Effective January 1, 2007, AB774 allows uninsured patients and patients with high medical costs who have a family income that’s less than 350 percent below the federal poverty level to apply for charity (free) or discounted care. The bill requires hospitals to maintain a written policy regarding discounts for financially qualified patients and allows patients to seek review from the business manager, chief financial officer, or other manager. Financially qualified patients are to be charged no more than the amount the hospital would receive from Medicare, Medi-Cal, Healthy Families, or any other government-sponsored health program in which it participates, whichever is greatest. Furthermore, hospitals must give financially qualified patients 150 days to negotiate bills before they are sent to a collection agency.
Despite the legislation, hospitals still overcharge regularly, says Dr. Geni Bennetts of Healthcare Billing Advocacy in Napa. The policies outlined in AB774 are rarely enforced “unless somebody like me challenges it.” Bennetts, former chief of the division of hematology/oncology and bone marrow transplantation at Children’s Hospital of Orange County, became aware of routine overbilling when she was paying emergency-room bills of her own. Since then, she has “hardly seen anything that wasn’t upcoded on something.”
“Upcoding” means using a code for a higher-paying item or procedure instead of the appropriate code. “It’s considered illegal,” says Bennetts, “but it’s done all the time.” The practice is particularly harmful to uninsured and underinsured patients. “People don’t choose to get $5000 to $10,000 deductibles,” Bennetts says of underinsured patients. “They get them because they are all they can afford. They go to the ER for a small operation and end up paying it all in cash. Those people are really stung.”
Common upcodings include medications charged at up to 6000 times their cost, billing for a 30-minute visit when the doctor leaves after 10, and billing for a higher level of treatment than was given. As an example of the latter, Bennetts once worked with a woman who had her throat and ears examined before being prescribed cough syrup. She was billed $1390 because it was coded as an emergency-room visit.
“Some people think it’s their dumb luck,” Bennetts says, “but they’re coming to realize it’s everyone’s dumb luck.”
Meanwhile, the nation’s five largest health insurance companies made combined profits of $12.2 billion in 2009, up 56 percent over 2008. The companies — WellPoint, UnitedHealth Group, Cigna, Aetna, and Humana — covered 2.7 million fewer people than they did in 2008. Premiums have simply become unaffordable.
Phil notes that if patients were charged what he ultimately paid (about 150 percent of the Medicare payment), insurance would be largely unnecessary.
In a revealing letter dated February 19, 2004, Tommy Thompson, then secretary of the U.S. Department of Health and Human Services, discussed with the president of the American Hospital Association, Richard Davidson, the association’s rationale for charging the uninsured higher prices. “Hospitals charging the uninsured the highest rates is a serious issue that demands all of our attention,” Thompson said. He continued, “Your letter suggests that HHS regulations require hospitals to bill all patients using the same schedule of charges [chargemaster] and suggests that as a result, the uninsured are forced to pay ‘full price’ for their care.”
Thompson went on to write that hospitals are encouraged to give charity care and discounts to poor and uninsured patients. In fact, Medicare was already subsidizing hospitals $22 billion a year to help offset the costs of charity care and another $1 billion for bad debt associated with serving Medicare clients.
The letter concluded, “I strongly encourage you to work with AHA member hospitals to take action to assist the uninsured and underinsured and therefore, end the situation where, as you said in your own words, ‘uninsured Americans and others of limited means are often billed and required to pay higher charges.’”
The American Hospital Association declined comment on this story but referenced the Healthcare Financial Management Association, which is “spearheading a patient-friendly billing project and can talk about the factors that go into a hospital bill.”
California Department of Public Health spokesperson Ralph Montano says his department is responsible for enforcing AB774 and encourages anyone who suspects that a facility is not following this law to contact the department and file a complaint. If you are uninsured, you are entitled to negotiate your bill down to the price paid by Medicare, Medi-Cal, Healthy Families, or any other government-sponsored health program in which it participates, whichever is greatest. A complaint can be filed on the department’s website.
Of the 4518 Medicare-certified hospitals in the nation in 2003, 58 percent were nonprofit, 18 percent were for-profit, and 24 percent were government owned, according to a 2006 Congressional Budget Office report.
Nonprofits, in theory, invest their proceeds back into providing health care rather than distributing earnings to private investors. They are exempt from paying federal taxes. In 2002, the report found, nonprofit hospitals received an estimated $12.6 billion in federal, state, and local tax exemptions. In exchange for exemptions, nonprofit hospitals are required to provide charity care and community benefits, though the Congressional Budget Office report admits there is “little consensus on what constitutes a community benefit or how to measure community benefits.”
“Hospitals are not required to provide a certain amount of charity care annually to maintain tax-exempt status,” says John Cihomsky, Sharp’s vice president of public relations and communications. “In California, private not-for-profit hospitals are required to comply with Senate Bill 697 by annually reporting the economic value of community benefits, including charity care. SB697 requires hospitals to conduct collaborative community planning and develop benefit plans that address identified community needs. The community-needs assessment is conducted by the Community Health Improvement Partners. The fiscal year 2009 community benefit report submitted by Sharp HealthCare identifies $342.5 million relating to unreimbursed community benefits.”
“In Nevada, the hospitals I heard about usually offered charity upon finding out the patient had no other form of payment,” says Talina Smith, the health-provider billing agent. “Other states typically waited until the patient requested some kind of help. The hospital chain I worked with in Colorado would run any unpaid accounts over a certain amount — I believe $10,000 — through a soft credit check at the end of the fiscal year and automatically apply charity to those accounts so they could obtain the maximum tax reduction.”