Committees Hold Hearings on Hospital
Billing Practices
June 25, 2004 - The House Ways and Means Subcommittee on
Oversight and Investigations June 22 held the first in a series
of hearings
on the tax-exempt status of hospitals and their hospital pricing
practices, including whether the public receives a greater community
benefit from not-for-profit vs. for-profit hospitals and the need
for greater transparency of hospital prices. Witnesses included
health care research experts, an employer health insurance purchaser,
and representatives from the hospital community.
Subcommittee Chairman Amo Houghton (R-N.Y.) opened the hearing
stating, "Hospitals seem to be stuck with a broken billing
system. No one knows the costs of the services in advance. People
receive bills for services where the charges appear too high…
and that people without health insurance individually negotiate
payment with hospitals, a process that creates anxiety and uncertainty."
Rep. Bill Thomas (R-Calif.), chairman of the full Ways and Means
Committee, said it is appropriate to review the 501(c)(3) status
of hospitals, suggesting that hospitals should have to justify their
tax-exempt status, since they account for 41 percent of reported
charitable expenditures. Rep. Thomas also questioned what not-for-profit
hospitals do differently than for-profit hospitals.
Karen Davis, president of The Commonwealth Fund, suggested that
non-profit hospitals admit more uninsured patients and provide more
uncompensated care than for-profit hospitals and that "the
burden for caring for patients who cannot pay is unevenly borne"
with academic health center hospitals providing more uncompensated
care than community hospitals.
Nancy Kane, a professor at Harvard Business School, stated that
her research indicates "the quantifiable value of hospital
tax exemptions greatly exceeds the average cost of charity care
provided." Because tax exemption is not tied to the provision
of medical services to the uninsured, Ms. Kane stated that policies
determining eligibility for free or charity care are variable and
determined by individual hospitals. Ms. Kane suggested that tying
hospital tax exemption with the provision of medical services to
the uninsured" would allow hospitals to "demonstrate how
they 'earn' the value of their tax exemption." Ms. Kane also
said that greater transparency of hospitals' charity care policies
and charges would help uninsured patients "facing the possibility
of medical debt - especially if prices can be stated meaningfully
rather than in the form of a traditional hospital charge book."
Noting that health care consumers "have better information
about the price and quality of the jar of tomato sauce they buy
than for the surgeon who will operate on their breast and prostate
cancer," Regina Herzlinger, a professor at Harvard Business
School, suggested that the "publication of price and quality
data for individual providers…will help ameliorate this problem."
Paul Ginsberg, Ph.D., President, Center for Health System Change
argued that transparency on hospital price data "is most important
in insurance products that use coinsurance" so that patients
could know how much they will have to pay out of pocket. Dr. Ginsberg
suggested that the complexity of hospital prices and the pitfalls
of making negotiated prices public "argues for consumers depending
on their health plans to negotiate contacts with hospitals and present
them with information as to which hospitals will cost them more."
David Bernd, president and chief executive officer of Sentara Healthcare
in Norfolk, Virginia, discussed the American Hospital Association's
efforts to develop comprehensive principles and guidelines around
better hospital billing and collections practices, stating, "hospitals
are committed to increasing the transparency of our efforts to best
serve our patients." Stated Mr. Bernd, "we agree that
the current health care 'system' does not serve Americans in many
ways, and that there must be more information available to consumers
so they can make better decisions about their care."
Richard Morrison, regional vice president for governmental and
regulatory affairs at Adventist Health System in Orlando, Florida,
offered a history on hospital charges and described how hospitals
bill patients based on their chargemaster. Acknowledging the tenuous
relationship between hospital costs and charges, Mr. Morrison stated
that charges are "still required by Medicare and by some insurance
companies" and that Medicare audit cost reports and calculates
outlier payments based on charges.
Randy Sucher, executive vice president and COO of for-profit Southern
Medical Health System, Inc. in Mobile, Alabama, a for-profit hospital,
suggested that high hospital charges "make up for those payors
that often pay hospitals below cost" such as Medicare and managed
care organizations and that high hospital charges are necessary
to help offset the "losses on cases when complications occur,
or when routine heart caths wind up involving expensive stents."
Harold Cohen, Ph.D., a self-employed consultant who was involved
in establishing Maryland's Health Care Access and Cost Commission,
which sets one rate for all insurance payors in Maryland, including
Medicare and Medicaid, described the equitable benefits of such
a system.
On June 24, the Energy and Commerce Subcommittee on Oversight and
Investigations plans to hold a hearing solely on hospital billing
and collections.
Information:
Lynne Davis Boyle, Assistant Vice President
AAMC Government Relations
ldavisboyle@aamc.org
(202) 828-0526
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