem.
Only when the uninsured have insurance will we truly solve this
challenge. But we have committed ourselves to do what we can to
ease this burden until more fundamental solutions are
developed.
That led us, in January 2003, approximately a month after I
made the comment that the chairman referenced in his opening
statement, to adopt what we call Tenet's Compact With Uninsured
Patients. The Compact has radically changed many of the ways
that Tenet hospitals interact with uninsured patients,
including a dramatic overhaul of some collection practices.
Under our Compact, we do not sue uninsured patients to collect
unpaid bills, if the patient is unemployed or lacks significant
income. And we also do not impose liens on homes if they are a
patient's only significant asset. These two changes in our
collection practices have reduced by 90 percent our patient
litigation and lien activity since 2002.
A key aspect of the Compact is our uninsured discount
program which we are currently rolling out. Uninsured patients
in Tenet hospitals who do not qualify charity care or
government health coverage will be offered a substantial price
discount similar to those negotiated by HMOs for their members.
Tenet's Compact provides uninsured patients with meaningful
price discounts and less onerous collection practices, but I
must emphasize that it is simply no substitute for health
insurance.
As Congress continues its efforts to address this problem,
I urge you to keep in mind that the most formidable challenge
faced by uninsured patients, as well as their hospitals and
other health care providers, is the lack of affordable health
insurance. With our Compact, all of us at Tenet believe we are
doing our part to ease the burden of this crisis on the
patients who need that the most.
We welcome this opportunity to work collaboratively with
Congress and others to find broader answers to this pressing
challenge.
I applaud the subcommittee's leadership in evaluating the
uninsured crisis and how our country can do a better job of
providing health care for all Americans, and I would be happy
to answer any questions that you might have.
[The prepared statement of Trevor Fetter follows:]
Prepared Statement of Trevor Fetter, President and Chief Executive
Officer, Tenet Healthcare Corporation
Thank you, Mr. Chairman. I appreciate this opportunity to address
the Subcommittee.
My name is Trevor Fetter. Last September, I was named Chief
Executive Officer of Tenet Healthcare Corporation. Prior to that, I had
served as President of Tenet since November 2002. I have spent nearly
nine years as an executive in the health care field.
Tenet is America's second largest investor-owned hospital company.
Last year, we treated more than 9.5 million patients at our 99
hospitals in 14 states across the nation. We employ more than 100,000
people in our hospitals. Tenet's largest regions are in California,
Texas and Florida. We also operate hospitals in Alabama, Georgia,
Louisiana, Massachusetts, Mississippi, Missouri, Nebraska, North and
South Carolina, Pennsylvania and Tennessee.
This has been a challenging time for our company. Last year we
reported a net loss of $1.4 billion. Tenet's challenges have galvanized
our board of directors, our new management and our employees to make
our company a model partner with federal and state payors and
regulatory agencies. In the past 18 months, we have made enormous
progress in the areas of compliance, quality and transparency, but all
of us know that we have to regain the full trust of the government, our
patients and our physicians if Tenet is to succeed in its mission.
The specific subject you have asked me to address is the growing
challenge of providing health care to uninsured and under-insured
Americans, and it has two parts. The first requires all of us to
recognize that individuals without insurance are not represented by
large payors and therefore do not benefit from negotiated pricing. The
second part is the limited ability that these patients have to pay for
health care, regardless of the price. Tenet has taken action we believe
is appropriate on both fronts, but our company--and our hospitals--
cannot solve this problem alone.
Every one of us at Tenet is very familiar with the growing
uninsured crisis in our country. We deal with it every single day, and
the burden is rapidly increasing. Tenet, like most hospital operators,
has always provided charity care to truly indigent patients with no
ability to pay. But in recent years, we have been forced to absorb the
sharply rising cost of treating uninsured patients who are not indigent
but for a variety of reasons can't or won't pay for the care we
provide. I think it's important to note that the uninsured crisis is
definitely not confined just to the unemployed and the indigent. In
some of our markets, as many as a third of our uninsured patients have
jobs, but no health care insurance.
We estimate that the number of uninsured patients receiving care in
Tenet hospitals has now risen to more than 500,000 per year. This has
an enormous cost. So far this year, it has cost us about $100 million a
month to provide care to patients where neither an insurance company
nor the patient has paid us. About three-quarters of that total was
from uninsured patients. In addition, Tenet provides $15 million per
month in charity care to people who we believe can't afford to pay us
anything.
What's most alarming is how the uninsured totals have grown just
recently. While our charity care increased 15 percent from 2002 to
2003, our write-offs from unpaid patient bills--the vast majority of
them uninsured--rose by 49 percent.
As hospitals continue to incur this significant and rapidly growing
cost, their ability to invest in capital improvements, expanded
services and new technology becomes limited. My greatest objective is
to improve the quality of care provided by our hospitals. But my
greatest concern is that the uninsured crisis may compromise our
ability to do that.
When I was named President of Tenet in November 2002, this company
faced many difficult issues. Our new management team set out to address
each one. Among the things we faced were some very vocal complaints
that our hospital charges and collection practices were unfair to
uninsured patients. I knew that Tenet alone could not fix the uninsured
challenge. Only when the uninsured have insurance will we truly solve
this problem. But I was determined to see what Tenet could do to ease
the burden until more fundamental solutions are developed.
In January 2003, we adopted our own approach to the uninsured
crisis. We called it Tenet's Compact With Uninsured Patients.
The Compact has radically changed many of the ways Tenet hospitals
interact with uninsured patients, including a dramatic overhaul of some
collection measures. The paramount goal of the Compact is to treat all
Tenet patients fairly and with respect, regardless of their ability to
pay. We start by giving our uninsured patients extensive financial
counseling to help them access all state and federal programs, such as
Medicaid, that may help pay for their health care. As part of this
process, we also determine if the patient is indigent and therefore
eligible for Tenet's charity care program.
Under our Compact, we do not sue uninsured patients to collect
unpaid bills if the patient is unemployed or lacks significant income.
And we also do not impose liens on homes if they are a patient's only
significant asset. These two changes in our collection practices have
reduced by 90 percent our patient litigation and lien activity since
2002.
One of the unique aspects of the Compact is our uninsured discount
program. Every uninsured patient who does not qualify for charity care
or government health coverage will be offered a substantial price
discount similar to those negotiated by HMOs for their members.
Although our uninsured patients have benefited from all other
features of the Compact since January 2003, Tenet has not implemented
the uninsured price discount until very recently. That's because we
wanted to be sure our program complied with all federal and state laws.
Earlier this year we concluded that Tenet's discount program is in
compliance with all federal laws, but there are two states where we
have had to take interim measures. By the end of July, the discount
will be available in virtually all of our hospitals, except those in
Texas and California. We are still awaiting resolution of regulatory
issues in those two states. In the interim, we are significantly
expanding our charity care policy there to include many more uninsured
patients until our discount is available.
As Congress continues its efforts to address this problem, I urge
you to keep in mind that the most formidable challenge faced by
uninsured patients--as well as their hospitals and other health care
providers--is the lack of available and affordable health insurance.
Tenet's Compact provides uninsured patients with meaningful price
discounts and less onerous collection practices. But it is no
substitute for health insurance. Even with the price discount offered
by our Compact, uninsured patients still must pay their own bills. Not
many Americans with health insurance would find it easy to pay their
own medical bills, even if they were discounted to HMO-style rates.
With our Compact, all of us at Tenet believe we're doing our part
to help ease the burden of this crisis on the patients who need help
the most. We welcome the opportunity to work collaboratively with
Congress and others to find broader answers to this pressing challenge.
I applaud the Subcommittee's leadership in evaluating the uninsured
crisis and how our country can do a better job to address the health
care of all Americans. I'd be happy to answer any questions the
Subcommittee may have.
Mr. Greenwood. Thank you very much, Mr. Fetter. The Chair
recognizes himself for 10 minutes for inquiry.
You all heard me quote Mr. Fetter's comments, and let me
just refer back to them again. He said, ``In other words, the
entire hospital industry renders its highest bills to the
customers who are least able or likely to pay. The problems
that this creates are obvious. The bills are tremendous and
incomprehensible to most people. The patient leaves the
hospital presumably after some traumatic event, and the
hospital ill adds to the trauma,'' and I think all of you have
essentially recognized that this has been a problem. All of you
have essentially testified that you have made changes in your
billing practices in order to deal with this problem.
The thing that I am trying to ascertain is when did this
occur to you, and why? In other words, this is a long-standing
issue. Mr. Fetter said in his statement it is a long-standing
issue. When did these issues first raise concerns in your mind,
and what did you do about it? I would just like the panel go
down from my left to right.
Mr. Tersigni. Mr. Chairman, we always had policies within
our health ministries. What we didn't have was a uniform policy
across all of Ascension Health. And so we began on the journey
beginning in early 2003, actually before the subcommittee's
investigation, and what we learned was that our policies
weren't always explicit and each hospital did things
differently. We really couldn't speak, as an Ascension Health
policy, that there really wasn't a process to measure how well
our charity care programs were doing, and then our billing and
collection wasn't receiving the level of attention and
oversight that we believe we needed to do from a systemwide
perspective. And, therefore, we went about, as we are beginning
to integrate our system, management systems, in creating a
systemwide policy that I indicated that our board approved.
Mr. Greenwood. I am going to ask everyone to be brief
because I have a series of questions and limited time, so just
basically when did you start working specifically on the
question of trying to make sure that the uninsured were not
billed charges. I know that all hospitals, all of your systems
have long-standing charity care procedures and so forth, but on
the specific question that this committee is focused on, making
sure that the uninsured aren't billed charges, when did you
recognize this is a problem, and when did you take action to
correct it?
Mr. Lofton. Again, we have had policies in place to help
them, so the assistance has been there. It has been done on an
individual patient-by-patient basis. The investigation brought
to light a serious problem that was there. We definitely could
have been more purposeful in addressing it as a system.
CHI itself is still a relatively new system with a
collection of hospitals, and each hospital had their own
policies and practices. So, last year was when we began to look
at it from a systemwide basis and looked to put systemwide
policies in place.
Mr. Greenwood. Very well. Mr. Bovender.
Mr. Bovender. In late 2002, I asked my staff to start
formulating a program where we could provide policy discounts
to charity care discounts, as I enumerated in my testimony. I
was told by both inside and outside legal counsel at the time
that we had to get clearance for this through CMS, and so we,
in March 2003, sent a letter detailing our plan to CMS. They
responded in June 2003, saying that they thought the plan was
good, fit within the regulations, but we would have to get
individual permission from each of our five fiscal
intermediaries in order to implement the plan.
Mr. Greenwood. What was the impetus for you to seek that
legal advice? Was it this investigation? Was it the lawsuits
that Tenet was experiencing? What was it?
Mr. Bovender. It was mainly seeing the growing problem and
the attention both this committee as well as the problems that
Tenet has alluded to earlier were seen, and I just said to our
people very frankly, we need to fix this problem, it is not
conscionable. This kind of disparity between what is actually
being charged to the uninsured and what is appropriate given
our managed care discounting and other rates, and it needed to
be changed. But it took a process through CMS to get approval.
We got approval in October. We have implemented the policy. And
as I have said, it has not been perfect. And we have learned a
lot. In fact, about 3 weeks ago, through the open forum that
the Office of Inspector General did in HHS, they opened the
doors a lot wider for discounting policies, and we are going to
go back and actually, as I mentioned in my testimony, implement
some new plans, which won't replace the charity discount, but I
think will change the pricing to the uninsured based upon
actually some of the things that Dr. Anderson was testifying
about earlier.
Mr. Greenwood. Dr. Pardes.
Mr. Pardes. We have had policies trying to address the
problems of the uninsured for some time, Mr. Chairman, and
those have included developments like reducing the number of
collection agencies, taking more of the collections under our
control, and trying to interfere with inappropriate practices.
Your investigation I think has spurred that further, and I
think you should be credited for it.
Mr. Greenwood. Thank you. Mr. Fetter.
Mr. Fetter. Well, those comments that you cited I made in
December of 2002. In January 2003, we announced this Compact
With the Uninsured, having those two features I mentioned, the
different collection practices as well as the discounting.
We did immediately take action to seek an opinion from HHS
with respect to the discounting, and it was almost a year later
that the Secretary clarified HHS policy. We then took immediate
action to roll out the discounting plan which we are doing now.
I would also, as Mr. Bovender just did, like to applaud HHS
for holding those open forums. We found them to be exceedingly
helpful in clarifying a variety of regulatory issues.
Mr. Greenwood. Thank you. And let me be clear. I am not
interested in knowing whether this investigation was the
inspiration for your change so we can take credit for it so
much as I want to examine the question of whether the Congress
feels a need to go on and do something legislatively, which I
think you would probably, to a person, prefer that we did not.
And so we are interested in seeing the impact of all of these
events on the hospitals across-the-board.
Let me ask this question now. What is the most--using
standards like Medicaid, Medicare, the average third-party
payment in your charges, what is the most highest price that an
uninsured person now could pay at your facilities? Dr.
Tersigni.
Mr. Tersigni. Our average patient cost per day for caring
for an uninsured is about $1376, of which we collect an average
of $155.
Mr. Greenwood. I am not sure that that exactly answered my
question. The question is, when an uninsured person comes into
your hospital, what is the most they could pay? Is it possible
now, given the procedures that you have, for that person to be
billed charges?
Mr. Tersigni. All of our patients presently are billed
charges. In the case of the uninsured, as they enter one of our
facilities, the financial counselors will begin working with
them, and the first questions they ask are, do you have
insurance, and then we begin the process of looking at the
means to pay or the inability to pay.
Mr. Greenwood. But, again, someone says ``I have no
insurance.'' Is it possible, in your system, for that person to
walk away from the hospital with an obligation equal to your
charges?
Mr. Tersigni. Not if we have all of the financial
information necessary to determine that they are in financial
need.
Mr. Greenwood. Mr. Lofton.
Mr. Lofton. One of the considerations that we have to look
at is differences across the country. I have heard a lot of
generalizations about charges and we have seen cost and average
charges put up, so the answer to your question will vary based
on where the location of the hospital is. We have some markets
where there is very little discounting from charges, so the
variation that was talked about earlier is very small between
what a managed care patient will pay and what a full-charge
patient will pay.
Mr. Greenwood. Is it still possible for an uninsured person
to pay significantly more than, let us say, third-party payers
pay at your hospital?
Mr. Lofton. That scenario is possible, but again if the
information is provided--one of the things that the advice and
guidance that the Secretary issued allows us to do, if we have
the proper information with that given patient, we are able to
determine whether there is a medical indigency reason whether
we can discount that bill. So a lot of it has to do with the
patient providing adequate and proper information for us to
make the proper determination as to what they should pay. There
is no clearcut answer to your question.
Mr. Greenwood. Mr. Bovender.
Mr. Bovender. In our circumstances, assuming that we can
qualify them under that 400 percent or below criteria, then the
payment will range from anywhere near a managed care rate down
to a 200 percent or below the Federal poverty guidelines, it
would be free. Above that level, above 400 percent now, they
are going to be charged charges. Under the plan that we are
evaluating now, hopefully we can move everyone uninsured into a
price point that is essentially around probably the 95th
percentile of all of our managed care contracts as a standard.
Mr. Greenwood. Now, that is the clearest answer I have had
so far. That is quite straightforward. Dr. Pardes.
Mr. Pardes. I would say, Mr. Chairman, that about--the bulk
of our patients either are either in Medicaid or Medicare
programs, or are under plans. That least about 2 percent who
are self-pay. We do have some people who are international
patients and wealthy patients who will pay charges. We
individually assess every other individual, and for those
individuals who have financial distress, we work out individual
arrangements so they will pay substantially below the charges.
Mr. Greenwood. Mr. Fetter.
Mr. Fetter. Once one of our hospitals has implemented our
Compact With the Uninsured Discounts, uninsured patients would
not be rendered a bill of charges. They would be rendered a
bill that would approximate the 75th percentile of what we are
paid in that market by managed care.
Prior to the implementation of the Compact, an uninsured
patient could receive a bill at full charges, but I would like
to point out----
Mr. Greenwood. When do you expect all of your hospitals to
have that contract in place?
Mr. Fetter. By the end of July, with the exception of the
States of California and Texas, where there are certain State
laws that have presented us with difficulties in implementing
that. But I would like to point out with respect to those
patients who would receive a bill at full charges, that was
represented by the Orange bar, I believe, on the graph that you
showed in the beginning. The collection rate from those
patients is actually less than 10 percent.
Mr. Greenwood. In the aggregate, I understand that. What we
have been worried about in this committee is that
disaggregated, that some individuals of limited means get
hammered with charges, and that is the only thing that we think
is unfair about it. Speaking for myself, that is the unfairness
of the system.
The gentlelady from Colorado.
Ms. DeGette. Thank you, Mr. Chairman. I would like to ask
you gentlemen about something you keep referring to, which is
about a year ago when you said you got clarification from CMS
as to the policies, and that combined with these pending
hearings were what caused you to really re-examine your
policies that related to the uninsured, and to change them.
What policy was it from CMS that you thought had to be
clarified? Mr. Fetter, we will just start with you, I think.
Mr. Fetter. Thank you. And I would point out I believe that
HHS guidance was actually issued in April of this year, not a
year ago. I referenced a year. That was more than a year ago.
Ms. DeGette. I am sorry. What policy was it that you
thought needed to be clarified?
Mr. Fetter. The policy that required that charges be
uniform for all patients, and that discounts could be
negotiated with individual payers, but there must be a charge
master, and the charge master must be the same, regardless of
the----
Ms. DeGette. For all patients. Now, was that a written
policy, or was that more of an understanding?
Mr. Fetter. You know, I am not an expert in----
Ms. DeGette. Does anybody know? Was that--Mr. Bovender?
Mr. Bovender. We were told by both our inside counsel and
outside counsel, Medicare experts, attorneys who are experts on
the Medicare law, that you could not arbitrarily, without
reference to some indigence test, discount your charges to
individual patients. And so that is what led us in March to
send a letter of request detailing our discount program that I
talked about before and, as I said, we got a letter back in
June that said that CMS thought the program was fine, but it
needed approval by each of our five fiscal intermediaries.
Ms. DeGette. And what Mr. Fetter just described about
having to have the same charges for everyone, was that everyone
else's understanding as well? Mr. Lofton?
Mr. Lofton. Yes. Ours was we could not charge individual
patients, there had to be consideration for discount.
Ms. DeGette. And was that also a basis of your previous
understanding, that CMS was requiring that you aggressively
pursue these collections as well?
Mr. Lofton. Yes. In the past, OIG has been very forthright
in making it clear about waiver of co-payments or reductions of
patient bills for individual patients.
Ms. DeGette. Now, do all of you think that has now been
cleared up by HHS?
Mr. Lofton. Yes.
Mr. Bovender. Yes.
Ms. DeGette. Okay. And so that is why you are now
instituting these policies, in addition with these pending
hearings, correct?
Mr. Fetter. Yes.
Ms. DeGette. I want to ask about the collection process
because you have all talked about how you are really making
these efforts to make accommodations for the uninsured
particularly, the less affluent uninsured, and so on, but I
just said this actually in a different hearing in this
committee on Tuesday of this week--the devil is really in the
details.
So, I want to ask you when--and I guess I will start with
you, Dr. Tersigni--what is your organization's policy when you
send these cases to a collection agency?
Mr. Tersigni. Well, we have asked the collection agencies
to comply with----
Ms. DeGette. Do you have a policy after a patient has been
discharged from the hospital, how long is it before you will
send it to a collection agency?
Mr. Tersigni. It depends on the circumstance.
Ms. DeGette. So you don't have a firm policy on that?
Mr. Tersigni. We don't have a firm policy of when it goes
to collection.
Ms. DeGette. Mr. Lofton, do you have a firm policy on that?
Mr. Lofton. I don't know if I can say policy. Our practice
is that a bill will go to a collection agency 90 to 120 days
following discharge. And during the course of the next 150
days, if that bill has not been acted on or been active during
that time, we take it back from the collection agency. So, 90
to 120 days we send it, and then another 150 days we take it
back.
Ms. DeGette. And is there some discretion involved within
that 90 to 120 days, or does every case go to a collection
agency at that point?
Mr. Lofton. It is discretion within that based on if they
have already worked with a given patient or family and they
think that they have a resolution, it does not have to go.
Ms. DeGette. Mr. Bovender?
Mr. Bovender. Our general policy is 180 days, but it does
also have the exceptions that Kevin mentioned, which is that if
we are working actively with a patient, either qualifying them
for Medicaid or on charity care policy, obviously that doesn't
happen.
Ms. DeGette. Dr. Pardes?
Mr. Pardes. We try to handle most internally, and then we
don't send it out to collection agencies until at least 6
months have passed.
Ms. DeGette. Six months have passed? Is that for every
bill, or certain kinds of bills?
Mr. Pardes. If there is an unpaid bill, then we would first
have bills sent out over a 6-month period before it went to a
collection agency.
Ms. DeGette. Mr. Fetter?
Mr. Fetter. Our policies are similar to what Mr. Bovender
and Dr. Pardes described, with the exception that we use an
internal staff, we do not generally send bills out to
collection agencies.
Ms. DeGette. Do you put it on people's credit reports after
a period of time, if you are using an internal----
Mr. Fetter. Yes.
Ms. DeGette. And how long is that?
Mr. Fetter. That would be also after about 180 days.
Ms. DeGette. Okay. I don't know if you heard the
testimony--I think you were all here--the testimony of the
previous panel. One of the panelists said that actually once it
goes to a collection agency and is listed on someone's credit
report, it may make it more difficult for them to get a job or
find some other method of paying their bills. Did you hear that
testimony? Mr. Bovender? What do you make of that?
Mr. Bovender. I think that is true, but I have been told by
people who do credit scoring and are in this type of business,
that hospital debt is not viewed at the same level as mortgages
or car payments. You may know that if you were to rank how well
people pay different portions of their debt, from first to
last, mortgages being first, hospitals are ninth on that list.
The only ones worse than us as far as payment are the student
loan programs.
Ms. DeGette. Let me ask you this question. Do any of you
utilize--this has been all over in the press, what they call
body attachments. They don't have those in Colorado. I
practiced law for a number of years, and they don't have that
civil arrest or body attachments, but in some States they do,
and of course those are some of the horror stories, people who
can't or don't pay their hospital bill and end up in jail.
Dr. Tersigni, do you know if your organization uses body
attachments?
Mr. Tersigni. I can't answer whether we have in the past
used body attachments. I know that presently that is not part
of our policy.
Ms. DeGette. And when you send something out to collection,
do you tell them not to go for body attachment?
Mr. Tersigni. Yes. As a matter of fact, each of our
collection agencies have to sign an agreement with us that
comply with our policy.
Ms. DeGette. Would you mind supplementing your testimony
today with a copy of that agreement?
Mr. Tersigni. Sure.
Ms. DeGette. That would be great. While I am asking
questions, what about attaching people's homes? Dr. Tersigni?
Mr. Tersigni. Again, we want to make sure that we are not
taking advantage of people's situation, so our financial
counselors will work with them, and we do, in some cases, have
liens, but it is very clear that we don't want to have any
foreclosures or do anything that is deleterious to their homes
or----
Ms. DeGette. Well, I am here to tell you, a lien on
someone's home is deleterious. Is your policy with respect to
liens on people's homes also in your agreement with the credit
agencies?
Mr. Tersigni. Yes, it is.
Ms. DeGette. Mr. Lofton, I think you testified that your
policies say no bench warrants, no court action without
approval, and no liens, is that right?
Mr. Lofton. That is correct. Every one of our contracts
have been amended to state such, that we would not do that, on
a primary residence.
Ms. DeGette. How long has that been your policy?
Mr. Lofton. That has been in effect since April 1st.
Ms. DeGette. April 1st, 2004?
Mr. Lofton. 2004.
Ms. DeGette. Why did you institute those policies, Mr.
Lofton?
Mr. Lofton. Well, again, we took this opportunity to look
at our practices. CHI cares deeply about the poor uninsured and
underinsured. And we have been working with those individuals
on a case-by-case basis, but we felt that we would take a look
at that from a system perspective, and the boards of every one
of our local hospital systems adopted that contract change.
Ms. DeGette. Mr. Bovender, does your organization allow
body attachment?
Mr. Bovender. No, ma'am.
Ms. DeGette. Is that in your written policies?
Mr. Bovender. Yes, I believe so.
Ms. DeGette. And what about liens on homes?
Mr. Bovender. Liens on homes are only permitted with homes
of over $300,000 in value.
Ms. DeGette. That seems reasonable. What about you, Dr.
Pardes?
Mr. Pardes. Body attachment is prohibited in New York
State, Congresswoman.
Ms. DeGette. What about liens on homes?
Mr. Pardes. We have liens on homes in exceptional
situations, do not have foreclosures on homes.
Ms. DeGette. Is that in your written policies?
Mr. Pardes. Yes.
Ms. DeGette. Would you mind supplementing your record?
Mr. Pardes. Happy to do so.
Ms. DeGette. What about you, Mr. Fetter?
Mr. Fetter. I do not believe we have body attachments as
part of our policy, and also, as I mentioned earlier, under our
Compact With Uninsured Patients, will not place liens on homes.
Ms. DeGette. I just want to ask one last question for all
of you, under your new policies, do you intend to release any
liens that you have already placed on primary residences? Just
go real fast because my time is over.
Mr. Greenwood. Be very brief because the gentlelady's time
has expired.
Mr. Fetter. As Congressman Walden pointed out earlier, you
always attempt to work things out with patients who owe you
money, so I am sure that we are releasing liens on homes where
we have liens today.
Mr. Pardes. I would say we are reviewing all of our
policies and issues, and we may well find that we will release
additional ones of those.
Mr. Bovender. If we find any we have with value under
$300,000, we will.
Mr. Lofton. We are reviewing for all patients, and all of
our patients can come back and we can review their record after
the fact, and make appropriate changes.
Mr. Tersigni. Again, as well, we review all patients and,
after the fact, can make the changes.
Ms. DeGette. Thank you.
Mr. Greenwood. The Chair thanks the gentlelady, and
recognizes the gentleman from Oregon, Mr. Walden, for 10
minutes.
Mr. Walden. Thank you, Mr. Chairman.
I am curious, as you all work on getting payment situations
set up for those who owe you money, do any of those folks end
up getting a loan from a financial institution to pay you? Do
you see that happening? Do they go to the bank or their credit
union and get a loan, take out a loan so they can pay you?
Anybody?
Mr. Tersigni. I don't know that.
Mr. Walden. You don't know.
Mr. Lofton. I am not aware of any specific cases.
Mr. Bovender. Do not know.
Mr. Walden. So you are not seeing any of that sort of
activity.
Mr. Pardes. Don't know.
Mr. Walden. Don't know. All right. I am just curious
because it would seem to me if they went to a financial
institution to get a loan to pay you back, that financial
institution would probably require that loan to be secured by
some asset, right? I mean, I was on a bank board for 5 years.
You don't make uncreditworthy loans on purpose, and so I wonder
how all that works.
Let me go to the charge master issue. Now that you all have
taken a second look at your charity care, your billing and
collection processes, and we have heard a lot today about
charge master rates being significantly higher than those rates
actually paid for by third-party payers, insurance companies,
Medicaid, Medicare. What have you done, if anything, to change
and lower your charge master rates? Have you adjusted your
charge master rate downward and, if so, by how much?
Mr. Tersigni. I don't know that the answer is we have
adjusted the charge master downward as of this point in time,
but we have asked all of our ministries to look at those
charges from various factors--market factors, service cost, the
competition within the little local area, as well as the impact
to the uninsured.
Mr. Walden. Mr. Lofton?
Mr. Lofton. We have looked at a number of ways of helping
our constituents and patients, and CHI has adopted the HUD
guideline for who would qualify for charity care. We feel that
they are both more inclusive, as well as they take into account
the geography differences.
Mr. Walden. But do the HUD guidelines--does that have
anything to do with how you set your charge master rates?
Mr. Lofton. No. We have not adjusted the charge master, but
what we have done from the charity care side is to see that we
can qualify more patients and then provide them discounts from
the charge master.
Mr. Walden. Mr. Bovender?
Mr. Bovender. There are really two issues associated with
this charge master problem. The first is the uninsured, and we
have talked about that, and programs and plans to fix that by
going to some discounted method that looks like managed care.
The more complicated problem is that many of our
contracts--and at HCA we have over 5,000 contracts with managed
care providers across the country. Many of those contracts are
not on a per diem basis or case rate basis, but are really
based on a discount off of charges.
It will take us probably two to two and a half years to
renegotiate all of those contracts because many of them are
multiple year contracts. It is our plan to get away from the
charge master having any impact, or very little impact, if you
will, even on the--not just on the uninsured, but on the issue
of how we negotiate managed care.
Mr. Walden. Good to know. Doctor?
Mr. Pardes. Approximately 2 years ago, we engaged an
outside consultant to examine our charges in relationship to
other charges in the area, and adjusted them accordingly.
Mr. Walden. Okay. But if the other hospitals in the area
had charge master rates that were high--I mean, we have heard
testimony in the prior panel that in some cases you have got a
$10,000 charge, $11,000 here, but if you are private pay, you
are $30,000. If that is the situation among all the hospitals,
is that really change anything, if yours is $30,000 and theirs
is $29,000, and you know what I am saying?
Mr. Pardes. Yes. We found that we were somewhat lower
actually than charges in many of the other areas. We found also
that our cost-to-charge ratio in our urban setting is lower
than urban settings in about 28 other States.
Mr. Walden. Maybe I will ask this question differently. How
much different is your charge master rate for a given procedure
compared to what you charge your managed care plans, your fee-
for-service plans, Medicare and Medicaid? What is that
relationship?
Mr. Lofton. Again, Representative Walden, for us, it is
going to range. We have some markets where we are a sole
community provider in rural north Nebraska, where there is only
a 7 percent difference between the two. And examples were given
about California rates. Well, we are not in California. So when
we look at the markets that we are in, the rates and variation
between charge master and the managed care contracts are going
to vary, so there is no one answer for the entire system.
Mr. Walden. Well, one of the prior witnesses--whose name
escapes me for the moment--suggested that the charge master
rate should be Medicare+25 percent, which seems sort of
arbitrary to me, but I guess that is what I am trying to get
at. What is your charge master rate compared to Medicare? Is
Medicare+25 percent far more than your charge master rate or
private pays, or is 25 percent a pretty good deal?
Mr. Bovender. Well, in our case, I can tell you that 25
percent is significantly below our managed care--our overall
average managed care rate. So it would put it significantly
below what we are negotiating with managed care.
Mr. Walden. So, Medicare+25 percent is below your managed
care rate.
Mr. Bovender. Right. I think the theory that he is putting
forward is good, the price point, at least in our case, based
upon what Medicare is paying us related to our total all end
charges is well below what the rate would need to be to make
that happen.
Mr. Walden. You see what I am trying to get at here,
though, is--I mean, being in the radio business, we sell
advertisements--I can set a rate at whatever per commercial,
but that doesn't mean I get it. And, yet, in your situation it
is a little different because my clients don't have to walk in
my door half dead and have to have a radio ad. It would be
easier to sell, but collections could still be a problem. But
in your case, that literally is what happens, and they can't
negotiate that price, and that is why we are having this
hearing, is to say is this system working? Is it broken? And it
sure seems like there are some problems. And you are addressing
some of them, I think we have all given you credit for that,
but what is that differential between charge master and actual
cost of delivering the service? What is the right price point,
Medicare+40 percent? Is that even a realistic way to do it?
Mr. Bovender. Well, it would be a realistic way, but I
think a better way was the second suggestion, which is to peg
the price for the uninsured and do it on possibly a DRG rate,
or a case rate, a diagnostic rate, but peg it to a percentage
of your average managed care contract either in a specific
market or nationwide. And as I said, we are looking at a price
point somewhere around the 95th percentile of all of our
managed care contracts. You have got to be careful in setting
that because, obviously, any managed care provider above that
is going to want at least as good as what the uninsured is
getting.
Mr. Walden. They are going to tell you that minus 3
percent.
Mr. Bovender. Well, it sounds easy to say, well, just fix
your charge master. It has to be fixed for the uninsured, which
it needs to be done, but it has to be fixed also taking into
account that we have got 5,000 managed care contracts to
renegotiate over the next year to 2 years.
Mr. Walden. I understand that. Anybody else want to comment
on that? Mr. Lofton?
Mr. Lofton. That approach makes a lot more sense because it
will allow the rate to be market-specific, and it will be on a
market rate tied to something that is realistic, as opposed to
picking numbers out of the air because when you have managed
care contracts, as Jack says, then they don't want someone else
coming in paying much lower than what they will be paying. So,
it would allow for whatever the market rate is in a given
community, it would be tied to what is the customary rate being
paid.
Mr. Walden. What about in--you don't always have managed
care contracts, though, in all communities, do you, in the
really rural communities? Isn't there a lack of managed care in
some cases?
Mr. Lofton. Yes, for the most part. The word is generally
used from a more generic standpoint.
Mr. Walden. Than traditional--okay. I guess the reason I am
trying to probe and get at the bottom of this is, there is
enough pressure built up that if you all don't figure it out, I
am afraid we will, in a way that may not work, and that isn't
good for the delivery of health care in my community or
anywhere else. But it is also hard for us to go back and say,
``Sorry, you don't have insurance and you are going to pay
three times the amount and they are going to take your house.''
I mean, you are correcting some of those. I appreciate your
comments, and I have used up my time. Thank you, Mr. Chairman.
Mr. Greenwood. Are you sure you want to yield back all 3
seconds of your time?
The gentleman from Los Angeles, Mr. Waxman, is recognized
for 10 minutes.
Mr. Waxman. Thank you very much, Mr. Chairman, from Bucks
County. Gentlemen, the American Hospital Association has
established a set of principles and guidelines regarding a more
humane way to deal with this problem, and the way they will do
billing and collection practices. And they have asked hospitals
to adopt these. But it is one thing to ask for a pledge and
another to be sure the pledge is carried out.
Will the American Hospital Association discipline members
who don't follow the guidelines? How can we be sure they are
enforced if we don't adopt legislation, but rely on the
industry to police itself? Anybody want to respond to that?
Mr. Lofton. Well, CHI's system supports the pledge that the
American Hospital Association promulgated. One hundred percent
of our hospitals approved the pledge, and that was done at a
local level, gaining approval from their local board of
directors.
The follow-up to that is such that we have to implement
audit processes to ensure that the pledge is being carried out
not just from an audit perspective, but we also are looking for
our system to include patient billing into our patient
satisfaction review. That had not been a component previously.
So, there are ways that you can monitor this on an ongoing
basis, and we plan to do that.
Mr. Waxman. Why don't we just go quickly down the line. Are
all of you going to abide by the American Hospital Association
guidelines?
Mr. Tersigni. Yes. As I indicated in my testimony, we have
asked all of our CEOs, CFOs, and BP submission to sign an
affidavit that will abide by our policy. We will then bring an
audit process in to make sure that they are in compliance.
Mr. Bovender. Yes, we will comply with it.
Mr. Waxman. Dr. Pardes?
Mr. Pardes. Yes, Mr. Waxman, we will comply, and we will
make sure it is implemented in our institutions.
Mr. Waxman. Mr. Fetter?
Mr. Fetter. Yes. I signed the pledge on behalf of our
hospitals, due to the investor-owned nature of our company, I
can ensure that it will be complied with, as well as our
internal policies.
Mr. Waxman. Thank you. In our first panel, we heard from
Mr. Rukavina, and he outlined the difficulties his organization
had in attempting to get information about the billing
practices for HCA and Tenet. He said it took him more than 6
months to get a copy of your policy. I would like to know why
that took so long, and whether you have a policy in effect
today, and how you are ensuring that it is being carried out.
Mr. Fetter?
Mr. Fetter. Two clicks on our Web site leads you to our
policy, so it is relatively easy and simple. It is also posted
in our hospitals and the Compact With the Uninsured is
distributed in leaflet form as well as poster form at points of
service within our hospitals.
Mr. Waxman. Mr. Bovender?
Mr. Bovender. We are making wide dissemination of our
discount policy. In fact, I have met with my staff within the
last week to make sure that it is getting much wider
dissemination than it has in the past. I think the problem, as
I was told, with the 6-month lag in his being able to get our
policy was that when it was first asked for, it still had not
been approved and implemented.
Mr. Waxman. Do you know why, Mr. Fetter, it took so long?
Six months he was asking for meetings, no one responded. In
fact, this is what he said. He called Tenet and HCA Healthcare
Systems, and he said both you had ``announced with fanfare
programs to help the uninsured with discounts and sliding
scale.'' And he asked the company to give him a copy of this
policy which they had announced. Made another request a month
later. Finally, 6 months later, he went in to find out what was
going on and asked for a community meeting, but the leaders--I
think it was in Florida--do you have any idea about that?
Mr. Fetter. I really am not aware of that. Are you sure he
is referring to Tenet, because it is quite available.
Mr. Waxman. Is there another Tenet?
Mr. Fetter. Well, I don't know the specifics of his----
Mr. Waxman. Mr. Fetter, you indicated in California that it
is different because of regulatory problems. I hadn't heard
from other California hospitals that this was a problem. What
specifically is the issue in California?
Mr. Fetter. The problem--and I am repeating here legal
advice that we received--but it relates to insurance
regulations. I have been informed that the California Health
Care Association, which represents hospitals, has brought this
to court to seek clarification, and we do expect that it will
be resolved sometime relatively soon. As an interim measure, we
have expanded our charity care policy within California.
Mr. Waxman. Would you submit that letter so that we can
have it for the record?
Mr. Fetter. Yes.
Mr. Waxman. I wonder if any of you would comment on the
issues you see for your institutions if HSAs and high
deductible plans become a major way people are provided
insurance coverage in this country. What will it mean for the
financial viability of your institutions? Any of you want to
comment on that?
[No response.]
Well, let me ask it this way. Is it fair to ask you to
provide discounted rates for persons during their period of no
coverage before the high deductible plans kick in? Any of you
have any views on that?
Mr. Bovender. My view on HSAs is that if they bring more
people in with insurance, even if it is catastrophic insurance,
that is helpful. My big fear, though, is that the high
deductibles and co-pays are going to increase the level of our
bad debts, just said very simply and shortly.
Mr. Waxman. You are worried about it increasing the amount
of bad debt?
Mr. Bovender. The higher levels of co-pays and deductibles
is going to increase the level of our bad debts.
Mr. Waxman. And why is that the case?
Mr. Bovender. Because the first $2,000 has to be assumed by
the patient, and assuming they haven't accumulated that amount
in their savings account, then we are exposed to that whereas
they may have been in a--some of them, at least--in a health
insurance plan before that had a $250 deductible or $500
deductible.
Mr. Waxman. Do you think if you discount the bills during
this period, you are helping the individual, or protecting the
insurer by lengthening the time before their coverage kicks in?
If you give a discounted rate to somebody who has a high
deductible, are you helping the individual by giving him a
discounted rate, or are you simply allowing the insurance
company not to negotiate a price with you to ensure that you
are going to actually be paid?
Mr. Bovender. I think the answer is that we absorb more and
more of the cost of the care. The insurance company, nor the
employer, nor the patient is absorbing it in those
circumstances.
Mr. Waxman. You would absorb most of the cost of that.
Mr. Bovender. Yes.
Mr. Waxman. Well, this hearing clearly has identified
several issues. One, people without insurance are charged the
very highest rate for services. Two, the charge structure of
hospitals no longer bears any sensible relationship to cost, if
it ever did. And, three, people faced with high bills beyond
what they can afford have been the victims of indefensible
collection policies in too many instances.
I think all of you agree health insurance coverage is the
best and probably only effective way to deal with this problem.
Policies to assist people of limited income to forgive bills,
to help arrange payment policies that are affordable can help,
but I want to concentrate on another piece of the problem--
billing the uninsured on the basis of a charge structure that
makes little sense and that clearly means the uninsured are
billed at the highest rate. Isn't it time to move away from
bills based on charges that make little sense? How can we move
to a billing that is more closely related to the cost of
service? And whatever rate you set, if they are uninsured and
they don't have the money, you are not going to be able to
collect it. Any of you want to respond to those points?
Mr. Tersigni. We would support that premise from the
standpoint that we need to move, and we have been moving in
this industry from a cost-based to competition-based pricing,
and I think that brings some reality to the present situation.
Mr. Lofton. From the standpoint of the uninsured, it makes
perfect sense. We generally, right now, only collect about 7
percent of our revenue comes from that population. So, the
change in terms of the dollars would not be really substantial.
And then when you look at this or HSAs, those are still slices
of the whole pie, and we still have to come back to the 40
million people that are not insured.
Mr. Waxman. Anybody else want to comment?
[No response.]
So, in the ultimate sense, then, if you are going to get
your money, it is far better to have somebody with insurance.
Mr. Pardes. Yes.
Mr. Waxman. And all the other things don't really account
for much, it just tinkers with how much bad debt you are
actually going to absorb.
Mr. Pardes. Not only is it better to have the insurance,
but it also provides the individuals with dignity when they
walk into the hospital.
Mr. Waxman. And for those who have these high deductibles,
to you it makes no difference, it is just most likely going to
be another bad debt.
Mr. Bovender. Could be.
Mr. Waxman. Unless they are higher income people.
Mr. Bovender. Right.
Mr. Waxman. Do you have trouble collecting from these
higher income people?
Mr. Bovender. Sometimes.
Mr. Pardes. I think it is important to recognize that there
are some high income people and some international patients who
do pay full charges, and as a result of that, there is a
certain amount of cost optimization. For hospitals like those
of us in New York in which 90 percent of the hospitals are
below 1 percent margin, that is very important.
Mr. Waxman. Thank you, Mr. Chairman.
Mr. Greenwood. The Chair thanks the gentleman. The
gentleman from New Jersey, Mr. Ferguson, is recognized for his
inquiry.
Mr. Ferguson. Thank you, Mr. Chairman. I have a few
questions for Dr. Tersigni. Doctor, first of all, you said this
is your fourth day on the job?
Mr. Tersigni. Yes, it is, Congressman.
Mr. Ferguson. Congratulations to you. Clearly, you learn
something quickly in your fourth day on the job, which is it is
good to bring the Nun.
I went to Catholic school. It is always a good idea to
bring the Nun.
Mr. Tersigni. I am still on probation, Congressman.
Mr. Ferguson. Good decision. Dr. Tersigni, you talked about
your new policies and some of the procedures you go through
with some of the uninsured. Is one of the things you do when
you are dealing--when your hospitals are dealing with the
uninsured is, do you ever help them or walk through with them
finding public assistance in other ways perhaps, if they don't
have their own insurance?
Mr. Tersigni. Yes, Congressman. As a matter of fact, the
whole process of identifying and meeting with the patient to
determine whether they are uninsured, whether they are
financially needy, or whether they are just working uninsured,
and then we begin the process of trying to identify for them
whatever public funds, private funds are available, and we
continuously do that through our financial counselors and our
registrars.
Mr. Ferguson. So part of the process in determining or
trying to figure out some sort of payment or reimbursement is
helping them to look through and find what public assistance
might be available.
Mr. Tersigni. That is correct.
Mr. Ferguson. Now, your new policy--you kind of outlined
your new policy, and I know it is in your written testimony. I
am assuming this is going to cost you money. This is going to
affect your bottom line--your revenues, and possibly your
bottom line. Do you have any estimates on that yet? Have you
determined what this is going to cost?
Mr. Tersigni. We don't have any estimates at this point. We
know that the present situation, we lost $222 million in 2003.
We expect that to go up, but our mission----
Mr. Ferguson. Was that a good year?
Mr. Tersigni. As a matter of fact----
Mr. Ferguson. This is a tough industry.
Mr. Tersigni. [continuing] it has been rising. But, again,
our mission is to care for the poor and the vulnerable in this
country, to actually seek them out. And so we actually incent
our CEOs of the Health Ministries to continue to grow the
charity care that we provide in our communities annually, and I
think there is some information in the testimony or in the
information that shows that charity care has grown.
Mr. Ferguson. Let me get that straight. You incent your
executives to try and grow your charity care each year.
Mr. Tersigni. Correct.
Mr. Ferguson. You try and find ways of providing more free
health care.
Mr. Tersigni. More free health care. We try to find ways to
take care of those who need to be taken care of, that are
falling through the cracks. We have invested millions of
dollars in 40 clinics, 175 programs across the country,
specifically to deal with preventative care, primary care, and
targeted for the poor and vulnerable.
Mr. Ferguson. And I don't imagine that is necessarily good
for the bottom line.
Mr. Tersigni. That isn't good for the bottom line, but----
Mr. Ferguson. It is part of your mission.
Mr. Tersigni. [continuing] it is part of our mission.
Mr. Greenwood. Would the gentleman yield just for a second.
I just want to be clear. There is a portion of charitable care
for which you get reimbursed. So, I want to be clear that we
are not saying--are you saying that you incent your executives
to actually lose money, or to be able to get as much money into
a pot that gets reimbursed by the Federal Government?
Mr. Tersigni. Actually, it is for charity care. We exclude
the bad debt out of that $500 million that we have provided in
2003 for charity care and uncompensated care. So, we continue
to seek out the poor and to make sure that we can begin--or
hopefully help address a problem that is mammoth in this
country.
Mr. Greenwood. Thank the gentleman for yielding.
Mr. Ferguson. Of course. How do you communicate your
charity care and your financial assistance policies to your
patients, obviously, particularly to your uninsured patients
that you serve?
Mr. Tersigni. Well, several ways. No. 1, we have signs and
materials in multiple languages in our presenting station
areas, whether it is emergency room, whether it is the clinics,
whether it is our waiting rooms of surgery centers. We train
our administrative personnel to make sure that as the patient
presents, that we have dialog with that patient and direct them
to the paraphernalia that we have relative to identifying what
the policy is.
Mr. Ferguson. There is a theme that has been suggested by
some today, and elsewhere, that hospitals can make money on
their uninsured patients. Now, obviously, there are uninsured
patients who have the ability to pay, and I could see how for
that portion of the uninsured population it is possible for a
hospital to make money, so to speak, on the uninsured patients.
But I have got to believe that, in the aggregate, it is
difficult for a hospital to make money on uninsured patients.
Is that accurate?
Mr. Tersigni. That is correct. As I indicated earlier, our
average patient cost for caring for the uninsured is about
$1376, of which we collect about $155.
Mr. Ferguson. Along these lines, I wanted to address
another question to the entire panel. Tenet operates about 100
hospitals, HCA about 190 hospitals, Catholic Health 68
hospitals, New York Presbyterian a handful of large health
campuses, and Ascension 75 hospitals. Across almost 40 States
you five systems have hundreds of men and women working daily
with patients to understand and address their hospital charges.
Consistent application of these policies and procedures is
clearly crucial to making sure that they work. If your policies
are not properly communicated to people, the policy is not
particularly relevant.
Can each of you, in a few minutes that we have left, can
each of you tell me the specific steps that your system is
taking to make sure that, in effect, possibly hundreds of
front-line employees know about and are applying consistently
and equitably your billing and collection polices and
procedures? Why don't we start with Dr. Tersigni.
Mr. Tersigni. I am happy to say that, No. 1, 103,000 of our
associates understand our mission is to care for the poor and
vulnerable, and we are in the process of reinforcing that by
communicating with them out new policy, and making sure that we
hold them as responsible as we hold ourselves to adhering to
that policy and making it work.
Mr. Lofton. All of our associates know that CHI takes care
of patients regardless of ability to pay. We have a very strong
process to roll out our core values across our system, which
are reverence, integrity, compassion and excellence. And we
have training for financial counselors along this line, so that
they know that all of our patients are treated with proper
respect and dignity and, as I mentioned earlier, all of our
collection agencies, by the end of this month, will have been
trained on the core values of CHI as well.
Mr. Bovender. Obviously, the practical problems of rolling
out any policy of any kind in 190 different hospitals is
difficult. One of the programs that we implemented, began
implementing 3 years ago, was to consolidate all of our
business office operations into ten regional revenue service
centers, patient account service centers. This makes rolling
out policies like this, and fixing problems, easier to do. It
is easier to do it in ten different sites because the people at
the hospital in the billing cycles and front-end, when they
receive patients into the emergency room and in the hospital,
are actually tied into these revenue service centers. So it
makes training easier for us, and it makes implementation of
these policies--and it also creates a better feedback loop
where we find where problems have been created and how we need
to fix those problems.
Mr. Pardes. We have been communicating our policies to all
staff involved in admissions intake, anything related to these
issues, Congressman, and disseminated to all the campuses. We
have also disseminated to community agencies. We have put
information in our emergency rooms and admission offices, so we
are trying to disseminate them as widely as possible to ensure
full compliance.
Mr. Fetter. Congressman, you raise an important challenge,
and we have undertaken this by virtue of a very extensive
communications and training program involving printed
materials, written materials, materials that are communicated
by the Intranet as well as conference calls.
Mr. Ferguson. Mr. Chairman, I have a question I would like
to submit for the record and ask for a written response, if I
could submit that for the record, please.
Mr. Greenwood. Without objection, that will be the order.
Mr. Ferguson. And I just want to close by thanking our
panelists for being here today. I understand the hospital
business is about the toughest--has got to be one of the
toughest, if not the toughest, business to be in in America
today. We hear it from our hospitals in our district. I am sure
ours are no different from many hospitals around the country,
particularly with the care and treatment that you provide
Americans all over the country. We appreciate that. We
appreciate the actions that you have taken to change some of
your policies and procedures, and certainly encourage you, as
you continue to implement those and find new ways of treating
and caring for those who you care for, and we certainly
appreciate you taking the time to be with us at a very long
hearing today. Thank you for being here, and thank you, of
course, to the Nuns for being here, too.
Mr. Greenwood. The gentleman from Florida, Mr. Stearns, is
recognized for 10 minutes.
Mr. Stearns. Thank you, Mr. Chairman.
I was wondering if staff could put this graph up, and you
folks could probably see it on the screens. What we have here,
the staff has taken four of the hospitals at the dais here, the
panels. One of them we didn't use. We took the four, and we
tried to nominalize it by Medicare net revenues. It appears the
cost of Medicare net revenues. We have blue, we have black, we
have green, we have yellow, and red. And the importance of this
is that Medicaid and Medicare are not too far from what appears
to be the actual cost by the hospitals in question.
The third-party payer is a little higher. Now, obviously,
that would be understandable because hospitals have to
recapture a profit so they can capitalize to expand or to
change and renovate and get new equipment and to keep up. But
then the last, which is the red, is the uninsured amount
billed. And we have on the first graph, 2000, then 2001 and
2002. So we are looking at a trend. Maybe we could argue about
these graphs, you might not agree what staff did, but I think
we see a trend in the red, which is the uninsured amount
billed.
So the question I have for you folks is, if we go to 2003
and 2004, will this trend continue like this? In other words,
will the red continue to go up, in your opinion? I would be
glad to start with Mr. Lofton, the Catholic Health Initiatives.
Would it be reasonable for me and the American public to say
that this red line, which is the uninsured amount billed, is
going to continue to go up? Just yes or no.
Mr. Lofton. If I understand the graph, it is yes. But if I
also look at the graph, it says Revenue, Cost, Revenue,
Revenue, and then you get to Bill. So, I don't think we are
comparing the same thing up there. If we talk about what is
billed, if we look at the cost column, I don't think that that
Medicare cost----
Mr. Stearns. Okay, I will grant you that. I would agree
that the cost, we could argue about that. I agree. But I am
concentrating on the red line because, really, this is all
about how this uninsured amount being billed is growing--not
geometrically, at least--it is going up for the last 3 years,
and then we have 2003 and 2004, and your opinion is probably in
2003 it is going to be higher, and in 2004 it is going to be
even higher.
Mr. Lofton. I would say it will be higher, but the actual
experience for our system is that that group of patients, we
only collect 13 cents on a dollar for.
Mr. Stearns. Dr. Pardes, would you agree?
Mr. Pardes. I think that that would be true. I think that
the costs of health care keep going up. Of course, the people
who pay the full charges, Congressman, are, as I said, the
well-to-do patients or international patients. We work
individually so that the bulk of people who are not in those
categories would pay far less.
Mr. Stearns. Is there anybody on the panel that does not
think that this trend is going up?
Mr. Bovender. I may need some clarification of your
question, but if you are talking about the charges actually to
the uninsured, given what CMS came out with about 3 weeks ago
and said that we are allowed to do now, as I testified earlier,
it is possible for us to go back and try to construct a charge
system for the uninsured possibly based on case rate or a DRG
basis, but to peg it to possibly the 95th percentile average of
all of our managed care contracting. If we are able to do that,
then obviously that red will not go up as fast. In fact, it
would actually probably come down.
Mr. Stearns. But your charge master rate, you can still use
that.
Mr. Bovender. But the charge--as I testified earlier, the
issue with the charge master is also separate. There is a
separate component from the uninsured part, which is the
managed care contracts we have that are pegged as a percentage
of charges, and we have committed ourselves, as a company, to
move away from percentage of charge contracting, and actually
move to case rate or other basis for managed care contracts.
But that will take us, as I testified, two, two and a half
years because we have got over 5,000 contracts.
Mr. Stearns. Now, isn't it true, when you have uninsured
costs that are going up so much like that, at the end of the
year, don't you take those uninsured costs and write them off
against revenue?
Mr. Bovender. Well, the uninsured----
Mr. Stearns. In other words, you try to collect the debt,
and if you can't collect the debt, it is considered a bad debt,
right?
Mr. Bovender. Correct, it is an expense.
Mr. Stearns. It is an expense. So, if this graph continues
to go up higher and higher, technically, you are going to be
able to write that off as expense on your revenue, is that
correct?
Mr. Bovender. Yes. I mean, it is a bad debt.
Mr. Stearns. So the incentive here is not necessarily to
control this because--and it appears from this that you are
charging so much more relative to your getting reimbursed from
Medicaid and Medicare, or even your third-party. So, you have
this master rate that you are using, and I guess the question I
have, what considerations go into the charges that make up that
red? And why does it keep going so much higher than the yellow?
I mean, the yellow seems to be stabilized here. That is the
third-party net revenue. And yet the red continues to go up in
almost quantum jumps here.
So my question is for each of you, what considerations go
into this for the costs that make up these uninsured? I mean,
how do you go about setting a charge rate for these? Let me
start here on the right.
Mr. Fetter. Congressman, at Tenet Healthcare, as I
mentioned, we have implemented this Compact With the Uninsured.
So, with reference to your graph, the first point I would make
is that our charges have been frozen since November 2002, so
the orange bar would not continue to go up.
Second, as we implement----
Mr. Stearns. So, under your--you are freezing it. You are
saying 2003 and 2004--it is a red bar, but I understand--you
are saying that bar would stabilize, it would not continue to
go up.
Mr. Fetter. Well, actually, more importantly, under our
discount plan that is part of the Compact With the Uninsured,
the red bar--orange it looks to me--would approximate the level
of the yellow bar. But I think it is very important--Mr. Lofton
made a very important point--no pun intended--the bars are
comparing apples to oranges because you have billed and a
billed amount on the----
Mr. Stearns. I anticipated that. I am trying to make my
argument in terms of trend.
Mr. Fetter. Right. I will answer with respect to our own
company, the trend will be that the red bar all the way on the
far right will drop substantially to approximate the yellow
bar.
Mr. Stearns. And, Dr. Pardes, you would agree, is yours
going to drop?
Mr. Pardes. I am not sure that ours will drop in the same
way that----
Mr. Stearns. Because what we are going to do now is we are
going to compute 2003 and 2004, so I want you to realize we are
going to take the same information and try to see, for each of
your hospitals, because your hospitals are up here, and we are
trying to determine that. Let me go to my far left here. Would
you care to comment, too?
Mr. Tersigni. I believe with our new policy, we are going
to have all uninsured at the same discount from charges on our
best-paying payer, so I believe that we will begin seeing a
difference in that red bar.
Mr. Stearns. What is the tax consequences of setting very
high billing levels for the uninsured amounts billed, then
writing them down? I mean, I touched on this, but in your own
words, what are the tax consequences? I mean, just tell us for
the--your bottom line and your profit, how this affects it. I
told you what I thought it was. I would like, in your own
words, basically with this huge amount of uninsured amount
billed, and you are not getting it back reimbursed, how does
this affect the bottom line?
Mr. Tersigni. Well, I can tell you, if our data is in that
red line, our bottom line for that particular year is 1.7
percent of margin.
Mr. Stearns. Now, if you didn't have that red bar,
basically, you would pay more taxes, wouldn't you?
Mr. Tersigni. We are not-for-profit.
Mr. Stearns. But if you were for-profit?
Mr. Tersigni. That information I wouldn't know. We haven't
calculated that.
Mr. Stearns. But, basically--Mr. Bovender, let me ask you
that question. If this was not there, wouldn't you pay higher
taxes? Just yes or no.
Mr. Bovender. No, I don't believe so because, if you didn't
put the charges on, they wouldn't appear on the bottom line, to
begin with. If you put the charges on, then take them off as a
bad debt, it has no impact. The change in the bottom line,
there is no impact.
Mr. Stearns. So you are not writing off the uninsured bad
debt on your revenue?
Mr. Bovender. Yes, we are, but if that revenue--if I
understand your question, you are asking if those charges were
smaller instead of large like you see them on the red side, is
it not beneficial for us to inflate the charges and then just
write off the bad debts, and that is not the case because, if
you never put the charges on, you wouldn't be paying taxes----
Mr. Stearns. But these uninsured are charges that you put
on.
Mr. Bovender. But it does not affect whether you do not
have the charges before the net revenue line or after the net
revenue line does not affect the actual profits at the end of
the day.
Mr. Fetter. Our company is the other taxpayer on the panel,
and Jack's answer is correct. There is no tax impact of this
level----
Mr. Stearns. So you are saying that because you have a
large uninsured and you can't collect it, it doesn't affect
your profit at all?
Mr. Fetter. Well, it affects book income, but your tax
impact is no different, regardless of where you set the charges
for the uninsured.
Mr. Stearns. But if you had a $100 million revenue and you
had $10 million of uninsured and you couldn't get it back, you
could take that $10 million and put it to the revenue and pay
less taxes. I mean, every small business knows that, and that
is what you have here with these red graphs.
Mr. Fetter. You are incurring the expense anyway,
regardless of the patients. That is determined by----
Mr. Stearns. But if the cost is a lot less than the red
line, then you have got a bigger spread that you can use to
write down your revenue. Instead of it cost you $10 and you
charge $100, then you can write the $100 off instead of the
$10.
Mr. Fetter. Respectfully, I don't believe it works that
way.
Mr. Stearns. Let me ask you this. For nonprofits, how much
does your hospital save each year on taxes by virtue of your
501(c)(3) status?
Mr. Lofton. I am not in a position to give you an answer
for the whole system. As you know, the tax base is based on a
State rate, but we don't compute that. We are in 19 States, and
the amount of the tax would vary. I can tell you that in one of
our markets in Carne, Nebraska, where we have a very
sophisticated way of computing our community benefits, they
have calculated that the amount that they would have
approximated that we would have paid in taxes there is about $3
million versus the community benefit which is about $28
million. So we submit that the kind of things that we do--free
clinics and other mission-based health care--where we provide
free care far outweighs the amount that the tax would be, but I
can't give you the total for the whole system.
Mr. Stearns. If I could conclude, Mr. Chairman, just a
quick comment, and I would say that I am very respectful--you
folks are trying to make a living and make a profit, and how
difficult it is, particularly, you have to take anybody that
comes into your emergency room. But I am saying if you want to
prevent Congress from coming in with the Hefley bill or any
price controls, that red line can't continue to get bigger and
bigger and bigger relative to the real cost, and that is what
you folks have got to come up with an answer for us. We are
trying to help you and to point out what we see as amateurs
here, and your CEOs, you have got to come back to me and say,
``Congressman, this is going out of sight, I am going to stop
it, and this is what I am going to do, and I am going to
reprice my master rule, and I am going to make sure this
doesn't go any higher, and in so doing, I don't need you as a
Congressman to come in and legislate with price controls,'' and
that is where you folks better get, I think, on the ball here
and start to make those arguments and articulate them, instead
of just arguing whether the staff has got that right
normalization with the cost or any of these others. I mean, our
attempt to understand this--the staff I think has done an
excellent job just trying to show trends, and that is what I
was trying to show. Thank you, Mr. Chairman.
Mr. Greenwood. The Chair thanks the gentleman and
recognizes himself for 10 minutes, and I want to follow right
on the gentleman's comments.
When we look at the red line, we look at what your master
charges are, and we try to figure out why do they seem so
absurdly high compared to your costs, and why are they rising
at such a rate? Now, we know--and Dr. Anderson commented on it
in the beginning--that there is a formula that CMS uses to take
care of outliers from the DRGs. So, when a patient comes to a
hospital, you are reimbursed on the basis of a DRG, but if
there are complications, if there are unanticipated costs, you
can, as I understand it, put those cases into an outlier pool
and then be reimbursed by Medicare on a formula that is
basically a cost-to-charge ratio, which puts the cost as the
numerator and the charge as the denominator.
Now, it seems to me that that, in and of itself, would
create a tremendous incentive for hospitals to set the charges
as high as possible so that when it comes time to submit their
data to CMS on a cost-to-charge ratio for reimbursement for
outliers, that the reimbursement is maximized. Am I correct
about that? Dr. Tersigni?
Mr. Tersigni. Mr. Chairman, I am not sure I quite
understood the last part of the question.
Mr. Greenwood. Okay. When you have outliers from your DRG--
in other words, as I understand it, there are CMS regulations
that say that when you have specific cases in the hospitals,
the cost of which significantly exceed certain parameters in
comparison to the DRG, that you then get reimbursed using a
different methodology than the DRG. You get reimbursed on the
basis of--that gets called an ``outlier.'' It gets put into a
dataset of outliers, and then you submit a bill to CMS for
those cases, and the basis of reimbursement is a function of
the cost-to-charge ratio. Is anybody with me, have I got this
right? The Nuns are nodding their heads ``yes.''
Anybody with me on this?
Mr. Fetter. Yes.
Mr. Greenwood. Would somebody comment, please? Do I have
that right?
Mr. Fetter. It is close enough, I think.
Mr. Greenwood. All right. Help me out.
Mr. Fetter. Largely because of an outlier issue with Tenet
Healthcare in late 2002, CMS undertook a change in the rules.
Now, Tenet voluntarily adopted the rules that CMS ultimately
promulgated----
Mr. Greenwood. Let me interrupt you. We will give you
plenty of time here. But am I correct that it has long been, or
ever since this regulation has been in place, an incentive for
hospitals to set charges high so that when they bill CMS,
Medicare, for outliers from the DRGs, that they maximize their
revenues?
Mr. Fetter. I was leading to a direct answer to the
question, which is that prior to August of 2003 when CMS
changed these rules, the system--I am ignoring a tremendous
amount of complexity--but the system was set up in a way where
rapid increases in gross charges did increase outlier payment.
CMS made two important changes in the regulation that have
essentially eliminated that incentive, as you describe it, or a
reward that would accrue to the hospital from that type of
behavior.
Mr. Greenwood. Because a part of my concern is that what we
had--let us at least talk about prior to that regulatory
change--you had this significant incentive to raise the charge
for purposes of Medicare reimbursement, and you had to be able
to say with a straight face, ``Yes, that is what we charge
people,'' and the only people that got charged that were people
who were uninsured. So the poor schmuck who is uninsured gets
ground up in the gears created by the CMS system that creates
an incentive for you to have high charges. Do I have that right
or wrong?
Mr. Fetter. I believe that problem was fixed, though.
Mr. Greenwood. I understand, but wasn't that the way it
was--isn't that what happened?
Mr. Fetter. I might not choose the same adjectives, but you
essentially have it.
Mr. Greenwood. It wasn't an adjective, it was a noun,
``schmuck.''
Look it up. But the fact of the matter is that people got
ground up in the system, I think, because of that. Now, the
question then remains, do incentives remain for you to have
charges that are quite high, from which you have to create a
discount so you don't overcharge the poor uninsured person. For
instance, if you have an automobile accident patient come into
your emergency room, and you are going to have a settlement,
and you are going to get a subrogation out of that, and then
you can bill the auto insurance company charges. Is that an
existing incentive to have high charges?
Mr. Fetter. I don't believe the incentives continue to
exist, but as Mr. Bovender pointed out earlier, because so many
managed care contracts are structured based on these charges,
it is very difficult to reduce the charges or address the
charges in that other type of way. There is no incentive to
have, on an absolute basis, high charges.
Mr. Pardes. The one concern we would have, Mr. Chairman, is
that we not necessarily decrease charges for international
patients or well-to-do patients who can handle the charges.
Mr. Greenwood. Yield to the gentlelady from Colorado.
Ms. DeGette. Thank you, Mr. Chairman. We are trying to
avoid holding you here while we have our next series of votes.
I just want to ask a couple questions of Dr. Pardes, and if you
will take a look at Tab 21--there is a notebook over there, do
you see that, Tab 21? Is that your policy on how you are going
to deal with the uninsured?
Mr. Pardes. There is a whole lot of page here. I can tell
you how we are going to deal with the uninsured.
Ms. DeGette. Well, take a look at this Tab 21, is this your
policy? I can represent to you----
Mr. Pardes. These are policies that--yes.
Ms. DeGette. These are the policies you have currently in
effect? Are they currently in effect?
Mr. Pardes. Not necessarily. I think they have been
updated.
Ms. DeGette. They have been updated. The date on this at
the bottom is 1995 to 2002. Have they been updated since then?
Mr. Pardes. Yes.
Ms. DeGette. All right. When were they updated?
Mr. Pardes. In early 2004.
Ms. DeGette. In early 2004. Did you provide this committee
with the updates of the policy? You lawyer is nodding ``yes.''
Mr. Pardes. I believe we did.
Ms. DeGette. I don't believe we have those updates. Would
you please, sir, supplement--we don't have those updates unless
they are under Tab 21, so would you please supplement your
response with that?
Mr. Pardes. Sure.
Ms. DeGette. I am going to ask you a couple of questions
very quickly. In this policy which is in Tab 21, it says that--
at the bottom, right-hand, NYPH0001520, it is sort of about
two-thirds of the way back in the document, do you see that?
Mr. Pardes. Yes.
Ms. DeGette. Now, it says there, ``Attempt to obtain
payment in full and settle the account. The second priority of
a representative''--first, they are supposed to get insurance.
Then if there is not insurance, ''The second priority of a
representative dealing with self-pay accounts is to settle the
account balance of the patient. First settlement offering is
100 percent of the estimated account balance at discharge.'' Is
that still your policy, Dr. Pardes?
Mr. Pardes. Our policies have been reworked----
Ms. DeGette. So none of these policies in here are still
your policies?
Mr. Pardes. The policies, as we said before, were updated
as of the beginning of 2004.
Ms. DeGette. But are they all new? Is this still your
policy and, if not, what is your policy?
Mr. Pardes. Our policy is, first of all, to try to get as
many patients----
Ms. DeGette. No, no. Do they still offer them 100 percent
of the estimated account balance at discharge?
Mr. Pardes. I am sorry, say again?
Ms. DeGette. You know what, Mr. Chairman, I am going to ask
unanimous consent to ask this witness some written questions
and to have him respond within 20 days of this hearing because
I have a number of questions about New York Presbyterian and
Columbia Presbyterian's policies that relate to patients, and
we have not been given the current policy.
Mr. Pardes. We would be happy to respond to that.
Ms. DeGette. Thank you. Let me just ask a couple--is that
all right?
Mr. Greenwood. Yes, the gentleman has agreed to respond to
questions that you submit in writing. They will become a part
of the record.
Ms. DeGette. All right. I will just do that, Mr. Chairman,
given the time.
Mr. Greenwood. We will add that to the record. The Chair
would note that we have 5 minutes and 13 seconds to go over to
the Capitol and undertake a series of votes, which will take
well more than a half an hour, and what we have tried to do, we
have debated whether to make you sit here for half an hour and
come back and grill you for another hour or so, and we have
decided that you have been saved by the bell. So, we thank you
for your testimony. WE thank you for your time this afternoon.
We thank you for all of the voluntary reforms that you have
done. We are going to continue our work, we are going to
continue to work with you. We may even ask you to come back at
another date, but for this evening you are dismissed. Thank
you.
The committee will recess for 30 minutes.
[Brief recess.]
Mr. Greenwood. The Chair thanks the witnesses for their
patience. I know it has been a long day for you, as it has for
us. As you both know, the committee takes its testimony under
oath. Do either of you have objection to giving your testimony
under oath?
Mr. Kuhn. No.
Mr. Morris. No.
Mr. Greenwood. You are entitled to be represented by
counsel, pursuant to the rules of the House. Do either of you
wish to?
Mr. Kuhn. No.
Mr. Morris. No.
Mr. Greenwood. Would you please stand and raise your right
hands?
[Witnesses sworn.]
Mr. Greenwood. You are under oath. Mr. Kuhn, you are
recognized to make your opening statement. Welcome.
TESTIMONY OF HERB KUHN, DIRECTOR, CENTER FOR MEDICARE
MANAGEMENT, CENTERS FOR MEDICARE & MEDICAID SERVICES, U.S.
DEPARTMENT OF HEALTH AND HUMAN SERVICES; AND LEWIS MORRIS,
CHIEF COUNSEL, OFFICE OF INSPECTOR GENERAL, DEPARTMENT OF
HEALTH AND HUMAN SERVICES
Mr. Kuhn. Thank you, Chairman Greenwood and members of the
committee. I appreciate you inviting me to speak today about
the Centers for Medicare and Medicaid Services regulations and
how they affect hospitals and the ability to bill patients who
are underinsured or uninsured.
Medicare and Medicaid provide health insurance for more
than 80 million Americans. I would like to state right from the
start that the provider reimbursement rules for those programs
in no way restrict the ability of hospitals and other providers
to offer free or discounted care to patients who are either
underinsured or uninsured. The Medicare program provides
flexibility to those providers who choose to offer discounted
care to patients.
CMS has been closely involved with hospital billing for the
underinsured and uninsured. A year ago, we received a request
from some hospitals for guidance on whether it was permissible
to discount charges to low-income uninsured or underinsured
patients. After providing guidance to these hospitals, CMS
began discussions with your staff in the Fall of 2003. In
December of 2003, Secretary Thompson received a letter from the
American Hospital Association that alleged that Medicare
program rules, as well as restrictions imposed by the HHS
Office of Inspector General hindered the ability of hospitals
to provide discounts to low-income patients or to patients who
were medically indigent. Secretary Thompson responded to the
AHA letter in February and subsequently responded to a letter
and request for information from this subcommittee.
Earlier this month, we held an open-door forum to provide a
detailed overview of our policy in this area, and to allow
providers to raise any additional questions or concerns. Of
course, providers and their representatives should feel free to
contact us at any time should they need guidance in this area.
Mr. Chairman, when CMS provides guidance on this issue, we
have found that there are three main areas of concern. The
first area is discounts and how they may be used. Medicare
billing requirements do not prevent discounts as long as full
charges, not discounted charges, are reported on the Medicare
cost report. To provide discounts, providers must maintain
accounts and records in a manner that would be necessary for
any business. The program's rules have attempted to prevent the
Medicare program from subsidizing a service that should be paid
for by another provider, or preventing another provider from
subsidizing a service the Medicare program should be
reimbursing.
The second area of concern is indigency. Medicare indigency
requirements do not prevent discounting to uninsured patients
provided a few requirements are met. Providers may make
indigency determinations using their customary method, but to
protect all patients in the Medicare program, the methods used
in determining indigency for non-Medicare patients should be
similar to those for Medicare patients. Any indigency
determination should be supported by documentation and be
determined on a patient-by-patient basis because financial need
is specific to each and every patient.
Hospitals set their own indigency policy and have the
discretion and flexibility to define eligibility, including
income level. This makes sense because hospitals are in the
best position to know what their community needs are.
The third area of concern is Medicare's rules regarding bad
debt. These rules do not require providers to aggressively
collect unpaid bills. The rules do require efforts to collect
from non-Medicare patients to be similar to those efforts for
Medicare patients. This is designed to protect the integrity of
the program if hospitals are seeking Medicare bad debt
reimbursement.
We often hear from hospitals that Medicare somehow requires
aggressive collection efforts that include attaching a
patient's home, use of a bill collector, or other similar
tactics. This is simply not true. The program does require,
however, that if the hospital wants to bill the Medicare
program for bad debt related to unpaid deductibles and co-
insurance by Medicare beneficiaries, it must use the same level
of collection activity to secure collection of those debts by
Medicare patients as it does to secure collection of debts by
non-Medicare patients. Simply stated, the collection of
Medicare and non-Medicare debts need to be treated similarly.
Mr. Chairman, thank you for this invitation to testify this
evening. I want to acknowledge the subcommittee for its efforts
in bringing to the forefront the problem of providing quality
health care for patients of limited means. I applaud you for
making this important issue the focus of your hearing today,
and I will be happy to answer any questions that you may have.
[The prepared statement of Herb Kuhn follows:]
Prepared Statement of Herb Kuhn, Director, Center for Medicare
Management, Centers for Medicare and Medicaid Services, Department of
Health and Human Services
Chairman Greenwood, Rep. Deutsch, thank you for inviting me to
speak with you about the role the Centers for Medicare & Medicaid
Services plays in how hospitals and other Medicare providers bill
patients who are uninsured or under-insured. I want to acknowledge the
Subcommittee for their efforts in bringing to the forefront the problem
of providing quality health care for patients of limited means and I
applaud you for making this important issue the focus of your hearing
today.
Combined, the Medicare and Medicaid programs provide health
insurance for over 80 million Americans. The provider reimbursement
rules for those programs ``should in no way restrict the ability of
hospitals and other providers to offer free or discounted care to
patients who do not have coverage under these two programs. I am here
today to talk about how the Medicare program provides the flexibility
for providers to do so if they choose.
Hospital billing for the uninsured and underinsured is a very
timely issue and an issue in which CMS and, in particular, the Center
for Medicare Management, which I direct, have been deeply involved for
over a year. It was a year ago that we received a request from some
hospitals in the country for guidance on whether it was permissible to
discount charges to low income uninsured or under-insured patients.
Some months later, after responding to numerous inquiries on the issue,
CMS began discussions with your staff in the fall of 2003. In December
of 2003, Secretary Thompson received a letter from the American
Hospital Association that alleged that Medicare program rules, as well
as restrictions imposed by the HHS Office of Inspector General,
hindered the ability of hospitals to provide discounts to low-income
patients or to patients who were medically indigent. Secretary Thompson
responded to the AHA letter in February, and subsequently responded to
a letter and request for information from this Subcommittee. CMS also
briefed your staffs in preparation for this hearing.
There are three central topics that most commonly arise when
providing guidance on this issue. I'd like to address those topics for
you today. Then, to conclude, I'd like to say a few words about what
the Medicare and Medicaid programs are currently doing to assist
hospitals that treat the uninsured. Finally, I'd like to conclude by
mentioning the many initiatives that the Administration has taken to
reduce the number of uninsured.
Three Topics of Focus on Billing the Uninsured
Discounts: Medicare billing requirements do not prevent discounts as
long as:
Full charges, not discounted charges, are reported on the cost
report.
Accounts and records are maintained in a manner that would be
necessary for any business.
Indigency
Medicare indigency requirements do not prevent discounting to
uninsured patients.
Providers may make indigency (including medical indigency)
determinations using their customary methods.
In order to protect all patients and the Medicare program, the
methods used in determining indigency for non-Medicare
patients should be similar to those used for Medicare
patients.
Indigency should be supported by documentation (good business
practices would dictate that).
Indigence should be determined on a patient-by-patient basis
because financial need is specific to each patient.
Medicare does not reimburse the bad debts of non-Medicare
patients.
Once indigence is determined, collection is no longer undertaken
with regard to the patient for the forgiven amount.
Bad Debt
Medicare does not require providers to be aggressive in their
collection of accounts. Medicare rules state that:
Efforts to collect from non-Medicare patients must be similar to the
efforts to collect from Medicare patients. Medicare wants
parity in the treatment of Medicare and non-Medicare patients
to protect the program and all patients, not just our
beneficiaries.
Efforts to collect on accounts should be more than a token effort.
Rather, they should be positive efforts that would be used in
any business.
Since the enactment of the Medicare program in 1965, the program's
rules have attempted to prevent ``cross-subsidization''--in other
words, preventing the Medicare program from subsidizing a service that
should be paid for by another payor, or preventing another payor from
subsidizing a service the Medicare program should be reimbursing. One
way that Medicare's regulations do that is to require hospitals to list
their stated charges for a service on their cost reports for a service
and maintain a uniform charge for a service. To repeat, nothing in CMS
regulations prevents a hospital from providing a discount off of that
stated charge. But when filing its cost report, the hospital must list
its full charges.
Without question, a hospital can provide free care or discount
charges to uninsured or underinsured patients. As we noted in our
response to the American Hospital Association, ``[n]othing in the
Centers for Medicare & Medicaid Services' (CMS') regulations, Provider
Reimbursement Manual, or Program Instructions prohibit a hospital from
offering discounts to any patients, Medicare or non-Medicare, including
low-income, uninsured or medically indigent individuals.''
In reference to the ability of a hospital to develop an indigency
policy, it may be overstating matters to say that the Medicare program
imposes a ``restriction'' on this. Hospitals--not the federal
government--set their own indigency policies and have the discretion
and flexibility to define eligibility indicators including income
level. This makes sense because a hospital, as a community institution,
is in the best position to know what policy best suits the community
that it serves.
As I have stated earlier, if a hospital wishes to provide a
discount off of its customary charges as part of an indigency policy,
it can do so, but it must report the full charge for that service on
its Medicare cost report.
Turning to the issue of bad debt, we often hear from hospitals that
Medicare somehow ``requires'' aggressive collection efforts that
include attaching a patient's home, use of a bill collector, and other
similar tactics. The reality is otherwise. The Medicare program does
not require any particular level of collection activity. It does not
require that collection activities be ``aggressive.'' It does not
require that hospitals seize patient's homes or bank accounts. What the
program does require, however, is that if the hospital wants to bill
the Medicare program for bad debt related to unpaid deductibles and
coinsurance by Medicare beneficiaries, it must use the same level of
collection activity to secure collection of those debts by Medicare
patients as it does to secure collection of debts by non-Medicare
patients. For example, if a hospital wants to use a bill collection
agency for its bad debts, it cannot turn only non-Medicare patient
bills over to that collection agency; rather, the hospital must treat
all bad debts the same. The principle, again to prevent cross-
subsidization, is that collection of Medicare and non-Medicare debts
need to be treated similarly.
In addition, a hospital may make an individualized indigency
determination for a particular Medicare patient and excuse that patient
from any efforts to collect unpaid deductibles and coinsurance. Doing
so would not prevent the hospital from collecting Medicare bad debt
payments from other payors on those unpaid amounts, provided the
hospital treats all indigent patients the same. This is also true if
the patient is a dually-eligible Medicare and Medicaid beneficiary. In
such a case, the hospital would submit a bill for the unpaid deductible
and coinsurance amounts to the state Medicaid plan. If the state
Medicaid plan was not liable and denied payment on the account, the
hospital could bill the Medicare program for it as a bad debt.
It is also important to note that in very limited circumstances,
Medicare reimbursement could be affected by the ``lesser of cost-or-
charges,'' or ``LCC'' principle. This principle was of significant
importance in the early years of the program, but is admittedly less so
now that most providers are reimbursed on the basis of a prospective
payment methodology rather than on the basis of costs. However, where
the LCC principle is applicable, a Medicare provider is paid the lesser
of its actual costs or its actual charges. Implementing a reduced
charge program for uninsured patients could potentially trigger the LCC
principle because if a hospital lowered charges for enough patients, a
hospital's fiscal intermediary could take the position that a
hospital's charges were not its posted, or stated, charges, but rather,
the charges applicable to most of its patients who were receiving
discounted services. If the FI did take that position, it could then
invoke the LCC principle and pay the hospital that lower charge-based
amount.
Few providers are subject to the principle at all. The only example
I am aware of is a pediatric or cancer hospital in its first year of
operation, before it becomes subject to the TEFRA methodology, because
there are no base year costs upon which to calculate a TEFRA target
rate limitation. Other providers, including critical access providers,
are not subject to the LCC provision.
The Office of Inspector General Guidelines
I cannot speak for the Office of Inspector General (OIG), but I
will note that shortly after we released our letter to the AHA, the OIG
put on its website a document addressing the application of its fraud
and abuse authorities to discounts for uninsured patients and cost-
sharing waivers for financially needy Medicare beneficiaries.
Lewis Morris, the Chief Counsel to the Inspector General, is here
with me today to address the OIG's perspective on these issues.
Funding Programs for Uninsured Individuals
CMS has done its share to reimburse hospitals for the treatment of
uninsured individuals. Since 1986, select hospitals have received
reimbursement under the Medicare disproportionate share (DSH) program.
Hospitals qualify for Medicare DSH payments if they treat a
``disproportionate share'' of low-income patients--defined in the
statute as the share of a hospital's total inpatient days attributable
to Medicare patients who are also eligible for SSI compared to all
Medicare patients plus days attributable to Medicaid patients compared
to all patients. As I mentioned above, Medicare also reimburses
hospitals for the bad debt that arises from treating low-income
Medicare beneficiaries who are unable to pay their cost sharing and
deductible amounts. Finally, the Medicaid program requires states to
designate certain hospitals as disproportionate share under their state
Medicaid plans, and make additional payments to those DSH hospitals.
The Medicaid DSH program is also advantageous for states because DSH
payments to a hospital under a state plan are not counted in
determining whether or not the state has breached the Medicaid upper
payment limit, thus enabling states to increase payments to other
providers participating under their state plan.
Other Administration Initiatives for the Uninsured
In addition to providing the guidance to hospitals on the
uninsured, this Administration has undertaken other initiatives to
address the plight of individuals who otherwise lack access to health
insurance or who may be under-insured. For example, the Administration
has dramatically increased funding to federally qualified community
health centers, the ``front line'' treatment option for low-income
uninsured individuals. The Administration provides an advanceable
health coverage tax credit to certain individuals who are receiving a
pension from the Pension Benefits Guaranty Corporation or who have
become unemployed due to the adverse effects of international trade and
are eligible for Trade Adjustment Assistance. This tax credit pays 65%
of the premium for qualifying health insurance, including either
employer-sponsored ``COBRA'' coverage or a state-designated private
health insurance plan. The Administration's Medicaid waivers, state
plan amendments, and HIFA waivers have provided health insurance for
2.6 million people who would have otherwise lacked coverage, and
enhanced existing benefits for nearly 7 million individuals.
Many of you in Congress voted for and deserve credit for the
provisions in the Medicare Modernization Act that will revolutionize
health savings accounts and help make insurance more affordable for
millions of Americans. In addition to creating a Medicare prescription
drug benefit and providing interim savings and subsidies through
Medicare-approved discount cards, this historic legislation allows
people to establish health savings accounts (HSAs) in conjunction with
affordable, high-deductible major medical coverage. These new products
will make health insurance more affordable to businesses large and
small, as well as to individuals whose employers do not sponsor
coverage. The President has proposed to provide further assistance to
such individuals by allowing them to claim an above-the-line deduction
of the major medical insurance premiums.
For working individuals and families who would not benefit from tax
deductibility because their incomes are too low, the President has
proposed $70 billion in refundable, advanceable tax credits. He also
proposed allowing expanded use of association health plans that allow
small businesses to more easily pool resources to purchase health
insurance. Combined with the steps that we have already taken,
enactment of these and other measures will further reduce the number of
individuals without health insurance in the United States.
Mr. Chairman and Congressman Deutsch, thank you for your invitation
to testify this morning. I am happy to answer any questions that you
may have.
Mr. Greenwood. Thank you, Mr. Kuhn.
Mr. Morris.
TESTIMONY OF LEWIS MORRIS
Mr. Morris. Thank you. Good evening, Mr. Chairman. I am
here today to discuss the Office of Inspector General's views
on the discounts that hospitals offer to uninsured patients and
to others who are unable to pay their hospital bills. Simply
put, the fraud and abuse laws enforced by the OIG allow
hospitals to offer discounts to patients who cannot afford to
pay for their care. Indeed, our legal authorities have
virtually no application to the discounts offered to uninsured
patients.
When the patient's health care is covered under a Federal
health care program, such as Medicare and Medicaid, our legal
authorities have greater relevance. But even then the laws
clearly establish that hospitals are able to help patients who
are experiencing financial hardship. Today, I will begin by
describing why the fraud and abuse laws have virtually no
relevance to hospitals offering discounts to uninsured
patients, and then I will describe how a hospital may reduce or
waive cost-sharing amounts for Medicare or Medicaid
beneficiaries experiencing financial hardship.
I would note that while today's presentation focuses on
discounts that hospitals offer to uninsured and financially
needy patients, the underlying principles apply equally to the
rest of the health care industry.
It has been suggested that the fraud and abuse laws,
particularly the anti-kickback statute, prevent hospitals from
offering financial assistance to patients who do not have
health care coverage. At best, this view reflects a
misunderstanding of the law. For the millions of uninsured
citizens who are not referral sources, the anti-kickback
statute simply does not apply. In other words, giving something
of value, such as a discount on hospital charges, to an
uninsured patient does not implicate the anti-kickback statute
except in the most unusual situation where the uninsured
patient is in a position to generate Federal health care
business, such as a physician. In short, no OIG authority or
policy should deter hospitals or others from offering financial
relief to uninsured patients.
I will now address a hospital's ability to offer discounts
to financially needy Medicare and Medicaid beneficiaries.
Simply put, the law allows hospitals significant flexibility to
help financially needy Medicare and Medicaid beneficiaries. For
these patients, a discount generally takes the form of some or
all of a co-payment or deductible waiver--that is, the portion
of the bill that the beneficiary owes.
In 1996, Congress passed a law that prohibits a provider
from offering a Medicare or Medicaid patient anything of value,
including waivers of cost-sharing amounts, that is likely to
influence the selection of a provider of Medicare or Medicaid
services. This law was necessary to curb abusive arrangements
under which providers would pay patients to obtain services,
often services which were unnecessary, overpriced, or
substandard. However, Congress recognized that some
beneficiaries might not be able to afford their cost-sharing
amounts. The statute does expressly allow providers to waive
these amounts on the basis of financial need. The exception has
three requirements. The waiver may not be routine, the waiver
may not be offered as part of an advertisement or solicitation,
and the waivers may only be made after determining in good
faith that the individual is in financial need or that
reasonable collection efforts have failed. This exception is
available to hospitals and others that want to provide relief
to Medicare and Medicaid patients who cannot afford their cost-
sharing amounts.
The OIG also has a long-standing and well-publicized
position supporting such financial hardship waivers. For
example, the ability to forgive Medicare cost-sharing amounts
is discussed in a 1992 OIG special fraud alert on this topic.
That fraud alert, as well as a wealth of guidance and other
information about these issues, is available on the OIG's Web
site. In short, the fraud and abuse laws clearly allow
hospitals to provide financial relief to Medicare and Medicaid
patients who cannot afford their cost-sharing amounts.
In conclusion, the OIG fully supports efforts to assure
that a patient's financial need is not a barrier to health
care. Our laws allow hospitals to offer bona fide discounts to
uninsured patients as well as Federal health care beneficiaries
who cannot afford their health care bills. Frankly, we do not
know why lawyers advising hospitals would tell them that the
fraud and abuse laws are an impediment to discounts to the
uninsured. Such discounts do not violate the fraud and abuse
laws. We have never taken any enforcement action in this area.
And, finally, we have issued guidance as early as 1992
suggesting otherwise.
Mr. Chairman, thank you for the opportunity to present the
OIG's views on these issues.
[The prepared statement of Lewis Morris follows:]
Prepared Statement of Lewis Morris, Chief Counsel to the Inspector
General, Department of Health and Human Services
Good morning Mr. Chairman and Members of the Subcommittee. I am
here today to discuss the Office of Inspector General's (OIG's) views
on the discounts that hospitals offer to uninsured patients and to
others who are unable to pay their hospital bills. We understand that
there is widespread concern about hospitals' billing and collection
practices as those practices affect patients who cannot afford to pay
their hospital bills. I--want to assure the Committee that OIG fully
supports efforts that hospitals have made to help financially needy
patients. We appreciate the opportunity to address this issue and to
discuss OIG's legal authorities in this area.
Simply put, the fraud and abuse laws enforced by OIG allow
hospitals and other health care providers and suppliers to offer
discounts to patients who cannot afford to pay for their care. Indeed,
our legal authorities have extremely limited application to discounts
offered to uninsured patients. When the patient's health care is
covered under a Federal health care program, such as Medicare or
Medicaid, our legal authorities have greater application. But even
then, the laws and regulations clearly enable hospitals and others to
help patients who are experiencing financial hardship. OIG has long-
standing and clear guidance on this point.
While today's presentation focuses on discounts that hospitals
offer to uninsured and financially needy patients, the underlying
principles apply equally to the rest of the Medicare- and Medicaid-
serving health care industry. Before I discuss OIG's views, it is
important to note that a thorough discussion of hospital discounts for
patients with financial hardship also involves questions for the
Centers for Medicare & Medicaid Services (CMS). CMS has programmatic
responsibility for the Medicare program and has established the cost
reporting and bad debt rules relevant to hospital discounting
practices. A CMS witness is also testifying today and will address the
CMS issues.
From OIG's perspective, discounts offered to uninsured patients are
analyzed under two fraud and abuse laws: the Federal anti-kickback
statute and the permissive exclusion authority prohibiting providers
and suppliers from charging Medicare or Medicaid substantially more
than they usually charge other customers. Discounts offered to
financially needy Medicare or Medicaid beneficiaries also must be
analyzed under the civil monetary penalty (CMP) statute that prohibits
offering inducements to Medicare and Medicaid beneficiaries.
Today, I will begin by describing the limited application of OIG's
legal authorities to discounts offered to uninsured patients. Next, I
will describe how a hospital may reduce or waive cost-sharing amounts
for Medicare or Medicaid beneficiaries experiencing financial hardship.
Finally, I will explain how hospitals and other health care providers
and suppliers can obtain further guidance from OIG on these issues.
DISCOUNTS FOR UNINSURED PATIENTS
OIG authorities allow hospitals to offer discounts to uninsured
patients. It has been suggested that two fraud and abuse laws--the
Federal anti-kickback statute and the exclusion authority prohibiting
excessive charges to Medicare and Medicaid--prevent hospitals from
offering discounted prices to patients who do not have health care
coverage. This view reflects a misunderstanding of the law.
The Federal Anti-Kickback Statute
The Federal anti-kickback statute is a criminal statute that
prohibits the purposeful offer, payment, solicitation, or receipt of
anything of value in exchange for, or to induce, business payable by
any Federal health care program, including Medicare and Medicaid.
Congress was concerned that improper financial incentives often lead to
abuses, such as overutilization, increased program costs, corruption of
medical-decision making, and unfair competition. Accordingly, Congress
banned kickbacks in the Federal health care programs.
Giving something of value (such as a discount on hospital charges)
to an uninsured patient does not implicate the Federal anti-kickback
statute, unless the patient is in a position to generate Federal health
care program business. For example, a hospital asked OIG about the
propriety of offering discounts to doctors who self-pay. Such discounts
would implicate the statute if one purpose were to induce the doctors
to refer Medicare or Medicaid business to the hospital. But those
situations are not, in our view, typical of hospital policies for
discounting to the uninsured. Rather, most need-based discounting
policies are aimed at making health care more affordable for the
millions of uninsured citizens who are not referral sources for the
hospital. For discounts offered to these uninsured patients, the anti-
kickback statute simply does not apply.
The Excessive Charges Exclusion Authority
By statute, OIG is authorized, but not required, to exclude from
participation in the Federal health care programs any provider or
supplier that charges Medicare or Medicaid substantially more than it
usually charges other customers. This law is intended to protect the
Medicare and Medicaid programs--and the taxpayers--from providers and
suppliers that routinely charge the Medicare or Medicaid programs
substantially more than they usually charge other customers.
Some providers have expressed concern that discounting to uninsured
patients might skew their ``usual charges'' to other customers and
possibly subject them to exclusion under this provision. Let me assure
you that this is not the case. OIG has never excluded or even
contemplated excluding any provider or supplier for offering discounts
to uninsured patients or other patients who cannot afford their care.
OIG believes that the statute can be reasonably interpreted as
allowing providers to exclude discounts to these patients when
calculating their usual charges to other customers. To this end, when
we proposed regulations in connection with this exclusion authority, we
included a provision that would clarify that free or substantially
reduced prices offered to uninsured patients do not need to be factored
into a hospital's usual charges for purposes of the exclusion
authority. Those proposed regulations are still under development.
To further assure the industry with respect to discounts to the
uninsured, we issued guidance in February that, pending issuance of
final regulations or a decision not to proceed with final regulations,
we will continue our enforcement policy that, when calculating their
``usual charges,'' providers and suppliers need not consider free or
substantially reduced charges to uninsured patients.
In sum, no OIG authority or policy should deter hospitals and
others from offering financial relief to uninsured patients.
WAIVERS OF COST-SHARING AMOUNTS FOR FINANCIALLY NEEDY MEDICARE AND
MEDICAID BENEFICIARIES
A discount offered to a Medicare or Medicaid beneficiary generally
takes the form of a waiver of all or a portion of the Medicare or
Medicaid program copayment or deductible, that is, the portion of the
bill that the beneficiary owes. Routine waivers of Medicare or Medicaid
cost-sharing amounts are problematic under the fraud and abuse laws
because they may be used impermissibly to induce Federal health care
program business. For example, many fraud schemes use the promise of
``free'' or ``no out-of-pocket cost'' medical items or services to
attract Medicare or Medicaid beneficiaries.
However, the law also clearly permits health care providers to
waive Medicare and Medicaid cost-sharing amounts for financially needy
beneficiaries. OIG has a long-standing and well-publicized position
supporting such financial hardship waivers. For example, the ability to
forgive Medicare cost-sharing amounts in consideration of a patient's
financial hardship is discussed in a 1992 OIG special fraud alert on
the waiver of copayments and deductibles. The alert is available on our
web site, along with other guidance on this subject, at http://
oig.hhs.gov/fraud/fraud
alerts.html.
The Civil Money Penalty Prohibiting Beneficiary Inducements
While the Federal anti-kickback statute may be implicated in some
cases, the primary legal authority in the area of waivers of Medicare
and Medicaid cost-sharing amounts is the CMP prohibiting inducements to
beneficiaries. Enacted as part of HIPAA in 1996, the CMP prohibits
offering a beneficiary anything of value, including waivers of cost-
sharing amounts, that is likely to influence the beneficiary's
selection of a provider, practitioner, or supplier of Medicare or
Medicaid payable items or services. Beneficiary inducements are of
particular concern because vulnerable beneficiaries may be enticed to
obtain services that are medically unnecessary, overpriced, or of
substandard quality.
While generally banning routine cost-sharing waivers, such
``insurance only'' billing and the like, the Congress recognized that
some beneficiaries might not be able to afford their cost-sharing
amounts. The statute thus includes an express exception for waivers on
the basis of financial need. The exception has three requirements:
the waivers may not be routine;
the waivers may not be offered as part of any advertisement or
solicitation; and
the waivers may only be made after determining in good faith that the
individual is in financial need or that reasonable collection
efforts have failed.
This exception is available to hospitals and others that want to
provide relief to Medicare and Medicaid beneficiaries who cannot afford
their cost-sharing amounts.
We recognize that what constitutes a good faith determination of
financial need may vary depending on individual patient circumstances.
We believe that hospitals should have flexibility to consider relevant
variables. For example, hospitals may consider:
the local cost of living;
a patient's income, assets, and expenses;
a patient's family size; and
the scope and extent of a patient's medical bills.
A hospital's financial need guidelines should be reasonable, based
on objective criteria, appropriate for the hospital's locality, and
applied uniformly to all patients. Hospitals should take reasonable
measures to document the financial need determination. We are mindful
that there may be situations when patients are reluctant or unable to
provide documentation of their financial status. In such cases,
hospitals may be able to use other reasonable, documented methods for
determining financial need, including, for example, patient interviews
or questionnaires.
As discussed in our 1992 special fraud alert and elsewhere, it is
OIG's position that the principles articulated in this CMP exception
apply equally to financial need-based cost-sharing waivers under the
Federal anti-kickback statute. There also is a safe harbor under the
Federal anti-kickback statute that protects certain cost-sharing
waivers for inpatient hospital services (waivers protected under this
safe harbor are also protected under the CMP). The safe harbor contains
a number of conditions designed to prevent abusive waiver practices,
but does not require a determination of financial need.
In sum, the fraud and abuse laws clearly allow hospitals to provide
relief to Medicare and Medicaid beneficiaries who cannot afford their
cost-sharing amounts.
OBTAINING OIG GUIDANCE
As evidenced by the number and range of fraud alerts, bulletins,
and other guidance we have issued, OIG has a strong commitment to
providing guidance to the health care provider community. As previously
noted, in February we issued specific guidance on OIG's fraud and abuse
authorities and their application to hospital discounting practices.
This guidance, titled ``Hospital Discounts Offered to Patients Who
Cannot Afford to Pay Their Hospital Bills'' (``Discounts Guidance''),
is available on our website at www.oig.hhs.gov and is attached to this
testimony.
In addition to these resources, OIG's advisory opinion process is
available to hospitals or others that want to know how OIG views a
particular discount arrangement. OIG advisory opinions are written
legal opinions that are binding on OIG, the Department of Health and
Human Services, and the party that requests the opinion. To obtain an
opinion, the requesting party must submit a written description of its
existing or proposed business arrangement. Further information about
the process, including frequently asked questions, can be found on
OIG's web site at: http://oig.hhs.gov/fraud/advisoryopinions.html
In addition, our web site contains the Discount Guidance, the
proposed regulations on the excessive charges exclusion authority, and
a special advisory bulletin discussing the CMP statute, as well as
special fraud alerts and bulletins, safe harbor regulations, compliance
program guidances, and advisory opinions that relate to the issues I
have discussed today.
CONCLUSION
In conclusion, I want to assure the Committee that OIG fully
supports efforts to ensure that a patient's financial need is not a
barrier to health care. Furthermore, OIG legal authorities permit
hospitals and others to offer bona fide discounts to uninsured patients
and to Medicare or Medicaid beneficiaries who cannot afford their
health care bills.
Mr. Chairman and Members of the Committee, thank you for inviting
OIG to testify today. I would be happy to answer any questions you may
have.
ATTACHMENTS
HOSPITAL DISCOUNTS OFFERED TO PATIENTS WHO CANNOT AFFORD TO PAY THEIR
HOSPITAL BILLS
This document addresses the views of the Office of Inspector
General (``OIG'') on the following topics: (1) discounts provided by
hospitals for uninsured patients who cannot afford to pay their
hospital bills and (2) reductions or waivers of Medicare cost-sharing
amounts by hospitals for patients experiencing financial hardship. For
the following reasons, the OIG believes that hospitals have the ability
to provide relief to uninsured and underinsured patients who cannot
afford their hospital bills and to Medicare beneficiaries who cannot
afford their Medicare cost-sharing amounts. The OIG fully supports
hospitals' efforts in this area.
Discounts for Uninsured Patients Who Cannot Afford to Pay Their
Hospital Bills
No OIG authority prohibits or restricts hospitals from offering
discounts to uninsured patients who are unable to pay their hospital
bills. It has been suggested that two laws enforced by the OIG may
prevent hospitals from offering discounted prices to uninsured
patients. We disagree and address each law in turn.
The Federal Anti-Kickback Statute.1 The Federal anti-
kickback statute prohibits a hospital from giving or receiving
anything of value in exchange for referrals of business payable
by a Federal health care program, such as Medicare or Medicaid.
The Federal anti-kickback statute does not prohibit discounts
to uninsured patients who are unable to pay their hospital
bills. However, the discounts may not be linked in any manner
to the generation of business payable by a Federal health care
program. Discounts offered to underinsured patients potentially
raise a more significant concern under the anti-kickback
statute, and hospitals should exercise care to ensure that such
discounts are not tied directly or indirectly to the furnishing
of items or services payable by a Federal health care program.
As discussed below, the statute and regulations offer means to
reduce or waive coinsurance and deductible amounts to provide
assistance to underinsured patients with reasonably verified
financial need.
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\1\ 42 U.S.C. 1320a-7b(b).
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Section 1128(b)(6)(A) of the Social Security Act.2 This
law permits--but does not require--the OIG to exclude from
participation in the Federal health care programs any provider
or supplier that submits bills or requests for payment to
Medicare or Medicaid for amounts that are substantially more
than the provider's or supplier's usual charges. The statute
contains an exception for any situation in which the Secretary
finds ``good cause'' for the substantial difference. The
statute is intended to protect the Medicare and Medicaid
programs--and taxpayers--from providers and suppliers that
routinely charge the programs substantially more than their
other customers.
---------------------------------------------------------------------------
\2\ 42 U.S.C. 1320a-7(b)(6)(A).
---------------------------------------------------------------------------
The OIG has never excluded or attempted to exclude any provider
or supplier for offering discounts to uninsured or underinsured
patients. However, to provide additional assurance to the
industry, the OIG recently proposed regulations that would
define key terms in the statute.3 Among other
things, the proposed regulations would make clear that free or
substantially reduced charges to uninsured persons would not
affect the calculation of a provider's or supplier's ``usual''
charges, as the term ``usual charges'' is used in the exclusion
provision. The OIG is currently reviewing the public comments
to the proposed regulations. Until such time as a final
regulation is promulgated or the OIG indicates its intention
not to promulgate a final rule, it will continue to be the
OIG's enforcement policy that. when calculating their ``usual
charges'' for purposes of section 1128&)(6)(A), individuals and
entities do not need to consider free or substantiallv reduced
charges to (i) uninsured patients or (ii) underinsured patients
who are self-paying patients for the items or services
furnished.
---------------------------------------------------------------------------
\3\ 68 Fed. Reg. 53939 (Sept. 15, 2003).
---------------------------------------------------------------------------
As noted in the preamble to the proposed regulations, the
exclusion provision does not require a hospital to charge
everyone the same price; nor does it require a hospital to
offer Medicare or Medicaid its ``best price.'' However,
hospitals cannot routinely charge Medicare or Medicaid
substantially more than they usually charge others.
In addition to the two laws discussed above, it has been suggested
that hospitals are reluctant to give discounts to uninsured patients
because the OIG requires hospitals to engage in vigorous collection
efforts against uninsured patients. This misperception may be based on
some limited OIG audits of specific hospitals' compliance with
Medicare's bad debt rules. The bad debt rules and regulations,
including the scope of required collection efforts, are established by
the Centers for Medicare & Medicaid Services (``CMS''). No OIG rule or
regulation requires a hospital to engage in any particular collection
practices.
Reductions or Waivers of Cost-Sharing Amounts for Medicare
Beneficiaries Experiencing Financial Hardship
The fraud and abuse laws clearly permit the waiver of all or a
portion of a Medicare cost-sharing amount for a financially needy
beneficiary.4 Importantly, under the fraud and abuse laws,
the ``financial need'' criterion is not limited to ``indigence,'' but
can include any reasonable measures of financial hardship.
---------------------------------------------------------------------------
\4\ Hospitals still need to ensure that they comply with all
relevant Medicare program rules.
---------------------------------------------------------------------------
Like many private insurance plans, the Medicare program includes a
cost-sharing requirement. Cost-sharing is an important control on
overutilization of items and services. If beneficiaries are required to
pay for a portion of their care, they will be better health care
consumers, selecting items or services because they are medically
needed.
The routine waiver of Medicare coinsurance and deductibles can
violate the Federal anti-kickback statute (discussed above) if one
purpose of the waiver is to generate business payable by a Federal
health care program.5 In addition, a separate statutory
provision prohibits offering inducements--including cost-sharing
waivers--to a Medicare or Medicaid beneficiary that the offeror knows
or should know are likely to influence the beneficiary's selection of a
particular provider, practitioner, or supplier.6 (This
prohibition against inducements offered to Medicare and Medicaid
beneficiaries does not apply to uninsured patients.)
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\5\ In certain circumstances, the routine waiver of coinsurance and
deductible amounts can implicate the False Claims Act, 31 U.S.C.
3729. See Special Fraud Alert: Routine Waiver of Copayments or
Deductibles Under Medicare Part B, 59 Fed. Reg. 65372, 65374 (Dec. 19,
1994), available on the OIG webpage at: http://oig.hhs.gov/fraud/docs/
alertsandbulletins/121994.html.
\6\ 42 U.S.C. 1320a-7a(a)(5). The statute includes several other
exceptions. One exception permits the waiver of cost-sharing amounts
for certain preventive care services without any requirement to
determine financial need. 42 U.S.C. 1320a-7a(i)(6)(D); 42 C.F.R.
1003.101; see also 65 Fed. Reg. 24400, 24409 (April 26, 2000).
---------------------------------------------------------------------------
However, there are two important exceptions to the general
prohibition against waiving Medicare coinsurance and deductibles
applicable to hospitals, one for financial hardship situations and one
for inpatient hospital services.
First, providers, practitioners, and suppliers may forgive a
Medicare coinsurance or deductible amount in consideration of a
particular patient's financial hardship. Specifically, under the fraud
and abuse laws, Medicare cost-sharing amounts may be waived so long as:
the waiver is not offered as part of any advertisement or
solicitation;
the party offering the waiver does not routinely waive coinsurance or
deductible amounts; and
the party waives the coinsurance and deductible amounts after
determining in good faith that the individual is in financial
need reasonable collection efforts have failed.7
---------------------------------------------------------------------------
\7\ 42 U.S.C. 1320a-7a(i)(6)(A); Special Fraud Alert, supra note
5.
---------------------------------------------------------------------------
The OIG recognizes that what constitutes a good faith determination
of ``financial need'' may vary depending on the individual patient's
circumstances and that hospitals should have flexibility to take into
account relevant variables. These factors may include, for example:
the local cost of living;
a patient's income, assets, and expenses;
a patient's family size; and
the scope and extent of a patient's medical bills.
Hospitals should use a reasonable set of financial need guidelines
that are based on objective criteria and appropriate for the applicable
locality. The guidelines should be applied uniformly in all cases.
While hospitals have flexibility in making the determination of
financial need, we do not believe it is appropriate to apply inflated
income guidelines that result in waivers for beneficiaries who are not
in genuine financial need. Hospitals should consider that the financial
status of a patient may change over time and should recheck a patient's
eligibility at reasonable intervals sufficient to ensure that the
patient remains in financial need. For example, a patient who obtains
outpatient hospital services several times a week would not need to be
rechecked every visit. Hospitals should take reasonable measures to
document their determinations of Medicare beneficiaries' financial
need. We are aware that in some situations patients may be reluctant or
unable to provide documentation of their financial status. In those
cases, hospitals may be able to use other reasonable methods for
determining financial need, including, for example, documented patient
interviews or questionnaires.
Second, another exception to the general prohibition against
Medicare cost-sharing waivers is contained in an OIG ``safe harbor''
regulation related to inpatient hospital services.8
Compliance with a safe harbor regulation is voluntary, and failure to
comply does not necessarily mean an arrangement is illegal. However, a
hospital that complies fully with a safe harbor is assured that it will
not be prosecuted under the Federal anti-kickback statute.9
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\8\ 42 C.F.R. 1001.952(k).
\9\ Furthermore, 42 U.S.C. 1320a-7a(i)(6)( B) provides that any
waiver that fits in a safe harbor to the anti-kickback statute is
similarly protected under the beneficiary inducements statute
(discussed above).
---------------------------------------------------------------------------
The safe harbor for waivers of coinsurance and deductibles provides
that a hospital may waive coinsurance and deductible amounts for
inpatient hospital services for which Medicare pays under the
prospective payment system if the hospital meets three conditions:
the hospital cannot claim the waived amount as bad debt or otherwise
shift the burden to the Medicare or Medicaid programs, other
payers, or individuals;
the waiver must be made without regard to the reason for admission,
length of stay, or diagnostic related group; and
the waiver may not be part of a price reduction agreement between the
hospital and a third-party payer (other than a Medicare SELECT
plan).
While the OIG is not concerned about bona fide cost-sharing waivers
for beneficiaries with genuine financial need, we have a long-standing
concern about providers and suppliers that use ``insurance only
billing'' and similar schemes to entice Federal health care program
beneficiaries to obtain items or services that may be medically
unnecessary, overpriced, or of poor quality.
OIG Advisory Opinion Process
The OIG has an advisory opinion process that is available to
hospitals or others that want assurance that they will not run afoul of
the fraud and abuse laws.10 OIG advisory opinions are
written opinions that are legally binding on the OIG, the Department of
Health and Human Services, and the party that requests the opinion. To
obtain an opinion, the requesting party must submit a detailed, written
description of its existing or proposed business arrangement. The
length of time that it takes for the OIG to issue an opinion varies
based upon a number of factors, including the complexity of the
arrangement, the completeness of the submission, and how promptly the
requestor responds to requests for additional information. Further
information about the process, including frequently asked questions,
can be found on the OIG webpage at http://oig.hhs.gov/fraud/
advisoryopinions.html.
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\10\ Section 1128D(b) of the Social Security Act; 42 C.F.R. part
1008.
---------------------------------------------------------------------------
Conclusion
Hospitals have the ability to provide discounts to uninsured and
underinsured patients who cannot afford their hospital bills and to
Medicare beneficiaries who cannot afford their Medicare cost-sharing
obligations. Nothing in the OIG rules or regulations prohibits such
discounts, and the OIG fully supports the hospital industry's efforts
to lower health care costs for those unable to afford care. While every
case must be evaluated on its own merits, it is important to note that
the OIG has never brought a case based on a hospital's bona fide
discounting of its bill for an uninsured or underinsured patient of
limited means.
Guidance about the anti-kickback statute and other fraud and abuse
authorities is available on the OIG's webpage at http://oig.hhs.gov/.
This guidance includes the Special Fraud Alert on Routine Waivers of
Copayments and Deductibles under Medicare Part B; safe harbor
regulations (and the ``preamble'' discussions that include explanatory
information), the compliance program guidance for hospitals, and OIG
advisory opinions.
Mr. Greenwood. Thank you very much. The Chair recognizes
himself for questioning.
I am going to go through a list of questions here, but
before I do, I think you were both here throughout the
afternoon, and you heard the line of questioning I started as
we were running out of time with the hospitals, and that is
that it seems to me the part of the phenomena that has driven
up the charges at hospitals has been the fact that hospitals
are reimbursed for outlying cases, outlying from the DRG range,
on a charges-to-cost ratio, and therefore it seems, since the
costs are fairly constant, growing at a slight rate, that it
was in the hospital's interest to have the charge set as high
as possible to maximize the revenue. Am I correct that that
was--at least prior to 2003, that that rather relatively
perverse incentive existed?
Mr. Kuhn. That is correct, Mr. Chairman. There was a
phenomena in the Medicare law that allowed some hospitals--and
they actually figured out this loophole--that by greatly
accelerating their charges, they could take advantage of the
outlier payment. And what was really happening is that charges
could be current, but the data on which they based cost were
about 2 or 3 years old. By increasing that spread, it triggered
the outlier payment more quickly. And, again, some hospitals
figured that out, some hospital systems--you heard Mr. Fetter
speak about that--capitalized and moved on that very
aggressively. When CMS discovered that, we moved new
regulations, which were finalized last year, that include two
things. One, to tighten the time period between costs and
charges in terms of the most recent cost report so hospitals
can't work on that spread. We also have a look-back provision,
so we can go back and really audit these folks and take dollars
back should they be abusing that system. So, you are correct in
your statement. There was an opportunity for hospitals to
accelerate charges because of some incentives in the Medicare
program, but that is now gone.
Mr. Greenwood. Was it the case that the higher the charge,
the higher the reimbursement, assuming constant costs, or was
it simply that the higher the charge, the more cases fit into
the outlier program and were reimbursed on a basis that is
unrelated to the charge itself?
Mr. Kuhn. It was more the latter. It just created a
quicker, easier opportunity to trigger the outlier payment and
to improve cash-flow.
Mr. Greenwood. But it still created incentive to raise the
charges, and it seems to me that that, I suspect, was the
driver for these charges going up, at least a significant
driver for the charges to go up, and to some extent the
uninsured patient just got caught in the crossfire because
hospitals had to, if they were going to, in fact, claim that
that was their charge, they had to charge it.
Mr. Kuhn. That was certainly one of the triggers that was
out there. There are other things, obviously, for charge
movement forward. That incentive did exist, but it does not
exist anymore.
Mr. Greenwood. It is your contention that since 2003 that
incentive has been eliminated.
Mr. Kuhn. That is correct.
Mr. Greenwood. Do hospitals still have incentives to keep
their charges high in cases of automobile accidents, for
instance, where there may be a settlement and they get to
subrogate and get a piece of the settlement and they use
charges, or is that outside of your area of expertise?
Mr. Kuhn. That is outside of my area. I am just looking at
the Medicare program. I would leave that to others to opine on
that.
Mr. Greenwood. Is it HHS' responsibility to make sure that
the uninsured self-pay patients are not adversely and unfairly
treated by hospital billing and collection practices?
Mr. Kuhn. What our policy is, and it is really reflected by
the clarification Secretary Thompson issued in the Qs and As we
provided for hospitals in February of this year, is that we
really did encourage hospitals to use whatever authority they
had to take care of the uninsured and work in that area.
Where our exact oversight applies, however, is if a
hospital wants to collect Medicare bad debt. That is really
where the indigency policy becomes critical, and that is where
we come into play. If a hospital wants to forego the bad debt
in that Medicare payment, we really don't have oversight
authority.
Mr. Greenwood. But suppose that an uninsured patient goes
to a hospital and gets billed for charges that are
extraordinarily high, and that patient just sucks it up and
puts it on a credit card and says, ``Well, I will spend the
rest of my life paying for this,'' there is no bad debt here.
CMS has no responsibility under any statute or regulation to
protect that patient from that effect?
Mr. Kuhn. You are correct, we have no authority in that
area.
Mr. Greenwood. In a February 2004 briefing to this
committee, representatives of HHS claimed to have not known
until the middle to late part of 2003 of hospitals' concerns
with the impact of Medicare rules on their treatment of the
uninsured. Today, we heard statements from Trevor Fetter of
Tenet who said in 2002 that this was something that had
concerned him for years.
Could you explain why something apparently known by some or
many in the industry for years was not even on the radar of HHS
until 2003?
Mr. Kuhn. That misunderstanding or that discrepancy also
troubles us as well because as we prepared for this hearing, I
queried a lot of staff in terms of what was going on in 2001,
2002, even 2003, and, quite frankly, we heard from few, if any,
hospitals asking questions. Likewise, we talked to our regional
offices and our fiscal intermediaries, and they too were
receiving little comment. So, it was our impression that
hospitals had a pretty good understanding of our rules which
have been out there for a long time in the Provider
Reimbursement Manual, and it wasn't until recently that some
concerns became known. And what we tried to do this year in
Secretary Thompson's response to Dick Davidson of the American
Hospital Association was to try a different format. Instead of
giving them a copy of, for example, the Provider Reimbursement
Manual, we decided to do it in a series of questions and
answers, and since then I think that has really clarified
things. I have heard from the American Hospital Association--I
really salute them for this effort--that they have over 2,700
hospitals in the country now that have signed a pledge that
says they understand the rules, they are going to move forward
with policy----
Mr. Greenwood. What percentage is that of the hospitals in
the United States?
Mr. Kuhn. I believe there are about 5,000 acute care
hospitals in the country, so it is well over half. So, I think
that is a good number in a very short period of time, and I
commend them for that effort.
Mr. Greenwood. Well, if they get to 5,000, we won't have to
legislate.
Mr. Kuhn. We can all hope.
Mr. Greenwood. As part of Medicare cost reporting, HHS was
aware of steadily declining cost-to-charge ratios revealing in
inverse steadily growing disparities between the cost to a
hospital and charges given to patients. In California, for
example, these markups rose, on average, from 174 percent in
1990 to 310 percent in 2003. These figures depict real bills to
real people with all too real consequences. Did this slip
through the cracks at HHS?
Mr. Kuhn. Well, I think we have become aware of that, and
obviously we were aware of it when we fixed the outlier policy
last year, as I mentioned earlier. But, again, when we set
Medicare payment policy, as you showed on your graphs earlier,
Medicare payment policy is very close to cost. We use charges
in a lot of different ways. We use it for apportionment. We use
it to set DRG rates. We use it to trigger outlier payments. So,
it is used importantly by us, but in terms of what we
ultimately pay, that is set by the rates when Congress gives us
the updates. So, it is part of the process, but it doesn't
really trigger that much in terms of the overall payment
scheme.
Mr. Greenwood. And aside from the outlier issue that we
talked about in the beginning, are you aware of any other
Medicare formulae or processes that would still create an
incentive for hospitals to have high charges?
Mr. Kuhn. We are not aware of any kind of incentives or
disincentives or perverse incentives that would be in the
Medicare program that would drive that.
Mr. Greenwood. You wrote in your response to this
committee, ``If a hospital wants Medicare bad debt
reimbursement, it must at the very least send non-indigent
Medicare patients a bill for the debt, and must make some
reasonable effort to collect from Medicare patients as it does
for non-Medicare patients.'' Why is HHS unwilling to be more
precise about what is a reasonable collection effort?
Mr. Kuhn. We really want to leave that up to the hospitals
and what works for them. Each hospital wants to design its own
bad debt policy differently. We want to give them maximum
flexibility. What we are really looking for in our manual is
genuine and reasonable efforts and good business judgment on
their part.
Mr. Greenwood. Do you think that that creates any incentive
for them to err on the side of more aggressive collections,
since there isn't perfect clarity?
Mr. Kuhn. Well, sunshine is a good thing, and I think this
hearing and some of the news reports have been a good thing to
kind of help stabilize and try to create community standards
out there.
Mr. Greenwood. And as you have said, you have never taken
any action whatsoever against a hospital for not actively
pursuing bad debt, isn't that what you said earlier?
Mr. Kuhn. What we would do is if, indeed, a hospital did
not have consistent policy--say, they were trying to collect
Medicare bad debt and they didn't have consistent policy on
either side--in an audit, we would go back and maybe take back
some of those Medicare payments that they claimed, but that
would be the only activity that we could take.
Mr. Greenwood. As part of the Medicare proscribed
reasonable and consistent collection efforts, can a hospital
consider bills of similar amounts differently, based on the
circumstances of the debtor? For example, if you had a $50,000
bill for a low-income person who doesn't qualify for charity,
and a $50,000 bill for a well off professional, must
collections proceed similarly against both individuals?
Mr. Kuhn. As long as they are pursuing similar collections
and it is a part of their indigency policy and they want to
collect Medicare bad debt, they need to be consistent on both
sides. However, I would just say that there are ways that they
could do their policy differently. For example, we all know if
you legislate, if you set any rule, if you draw a line at, say,
300 percent of poverty or $50,000, but, say, the person with
$50,000 is the young college student right out of school, and
he has got a pretty good job, he is making $50,000, but he
incurs a huge debt from a medical incident. A hospital could
simply have a policy that says, ``We have an indigence
policy,'' but anything that falls outside of that, we are going
to look at these on a case-by-case basis. We are going to have
a special committee of the hospital that will include the CEO
and other folks, and as long as they do that consistently for
Medicare and non-Medicare patients, we are fine.
Mr. Greenwood. Do all determinations of indigency for the
purpose of qualifying a patient for a charity program have to
be through a means test?
Mr. Kuhn. No, they don't have to be through a means test,
although we would like to see--I think what works best for us
is to see income levels, and if you mean by means test, assets
test, et cetera, we don't require that. They could use just a
straight income test.
Mr. Greenwood. Hospitals have suggested that the anti-
kickback law could interfere with efforts to make widely
available to patients notice of a hospital charity policy.
Could posting a hospital's charity policy on a Web site or
including information about the policy in billing mailings, for
example, ever run contrary to any HHS rules?
Mr. Morris. Probably the anti-kickback statute would not
even be of concern. As I noted in my testimony, discounts to
the uninsured have very little relevance because they are not
Medicare and Medicaid patients, and that is not within the
scope of the anti-kickback statute.
I did reference a beneficiary inducement prohibition which,
in order to meet the protections of it, one of the elements is
not advertising the promotion of those routine waivers, by
which we believe Congress meant a provider should not be out
there saying, ``No out-of-pocket for you. We don't bill
anything but insurance.'' But the public service announcements,
things that would let the community know that the hospital has
an indigency policy? You should ask about it. Putting flyers up
so people can be informed? We don't think that is what Congress
intended by the bar on advertising. The concern was that people
should not be encouraged to seek medical care where they are
told there is no out-of-pocket, and it is being put on the side
of buses and things.
Mr. Greenwood. Isn't it true that with very limited
exception such as prompt pay discounts, for example, the only
manner by which a discount might be offered to an uninsured
patient is by means of a hospital's charity program?
Mr. Morris. Well, a discount can be offered to anyone that
the hospital, based on its indigency program--and, as has been
indicated, we believe there should be great flexibility
provided so they can structure those as they see fit--so a
prompt pay discount, if it is a bona fide prompt pay discount
reflecting the fair market value of not having to pursue
administrative action against the money to seek, that would be
appropriate--you could construct your indigency policy with a
great deal of flexibility. It would not need to be restricted
to a prompt pay.
Mr. Greenwood. The problem some hospitals are having, I
believe, is how broad can a charity policy be. The issue turns
perhaps on the definition of ``financial need'' and what to do
about the group who is above both Medicaid and the 200 to 400
percent of the Federal poverty line bracketing many hospital
policies.
Mr. Morris. I think the way I would answer that is that a
good faith determination of financial need resides with the
hospital, and they can bring whatever community assessment they
want to that.
Where I think the fraud and abuse laws could be implicated
is if there was a blanket waiver of all cost-paying obligation
to an entire community--no one was expected to pay the co-pays
and deductibles--which, frankly, would seem to be a rather
dangerous business proposition, much less a----
Mr. Greenwood. Suppose they said anyone without insurance?
Mr. Morris. And they applied that across-the-board?
Mr. Greenwood. Is that too broad?
Mr. Morris. I think there would need to be an
individualized determination; so a blanket statement to anyone
who does not have insurance does not have to pay co-payments
would be problematic. There would need to be an individualized
determination, but the element----
Mr. Greenwood. Based on things like income and assets.
Mr. Morris. Income, assets, number of members in the
family, size of the debt, all those would be variables that
should be taken into account.
Mr. Greenwood. Is there some limit? If a hospital said that
our charity applies to anyone who is above 500 percent, or 700
percent, or 800 percent of poverty, is there some point at
which CMS would say, ``Wait a minute, that is too high?''
Mr. Kuhn. I would say, ultimately, there would be a
community standard that the auditors could come and look at.
For example, under Medicare right now, the deductible is $876,
so if you set the income standard so high that you waive that
deductible on a consistent basis, I think that would be a bit
of a problem. One, as Lew said earlier, as a business sense, I
don't think the hospital would be doing that. But if you set it
so high to kind of write everything off and collect a Medicare
bad debt, I think the auditors would have to look at that one a
little bit differently because, when Congress had the idea that
there ought to be deductibles and co-payments, for those that
have the ability to pay, I think there was an intent that
people should pay those things.
Mr. Morris. It is worth remembering, too, that when we talk
about Medicare co-pays and deductibles, we are therefore
talking about people who have insurance, they are covered by a
program, as distinct from those who are uninsured, for which,
from a fraud and abuse standpoint, we have no jurisdiction
directly. So, if we are talking about waivers of co-pays and
deductibles for those who have Medicare coverage, what we
expect is some reasonable assessment of financial need with a
great deal of flexibility.
Mr. Greenwood. If CMS reimburses a hospital for a bad debt
and 10 years later, or 5 years later, some period later, the
debt ends up being collected by an agency and remitted to the
hospital, does the hospital have a legal duty to report that to
Medicare?
[The following was received for the record:
Yes. Medicare regulations at 42 CFR 413.80(f) state, 11In
some cases an amount previously written off as bad debt and
allocated to the program may be recovered in a subsequent
accounting period: in such cases the income from there must be
used to reduce the cost of beneficiary services for the period
in which the collection is made.'' Unfortunately, there is no
way to quantify these offset amounts. There is a line on
Worksheet E, part A of the Medicare cost report for offset
adjustments, but that is an aggregate amount and a myriad of
things is combined in the total.
Mr. Kuhn. In 10 years, I am not sure, but within a
reasonable amount of time. There is a part of the cost report
where there is a place to report income. I remember looking at
this recently, and I can't tell you exactly where, but we could
follow up in writing to make sure. But there is a way for that
to be reported back and to indicate it that was once claimed as
a bad debt but then reported back as income in the cost report.
Mr. Greenwood. What is the current process by which a
hospital can seek an advisory opinion on matters such as this.
Mr. Morris. The advisory opinion process, as set forth on
our Web site, allows any provider to write in with a proposed
or actual arrangement if they would like to know whether it
violates any of our anti-fraud and abuse provisions. Generally,
the process takes a great deal of give-and-take. Sometimes the
initial solicitation isn't clear, or in an effort to try to get
an affirmative response, we may make suggestions to improve or
reshape the proposal so it will not trigger concerns.
We have a team of attorneys who work on those. We have a
substantial backlog because of the size of our staff.
Mr. Greenwood. Well, that gets me to the next question,
which is what are the timeframes involved?
Mr. Morris. It depends a lot on the complexity of the
request. The timeframes can be anywhere from the 60-day
statutory obligation, provided that it is a clean request and
doesn't require any sort of feedback. Some of our requests have
been pending for over a year. In many cases, it is because we
ask additional information of the requestor and we have not
gotten information back for those, we are still waiting for
additional information.
Mr. Kuhn. And if I may, Mr. Chairman, if I could just
reference that as well. This is for the OIG's advisory opinion
process. But for hospital indigency policies, in order to go
forward, they need not request an advisory opinion from CMS. In
fact, we don't give advisory opinions. Hospitals are empowered
to go out and set their own policies and move forward. And as I
referenced earlier, the AHA said that 2700 hospitals have
already signed a pledge that they have already done it. There
is no way we could do 2700 advisory opinions that fast. They
are empowered to do it, as they always have been. And so
earlier there was testimony where people say they were waiting
6 months for these opinions, et cetera. That is not the case.
They are empowered to go forward, set their policies, and move
forward. We are not holding them up. Go do it.
Mr. Morris. And if I could add one other point germane to
advisory opinions in this area, we have not seen a great deal
of requests for advisory opinions on the application of our
statutes to the uninsured because they don't apply. I am aware
of only one formal request, for an advisory opinion, and before
we were able to finalize our response, the request was
withdrawn in light of the information that the Secretary
provided earlier this year.
Mr. Greenwood. What is a UB92 form?
[The following was submitted for the record:]
The UB92 was developed over many years by the National
Uniform Billing Committee to serve as a single simplified
billing form that is used nationwide by institutional providers
and payers for handling health care claims. The data elements
included on the form are identified as being necessary for
claims processing and meet the requirements for preparing
Medicare, Medicaid, OCHAMPUS, BCBS, and commercial insurance
claims. (A copy of the UB92 form and instructions is attached
for the record.)
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Mr. Kuhn. Uniform bill. UB92, and it is a bill that is used
by hospitals in order to bill insurers, Medicare, everybody
else, and it is an attempt to try to consolidate the
information so there is standardization in terms of the
information that moves forward, one, for standardization, but
hopefully to help hospitals save cost by not having to add a
lot of different things for this payer or that payer, et
cetera.
Mr. Greenwood. Should these be available to any patient,
Medicaid or otherwise--anyone who wants one, at least?
Mr. Kuhn. That is a good question. In terms of transparency
on the bill, I wouldn't see that there would be any barriers on
that, but I would like to check with staff, and if we could get
back to you on that one, that would be helpful for me, if I
could.
[The following was submitted for the record:]
No. As previously stated, the UB92 is a claim form used to
bill insurers for services provided to a patient they cover.
Providers use many different codes on this claim form to
identify services and reimbursement for different insurers.
These codes are meaningless to the patient. Furthermore, these
forms would not apply to uninsured patients.
Mr. Greenwood. Okay. Seeing no other colleagues with
questions--in fact, seeing no other colleagues--we thank you
for your help this afternoon. We apologize for the length of
time you have had to spend here, but it is helpful.
Without objection, the binder of documents will be added to
the record. The record will be kept open for 30 days, and the
subcommittee is adjourned.
[Whereupon, at 7:40 p.m., the subcommittee was adjourned.]
[Additional material submitted for the record follows:]
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