An Interesting New Year – For Hospitals

IN THIS ISSUE:

 

 An Interesting New Year – For Hospitals

 New York Times on Suing Indigent Patients

 Hospital Price Comparisons in California

 Keep Hands Off Specialty Hospitals – WSJ

 CMS Allows Hospital Discounts for Uninsured

 

An Interesting New Year – For Hospitals

 

I hope your new year is getting off to an interesting start. I know mine is. For nearly a year I've been saying that the hospital industry will come under the gun in 2005, and that seems to be exactly what is happening. I won't take any credit for prognostication because the trend is pretty obvious. Once consumers control their own resources, they will start looking for the best deals.

 

They are very unsentimental about it. They (we) want good quality, conveniently delivered, at an excellent price. If the vendors can't do the job, consumers have little hesitation throwing them overboard. Witness the Beta Max video system, or vinyl records, or hundreds of other products and services that have been replaced by newer incarnations.

 

But right now it is impossible to tell what kind of a deal you are getting when you go to the hospital. Prices mean nothing, quality is dubious at best, and convenience is unheard of. The only reason the system survives is because it is free — or seems to be from the perspective of the patient — and you don't look a gift horse in the mouth.

 

Granted that this is not all the fault of the hospitals. They are burdened with onerous regulations like EMTALA and the ridiculous nurse staffing ratios in California, paltry reimbursement from the major payers, and requirements that they be the providers of last resort for the indigent and illegal aliens.

 

But neither has the hospital industry offered up any ideas for reform. Or if it has, it has been kept pretty secret, even from those of us who pay attention to these things. The hospitals cling to old anti-competitive monopolistic protections like Certificate of Need and the Stark restrictions on physician ownership in the hope they will survive by keeping out better models. It is not a strategy for long-term success and empowered consumers will not put up with it.

 

Now the media is paying attention to these problems, and once the media is on the hunt the politicians will not be far behind. If the hospital industry hopes to control its own destiny it has a very narrow window of opportunity – like six months – to get on board with consumer driven health care. If the industry embraces the needs of the consumer as its organizing principle, it might be able to stave off a new round of regulatory interference. But it has to immediately act boldly and decisively.

 

New York Times on Suing Indigent Patients

 

One example of growing media attention was an article published in "The New York Times" magazine just before Christmas. Written by Jonathan Cohn, the article looks at how even charitable hospitals aggressively pursue indigent patients for debts they can't possibly pay. The article says, "When a faith-based hospital sues a grieving widow over medical debt, plunging her family deeper into poverty, some part of the health care system has clearly failed." It goes on to quote Princeton's Uwe Reinhardt as saying, "To put so much silent agony on hapless, hard-working low-income Americans, that's just absolutely unacceptable as conduct." The article goes on to discuss the practices of the collection agencies used by hospitals and excessive executive compensation, but it also discusses the free care provided by hospitals and the inadequate reimbursement received from payers.

SOURCE: http://www.nytimes.com/2004/12/19/magazine/19HOSPITAL.html

 

Hospital Price Comparisons in California

 

"The Wall Street Journal" also weighed in with a front-page article on hospital pricing. California requires hospitals to allow public access to their chargemaster prices, revealing a vast disparity not only in the posted prices, but in the logic and techniques used in establishing those prices. The legislation was sponsored by Assembly majority leader Dario Frommer who maintains it is "just a first step," according to the article by Lucette Lagnado – "They hope the information will help consumers compare prices, shop around and make the industry more mindful of what it charges for some health-care services." The information provides a look into the fun-house mirror of hospital billing and makes for hours of entertainment. An accompanying table shows prices for a simple chest x-ray varying from $120 to $1,159, a complete blood count from $47 to $547, a complete metabolic panel from $97 to $1,732. William McGowan, CFO of the UC Davis Health System is quoted as saying, "There is no method to the madness. As we went though the years, we had these cockamamie formulas." The CEO of Scripps Memorial in La Jolla, Chris Van Gorder reports that competition works. The article says that "stiff competition from freestanding radiology centers, laboratories and outpatient clinics has forced his hospital to be more price-conscious about certain procedures?"

SOURCE (subscription required): http://online.wsj.com/article/0,,SB110410465492809649-search,00.html?collection=wsjie%2F30day&vql_string=Lagnado%3Cin%3E%28article%2Dbody%29

 

Keep Hands Off Specialty Hospitals – WSJ

 

More recently, "The Wall Street Journal" published a Review & Outlook item encouraging regulators to keep their hands off the growth of specialty hospitals. They say these hospitals' "focused mission helps to drive down costs, drive up quality of care and give consumers greater choice over health decisions." The article adds, "For all these reasons, they've earned the ire of traditional hospitals and the government-run-medicine crowd, who've teamed up to try to outlaw or overregulate these new competitors." The article notes that they tend to be concentrated in only seven states with the most favorable regulatory environment, but they are growing fast, having tripled in number since 1990. The article goes on to address the questions raised by critics, and concludes with noting a pending MedPAC report that suggests the presence of a specialty hospital forces area general hospitals to improve their operations as well. The article wraps up by saying, "What the critics really want is to take away consumer choice, forcing patients into treatment at less-optimal facilities for no reason other than to prop up the current system." The article says Congress has taken a baby step towards reform with HSAs, "but the other side of the equation is ensuring that consumers have a choice of places to spend those dollars, which means competition among hospitals."

SOURCE (subscription required): http://online.wsj.com/article/0,,SB110471192854514867,00.html

 

CMS Allows Hospital Discounts for Uninsured

 

Meanwhile, CMS has released an FAQ clarifying that there is no prohibition on offering "discounts" to uninsured patients. It says that "when a hospital discounts charges to non-Medicare patients, such as uninsured patients, there is no effect on outlier payments under either Medicare's Hospital Inpatient (PPS) or Medicare's Hospital Outpatient (PPS)." Therefore there is no requirement that a self-pay patient pass some "determination of need" standard in order to receive a discount. Of course, the problem here is the whole idea of discounts. Instead of manufacturing bogus discounts from fictitious charges, hospitals should begin with realistic prices that bear some resemblance to the cost of the service provided.

SOURCE: http://www.cms.hhs.gov/providers/FAQ_Uninsured_Additional.pdf

 

Please send all comments/questions directly to me at gmscan@aol.com.

 

"Consumer Choice Matters" is a free weekly newsletter published by the Galen Institute, a not-for-profit public policy organization specializing in research and education on health policy. Visit our website at http://www.galen.org for more information.

 

If you wish to subscribe/unsubscribe or update your address, please send an e-mail to galen@galen.org.

 

The views expressed in this newsletter are the opinions of the authors and do not necessarily reflect the views of the Galen Institute or its directors.

 

 

 

 

SHARE THIS ARTICLE

About the author

IN THIS ISSUE:

 

 An Interesting New Year – For Hospitals

 New York Times on Suing Indigent Patients

 Hospital Price Comparisons in California

 Keep Hands Off Specialty Hospitals – WSJ

 CMS Allows Hospital Discounts for Uninsured

 

An Interesting New Year – For Hospitals

 

I hope your new year is getting off to an interesting start. I know mine is. For nearly a year I've been saying that the hospital industry will come under the gun in 2005, and that seems to be exactly what is happening. I won't take any credit for prognostication because the trend is pretty obvious. Once consumers control their own resources, they will start looking for the best deals.

 

They are very unsentimental about it. They (we) want good quality, conveniently delivered, at an excellent price. If the vendors can't do the job, consumers have little hesitation throwing them overboard. Witness the Beta Max video system, or vinyl records, or hundreds of other products and services that have been replaced by newer incarnations.

 

But right now it is impossible to tell what kind of a deal you are getting when you go to the hospital. Prices mean nothing, quality is dubious at best, and convenience is unheard of. The only reason the system survives is because it is free — or seems to be from the perspective of the patient — and you don't look a gift horse in the mouth.

 

Granted that this is not all the fault of the hospitals. They are burdened with onerous regulations like EMTALA and the ridiculous nurse staffing ratios in California, paltry reimbursement from the major payers, and requirements that they be the providers of last resort for the indigent and illegal aliens.

 

But neither has the hospital industry offered up any ideas for reform. Or if it has, it has been kept pretty secret, even from those of us who pay attention to these things. The hospitals cling to old anti-competitive monopolistic protections like Certificate of Need and the Stark restrictions on physician ownership in the hope they will survive by keeping out better models. It is not a strategy for long-term success and empowered consumers will not put up with it.

 

Now the media is paying attention to these problems, and once the media is on the hunt the politicians will not be far behind. If the hospital industry hopes to control its own destiny it has a very narrow window of opportunity – like six months – to get on board with consumer driven health care. If the industry embraces the needs of the consumer as its organizing principle, it might be able to stave off a new round of regulatory interference. But it has to immediately act boldly and decisively.

 

New York Times on Suing Indigent Patients

 

One example of growing media attention was an article published in "The New York Times" magazine just before Christmas. Written by Jonathan Cohn, the article looks at how even charitable hospitals aggressively pursue indigent patients for debts they can't possibly pay. The article says, "When a faith-based hospital sues a grieving widow over medical debt, plunging her family deeper into poverty, some part of the health care system has clearly failed." It goes on to quote Princeton's Uwe Reinhardt as saying, "To put so much silent agony on hapless, hard-working low-income Americans, that's just absolutely unacceptable as conduct." The article goes on to discuss the practices of the collection agencies used by hospitals and excessive executive compensation, but it also discusses the free care provided by hospitals and the inadequate reimbursement received from payers.

SOURCE: http://www.nytimes.com/2004/12/19/magazine/19HOSPITAL.html

 

Hospital Price Comparisons in California

 

"The Wall Street Journal" also weighed in with a front-page article on hospital pricing. California requires hospitals to allow public access to their chargemaster prices, revealing a vast disparity not only in the posted prices, but in the logic and techniques used in establishing those prices. The legislation was sponsored by Assembly majority leader Dario Frommer who maintains it is "just a first step," according to the article by Lucette Lagnado – "They hope the information will help consumers compare prices, shop around and make the industry more mindful of what it charges for some health-care services." The information provides a look into the fun-house mirror of hospital billing and makes for hours of entertainment. An accompanying table shows prices for a simple chest x-ray varying from $120 to $1,159, a complete blood count from $47 to $547, a complete metabolic panel from $97 to $1,732. William McGowan, CFO of the UC Davis Health System is quoted as saying, "There is no method to the madness. As we went though the years, we had these cockamamie formulas." The CEO of Scripps Memorial in La Jolla, Chris Van Gorder reports that competition works. The article says that "stiff competition from freestanding radiology centers, laboratories and outpatient clinics has forced his hospital to be more price-conscious about certain procedures?"

SOURCE (subscription required): http://online.wsj.com/article/0,,SB110410465492809649-search,00.html?collection=wsjie%2F30day&vql_string=Lagnado%3Cin%3E%28article%2Dbody%29

 

Keep Hands Off Specialty Hospitals – WSJ

 

More recently, "The Wall Street Journal" published a Review & Outlook item encouraging regulators to keep their hands off the growth of specialty hospitals. They say these hospitals' "focused mission helps to drive down costs, drive up quality of care and give consumers greater choice over health decisions." The article adds, "For all these reasons, they've earned the ire of traditional hospitals and the government-run-medicine crowd, who've teamed up to try to outlaw or overregulate these new competitors." The article notes that they tend to be concentrated in only seven states with the most favorable regulatory environment, but they are growing fast, having tripled in number since 1990. The article goes on to address the questions raised by critics, and concludes with noting a pending MedPAC report that suggests the presence of a specialty hospital forces area general hospitals to improve their operations as well. The article wraps up by saying, "What the critics really want is to take away consumer choice, forcing patients into treatment at less-optimal facilities for no reason other than to prop up the current system." The article says Congress has taken a baby step towards reform with HSAs, "but the other side of the equation is ensuring that consumers have a choice of places to spend those dollars, which means competition among hospitals."

SOURCE (subscription required): http://online.wsj.com/article/0,,SB110471192854514867,00.html

 

CMS Allows Hospital Discounts for Uninsured

 

Meanwhile, CMS has released an FAQ clarifying that there is no prohibition on offering "discounts" to uninsured patients. It says that "when a hospital discounts charges to non-Medicare patients, such as uninsured patients, there is no effect on outlier payments under either Medicare's Hospital Inpatient (PPS) or Medicare's Hospital Outpatient (PPS)." Therefore there is no requirement that a self-pay patient pass some "determination of need" standard in order to receive a discount. Of course, the problem here is the whole idea of discounts. Instead of manufacturing bogus discounts from fictitious charges, hospitals should begin with realistic prices that bear some resemblance to the cost of the service provided.

SOURCE: http://www.cms.hhs.gov/providers/FAQ_Uninsured_Additional.pdf

 

Please send all comments/questions directly to me at gmscan@aol.com.

 

"Consumer Choice Matters" is a free weekly newsletter published by the Galen Institute, a not-for-profit public policy organization specializing in research and education on health policy. Visit our website at http://www.galen.org for more information.

 

If you wish to subscribe/unsubscribe or update your address, please send an e-mail to galen@galen.org.

 

The views expressed in this newsletter are the opinions of the authors and do not necessarily reflect the views of the Galen Institute or its directors.

 

 

 

 

SHARE THIS ARTICLE

About the author