Hospitals as Loan Sharks:  Why We Need to Replace Our Profit-Driven Health Care System

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Weekend Edition May 17-19, 2013

Why We Need to Replace Our Profit-Driven Health Care System

Hospitals as Loan Sharks

by DEBORAH BURGER

If there is one problem that symbolizes the ongoing national healthcare emergency, it is the rampant price gouging in the healthcare industry that continues to price too many Americans out of access to care and into financial ruin. Not only is the problem not solved by the Affordable Care Act, but it is a likely reason many will continue to demand more effective reform, as in expanding and extending Medicare to cover everyone.

Predatory pricing practices can be found nearly everywhere in healthcare, by the drug companies, insurance companies, medical suppliers, outpatient clinics, boutique medical services, and many others as chronicled this spring in Time magazine.

U.S. hospitals are among the biggest abusers, as illuminated in recent data released by Medicare on hospital charges for a variety of common procedures, as well as brand new findings by the Institute for Health and Socio-Economic Policy, the research arm of the National Nurses United, based on Medicare cost reports. (See charts here http://www.nationalnursesunited.org/)

The nurses’ data augments the Medicare findings, and goes the next step, illustrating a trend of rising high hospital charges while providing context to a very ugly picture and the deplorable impact on anyone who needs healthcare.

Here’s the sobering numbers:

* U.S. hospitals charge on average $331 dollars for every $100 of their total costs, in statistical terms a 331 percent charge to cost ratio.

* While hospital charges over costs have been climbing steadily over the past 15 years – the charges took their biggest leap ever in 2011– a 22 point vault.

* From 2009 to 2011 (the most recent year for which the data is available), hospital charges lunged upward by 16 percent, while hospital costs only increased by 2 percent.

* U.S. hospital profits, pushed upward by the high charges, hit a record $53.2 billion, while nurses see more and more hospitals cutting patient services and limiting access to care.

* One case study is California where hospitals soared past the national average with a charge to cost ratio of 451 percent, or $451 for every $100 of costs.

That similar pricing practices occur elsewhere in the healthcare industry is hardly an excuse for the private hospitals to act more like Wall Street corporations than responsible, community based institutions. It should be no shock that the lowest charges are by government-run hospitals that operate in public, not in secret, and have far more accountability and transparency.

Hospitals ought to act as responsible providers of needed medical care, not loan sharks. Piling up profits in large part by jacking up prices is at sharp odds with the glossy feel good ads from hospitals we see so often on our TV screens, newspaper pullouts, sponsorship of sports teams, and on mass transit placards.

Hospital lobbyists have tried for years to convince us all that predatory pricing policies don’t matter. These are just “list” prices that few people actually pay, they claim, and it is a random phenomenon that two hospitals in the same city, or even on the same block, might have widely varying prices for similar patient services.

But the grotesque reality tells a different story.

We’re not the only ones who think so. As Glenn Melnick, a USC health economist, told a reporter, “If (hospital prices are) meaningless how come hospitals spend all this money on consultants to raise them? Why haven’t they stayed flat for the past 15 years? Why do hospitals keep raising them if they have no impact?”

While it is true that major payers seldom pay the list price, hospitals typically bargain with insurance companies over reimbursements. Anyone who has ever bought a car knows that the higher the list price, the more you end up paying. That’s true with hospital charges as well.

The inevitable result is insurance companies respond by ratcheting up their charges to employers and individuals. In California, for example, since 2002, premiums have risen 170% — more than five times the inflation rate, as noted in a California Healthcare Foundation survey last month.

An alarming, if predictable ripple effect follows. As the CHF survey noted, in the past decade, the percentage of California employers providing health coverage dropped from 71 to 60 percent; 21 percent said they’d increased workers’ co-insurance premiums while 17 percent said they had reduced benefits or increased other out of pocket costs. More than one-fourth of workers in small firms have deductibles of $1,000 or more on their health plan.

Then there’s the uninsured who do not have the collective clout to bargain down the list price. Hospitals say they write off a lot of those bills, but clearly not all of them. How many distressing stories have we all heard about patients staggered by $50,000 or $100,000 un-payable medical bills while being hounded by the hospitals or bill collection agencies to pay up?

Patients and families, even those paying for insurance, have a stark choice. Use your health coverage and get socked with huge out of pocket costs that may mean choosing between medical bills, housing costs, food, or other necessities, or facing financial calamity, or forgo needed care.

As the Washington Post recently noted, the Affordable Care Act has not ended the deplorable story of medical bills accounting for more than half of all personal bankruptcies in the U.S.

Even many of those now paying for health insurance either through their employer or as individuals, or who will be required to buy insurance under the ACA, choose not to use it because of the high co-insurance, deductibles, co-pays, and all the add ins that get thrown in by the hospitals, such as professional fees, facility fees, pathology fees, anesthesia fees, and so on.

A 2011 Commonwealth Fund study found that the U.S. stands out among high income countries with as many 42 percent of Americans skipping doctors’ visits, recommended care, or not filling prescriptions due to cost.

Consequently, people end up in emergency rooms for medical problems that should have been resolved earlier at far less cost and pain. It is also why two recent reports disclosed that the U.S. has the lowest life expectancies and the highest first day infant death rate among major industrial countries.

It’s long past time to fix this nightmare, and sadly the ACA won’t meet that test. At a minimum we need to crack down on price gouging by all the corporations that control our health, with real penalties for lack of compliance.

But a longer vision is needed. Replace our profit focused health care system with one based on patient need and quality care as all those other countries with national or single payer systems that surpass us in access, quality, and cost, have long figured out.

Deborah Burger is a registered nurse and co-president of National Nurses United

http://www.counterpunch.org/2013/05/17/hospitals-as-loan-sharks/

8/22/2011 @ 7:00오후 |17,441 views

Hospital Monopolies: The Biggest Driver of Health Costs That Nobody Talks About

Avik Roy, Contributor

 

The debate about health-care reform, on both the Left and the Right, revolves almost entirely around changing the way we pay for health care. Progressives advocate government-run, single-payer monopsonies, whereas conservatives advocate consumer choice among private insurers.

I agree that changing the way we buy health care is important—I once wrote a 6,400-word magazine article on the subject—but there’s an entire other side to that equation that we completely ignore: changing the way we sell health care.

For all the crap that insurers get for raising premiums, attacking insurers is the health-economics equivalent of shooting the messenger. Insurers are in the business of distributing to policyholders the cost of health care; that is, the prices that are charged by hospitals, doctors, and manufacturers for their services and products.

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Insurers can, and do, play a constructive role in preventing doctors from overcharging for their services. By requiring their beneficiaries to use doctors that charge less, such as what’s done in a preferred provider network, they can help keep costs down. But insurers have much less leverage with the most predatory force in our health-care system: hospital monopolies.

Take Massachusetts. While Romneycare is one large driver of rising costs in the Bay State, an equally large driver has been the 1993 merger between two eminent Harvard-affiliated hospitals, Massachusetts General Hospital and Brigham and Women’s Hospital. With the two most prestigious hospitals in the state locking arms, insurers were hosed. The new hospital monolith, Partners HealthCare, could deny access to the beneficiaries of any insurer who dared not accept whatever they wanted to charge. After all, who would want to be on an insurance plan that didn’t have access to the two most prestigious hospitals in Boston?

In 2008, the Boston Globe ran an important exposé on the “handshake that made healthcare history”: Partners’ secret agreement in 2000 with Blue Cross Blue Shield of Massachusetts, in which Blue Cross would give Partners more money, in exchange for Partners’ promise that they would demand the same rate increases from everyone else. The growth rate of individual insurance premiums in the state doubled.

Not everybody at Blue Cross wanted to roll over. Some company executives wanted to take a tougher stand. But Blue Cross knew that they would get blamed by politicians and the media if they took Partners on:

No private company was able and willing to moderate Partners’ ambitions. Blue Cross, which now controls 60 percent of the health insurance market, was best positioned to do so but flinched at the possibility of a public tangle. As former Blue Cross executive Peter Meade said at a meeting of company executives in 2000 at which some urged a tougher stand against Partners: “Excuse me, did anyone here save anyone’s life today? We are a successful business up against people that save people’s lives. It’s not a fair fight…”

Today Partners dominates what was once one of the most competitive healthcare markets in the world, with a hospital and physician network big enough to overwhelm competitors and intimidate insurers.

The government needs to do more to fight consolidation among hospitals. And there are signs that this is starting to happen. In 2010, the Department of Justice opened an investigation into “anticompetitive behavior” by Partners.  And yesterday, the New York Times’ Robert Pear reported that the Federal Trade Commission is challenging a similar merger in Toledo, Ohio, between ProMedica Health System of Toledo and St. Luke’s Hospital of Maumee, a Toledo suburb.

As with the Partners case, the Toledo hospital executives are offering bromides about how consolidation will lead to “more efficient and cost-effective care.” But the long history of hospital mergers shows no evidence that consolidation leads to either. Indeed, according to FTC lawyer Matthew J. Reilly, the merged Toledo hospitals immediately went to work jacking up rates:

St. Luke’s chose to join ProMedica even though it concluded that the affiliation could “stick it to employers, that is, to continue forcing high rates on employers and insurance companies,” according to an internal document unearthed by the commission.

“Soon after the acquisition was consummated,” Mr. Reilly said, “ProMedica approached certain health plans to obtain higher reimbursement rates.” The higher rates, he said, are typically passed on to consumers in the form of higher premiums, co-payments and other costs.

Numerous witnesses, including insurance executives and employers, have testified that Toledo has some of the highest health care costs in Ohio. In addition, they say that ProMedica’s rates are among the highest in the Toledo area, while St. Luke’s is a low-cost, high-quality provider. The government’s goal is to undo the merger and restore the competition that existed when St. Luke’s was independent.

I get that there are certain areas of health care where there will always be philosophical differences. But, in theory, both liberals and conservatives oppose monopolies. So why can’t we all get together and launch a crusade against exploitative hospital mergers? I mean, how often do I get to agree with Martha Coakley?

UPDATE 1: Austin Frakt, Reihan Salam, and AHIP, the insurer trade group, nominated themselves on Twitter for the title of “nobody.”

UPDATE 2: Commenter Mike Bertrand, former Insurance Commissioner of Vermont, points out that accountable care organizations, a phenomenon I discussed last week, could make the problem worse, by driving provider consolidation. Here’s an article (linked to below by Tim Ferguson) on the subject (emphasis and links added):

The federal Patient Protection and Affordable Care Act is looking for $500 billion in savings over the next decade to help pay for extending coverage to 32 million uninsured Americans. Yet it doesn’t address the problem of market concentration — and may make it worse, said Robert Berenson, a physician and policy analyst at the Urban Institute in Washington D.C.

The “unchecked” clout of hospital and physician groups in California is a “cautionary tale for national health reform,” Berenson said in a February article in the journal Health Affairs. He warned that incentives in the new legislation to improve treatment by promoting doctor-hospital alliances — called “accountable care organizations” — could backfire by strengthening providers’ bargaining leverage.

Higher prices stemming from hospital mergers that took place between 1997 and 2006 alone add $12 billion to annual health care costs, according to a study last year by Cory Capps, a former U.S Department of Justice economist. Capps, now a consultant, estimated that the ability of powerful hospitals to stimulate usage and the merging of doctors’ groups might be adding another $6 billion to $10 billion.

UPDATE 3: John Goodman points us to three useful pieces on the subject by Chris Fleming of the Health Affairs blog, Merrill Goozner of the Fiscal Times, and Paul Ginsburg of the Center for Studying Health System Change. (Dan Diamond discusses the CSHSC study here.)

UPDATE 4: Don Taylor weighs in on the situation in North Carolina.

http://www.forbes.com/sites/aroy/2011/08/22/hospital-monopolies-the-biggest-driver-of-health-costs-that-nobody-talks-about/