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Opening
Statement of
The Honorable Jim Greenwood
Chairman, Subcommittee on Oversight and Investigations
"A Review of Hospital Billing and Collection Practices"
June 24, 2004
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.This situation is unfair and unjust.
To put these hospital
charges in perspective, let's 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 payors,
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
uninsured/self-pay patients to pay.
Why
are these rates so high?
This
charge to uninsured/self-pay patients is, generally speaking, the hospital's
"charge master" rate.That term
will come up a lot today.So
let's 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 and reasonable profit for the hospital.Indeed, some items on a charge master, can reach well over a 1000%
mark-up.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% in 1990 to 310% 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 off an already inflated number.For example, let's return to the chart.Using the 2002 numbers, even if an uninsured patient had a 25% 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 allow
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 this current
charge master structure serve?
Let's 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 non-profit hospital in Connecticut was
found to have had, over a nine year period, medical liens on 7.5% of the homes
in a community it purported to serve.The
hospital may indeed only collect 10¢ - but the other 90¢ 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 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
two 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's more troubling in the story than the age of
the bill was the excuse offered by the hospital.The hospital indicated that this was a mistake on the part of 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 "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.Asa further illustration,
one system with us today, in a customer service training manual produced to the
Committee, 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 in practice 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/self-pay
patients.In December 2003, five 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 we 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 this 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 so that the agency must have seen
the growing divergence between costs 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 today, made some very interesting
remarks in an investor conference call shortly after joining Tenet.This was almost a year and a half ago - and in many ways he
framed precisely the issues for which we come here today.Quoting Mr. Fetter:
"I'd like to turn to an issue that has
bothered me for years.I mentioned
earlier [in the conference call] that Medicare requires hospitals to set charges
the same for everyone.This means
that the uninsured or under-insured patient receives a bill at gross charges.[The red line of the chart].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 [one hundred percent] of the
collections from this group.[Seventy
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
these patients is huge, and the whole situation is far from ideal from a social
or economic perspective.Tenet
employs more than [five thousand] people to render bills and attempt to collect
from these patients.It's
ridiculous."
It's 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 coverage for the foreseeable future.But since this Committee started this investigation almost one year ago,
we have seen concrete action improving the condition of uninsured/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.I
look forward to your testimony.
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