[A visit to a hospital in Europe is an eye-opener to the many ways
monopolized U.S. hospitals pad their profits with unnecessary costs. ]
[[link removed]]

HOSPITAL BILLING IS A CRIME AGAINST AMERICAN PATIENTS  
[[link removed]]


 

Robert Kuttner
November 22, 2022
The American Prospect
[[link removed]]


*
[[link removed]]
*
[[link removed]]
*
*
[[link removed]]

_ A visit to a hospital in Europe is an eye-opener to the many ways
monopolized U.S. hospitals pad their profits with unnecessary costs. _


The entrance of Massachusetts General Hospital, in Boston, seen in
November 2018, BILL SIKES/AP SIKES

 

PARIS – Last month, I experienced some symptoms that mimicked a
possible heart attack. It turned out to be a false alarm, and I’m
fine. But taking no chances, we headed for the emergency department at
the American Hospital of Paris, where I’ve been living this fall. I
got a complete workup: a full physical, cardiogram, blood tests, a
scan to check for possible clots, and a consultation with doctors. The
care was efficient and superb. It all took less than four hours.

At the end of the visit, when I was pronounced in good health, I was
presented with the bill: 875.57 euros, or about $890 at prevailing
exchange rates. At a good hospital in the U.S., the bill would have
been at least $10,000, maybe double that, mostly paid by insurance.

The visit to the ER alone, before a single test was done or care was
provided, would have been billed at more than the total cost of my
workup in France. In the U.S., the average ER “facility” charge
[[link removed]] is
$1,201.

My visit was such a bargain compared with standard billing practice at
U.S. hospitals that I wondered if I was somehow being subsidized by
the French medical system. So I sought out one of France’s leading
experts on hospital financing and comparative hospital systems, Dr.
Isabelle Durand-Zaleski, who is both a professor at the University of
Paris and a practicing physician.

Dr. Durand-Zaleski reviewed my bill, which was conveniently displayed
in a single page with clear line items. She confirmed that these were
the hospital’s actual costs, and the identical bill would have been
sent to the French social security system, had I been a French
citizen. And, _bien sûr_, the French citizen would have paid nothing
out of pocket.

HOW ARE AMERICAN HOSPITALS able to bill at 10 or 20 times these
rates? And how does their billing strategy interact with the
near-collapse of the American hospital system?

There are several parts to the answer. One is that there is no direct
price regulation in the U.S., so hospitals are free to charge what
they think the market will bear.

The market in this case is mostly insurance companies. Hospitals have
been on an orgy of mergers and acquisitions to increase market
concentration and bargaining power relative to insurance companies. In
Boston, where mergers have reduced hospitals to two large systems, the
big hospitals tell the insurers, if you want your subscribers to be
able to use Mass General, or Beth Israel, you have to pay our charges.

This is partly in reaction to health insurance industry consolidation
[[link removed]] across
America. Concentration on one side of the transaction begets
concentration on the other side. My colleague David Dayen has called
this “concentration creep
[[link removed]].”

Most hospitals in the U.S. are either for-profits, or nominal
nonprofits like large teaching hospitals that behave just like
for-profits. Their goal is to maximize market share, particularly for
the most lucrative specialized procedures. That means they spend a
great deal of capital, not just on acquisitions but on construction of
new facilities (that may be redundant in many cities) and on new
costly equipment.

As we’ve seen, a French hospital bills actual costs. By contrast, an
American hospital adds to the bill several layers of overhead, each
with exorbitant markups. The capital cost of a merger is part of your
bill, along with the capital cost of the equipment.

For instance, in the U.S. when you get a scan, you are being billed
for part of the capital cost of the scanner, plus the hospital’s
markup. In France, you pay a flat rate that has been negotiated with
French social security, based on how long you were in the room, any
materials such as injectable dyes, and the salary of the technician.
My scan was billed at 280 euros. In the U.S., the average price of an
inpatient CT scan is $4,750
[[link removed]].

My Brandeis colleague, professor Stuart Altman, a national expert on
hospital costs who was the longtime chair of the Massachusetts Health
Policy Commission, the state agency tasked with restraining costs,
calculates that at more than $6,000 per patient, U.S. hospitals have
triple the capital costs of Europe’s hospitals. Meanwhile, every
major European nation not only spends far less on health care but has
much better outcomes in terms of every major health indicator.

The more complex the billing strategy is, the more it adds to costs.
Expenses related to billing add about $99,000 per year
[[link removed]] per
clinician, or about one-seventh of a hospital’s costs, according to
a study in the _Journal of the American Medical Association_. Another
study, published in _Health Affairs_ in 2014, found
that administrative costs accounted for 25.3 percent of all hospital
costs [[link removed]] in the U.S. health
system. If anything, that number is higher today.

In principle, Medicare could use its extensive bargaining power to cut
hospital charges. But Medicare is very timid about challenging
hospital billing practices and is reluctant even to crack down on the
notorious abuse of “upcoding”—assigning the most expensive
reimbursement code possible to every patient condition. If I once had,
say, benign heart palpitations, and I go to the hospital for knee
surgery, the hospital would assign a code allowing it to bill at a
higher rate on the premise that I’m also a heart patient.

Medicare could save taxpayers a lot of money. Why are they so timid?
Because hospitals in many areas are the largest and most politically
powerful local employers, even more so when they are teaching
hospitals connected to universities. Don Berwick, who headed the
Centers for Medicare & Medicaid Services (CMS) under President Obama,
told me, “If CMS ever tried to seriously crack down, their phone
would ring, from the American Hospital Association, local senators and
congressmen, and the White House.”

ONE OF THE MANY REGULATORY FAILURES of antitrust in the U.S. is the
nearly complete failure to challenge hospital mergers and
acquisitions, which have created monopoly power and degraded services
in city after city. When the FTC has tried to move, it has been
overruled by conservative courts.

Even worse, many of these merger binges are by hospital systems that
are nominal nonprofits, such as Mass General Brigham in Boston and
the University of Pittsburgh Medical Center
[[link removed]].
In New York, Mt. Sinai is now an eight-hospital system. In
Philadelphia, the courts overruled an effort by the Federal Trade
Commission to block a merger by two nominally nonprofit systems,
Thomas Jefferson University and Albert Einstein Healthcare Network,
which together now control 18 hospitals and at least 60 percent of
inpatient services
[[link removed]].
According to a study
[[link removed]] published
in _Health Affairs_, seven of the ten most profitable hospitals in
United States are technically not-for-profits.

Hospitals also overuse specialists, who can bill at higher rates. Back
in the day, if you had, say, a small wart, your family doctor would
remove it. Today, you are likely to be referred to the dermatologist
for anything more complex than a hangnail, and of course the
dermatologist can bill at a much higher rate, some of which is shared
with the hospital as profit.

But here’s the irony. This general business strategy is backfiring,
not only on patients but on hospitals. Most large hospitals today are
losing money. They have overspent on capital equipment and lavish
facilities and acquisition of doctors’ practices to attract patients
for the most lucratively reimbursable procedures. That adds costs and
leaves less money for basic care.

Boston is now suffering from an emergency room catastrophe. This is no
longer about COVID; there are few such cases in ERs. _The Boston
Globe_ recently reported standard eight-hour waits
[[link removed]] in
the emergency room at Mass General. People were piled up on gurneys in
hallways.

“It’s unprecedented in my career,” Dr. Michael VanRooyen, chief
of emergency medicine at Mass General Brigham, told the _Globe_,
adding that about 6 percent of people who sought treatment in the ER
gave up and went home without being seen.

The ER pileup is substantially the result of staff shortages. RNs have
burned out from the hellish working conditions, and many have left the
profession. This is another vicious downward spiral. If there were
more adequate staffing levels and better pay, there would be less
nurse burnout. But hospitals spend so much on acquisitions and
facilities for the most lucrative procedures that they can’t find
enough money for basic clinical staffing. And because of the political
power of hospitals, nurse staffing ratios are one more fundamental
that is unregulated or unenforced in most states.

When Mass General, Boston’s oldest and most distinguished hospital,
entered into a joint operating agreement with the Brigham and
Women’s Hospital in 1994, the new parent corporation was named
Partners HealthCare. It later occurred to the corporate leadership
that this bland branding was squandering one of Boston’s most
familiar and prestigious brands, the Mass General Hospital. Brigham
was also right up there.

So, in the contest for market share, the execs at Partners decided in
2019 to take their branding full circle. They spent a cool $100
million [[link removed]] on a
campaign to re-rebrand Partners as … wait for it … Mass General
Brigham. Sheer genius. Imagine if some of that had been spent on
nurses, or emergency rooms.

Executive pay is also exorbitant. Anne Klibanski, chief executive of
Mass General Brigham, earned $4.3 million in total compensation in
2020, the most recent year for which IRS tax forms are available. Her
predecessor, David Torchiana, took home $6,128,085 in 2019. Nine
executives received more than a million dollars
[[link removed]].

Despite its nonprofit status, which generates massive tax breaks, Mass
General Brigham does not deign to publish annual reports disclosing
either salary information or details of its relative outlays and
capital investments. It does disclose its quarterly profit or loss.
You could actually get a lot more information from mandatory SEC
filings if it were a for-profit—which it is in everything but name
and legal form.

THERE WAS A TIME, before the allure of market competition and
profit-maximizing took over, when hospitals were more heavily
regulated. Two basic mechanisms that prevented the game of padding
bills were direct rate regulation and certificates of need.

Until the 1980s, in most states hospital rates were directly
regulated, a system known as all-payer rate setting. They still are
in Maryland
[[link removed]],
whose costs are far below average. But rate regulation was phased out
in most places in favor of market competition.

In that era, most states and the federal government also required
“certificates of need” before hospitals could buy expensive new
equipment that might duplicate equipment available elsewhere in the
service area. In the era of deregulation, certificate-of-need
regulation was also scrapped or weakened
[[link removed]],
leaving hospitals free to purchase often redundant capital equipment
that adds to the rate base. In fact, certificates of need have now
become a barrier to entry for startup hospitals, which must navigate
the regulatory thicket to get cleared to buy equipment, while dominant
rivals who have mastered the system skate by.

A variety of market-friendly techniques were devised to contain costs.
Hospitals proved expert at gaming all of them.

The most highly touted was called DRGs, or diagnosis-related groups.
The idea was that the insurer would pay the hospital a flat sum, based
on the average cost of treating a given condition, rather than paying
by the day or by the suture. This way, the hospital would be
incentivized to use the most efficient treatment modalities rather
than the most lucrative. Dream on.

The concept was first devised by researchers at Yale in the early
1970s. New Jersey was the first state to implement a version of it.
And in the 1983 budget legislation, DRGs were mandated for Medicare.

How did that reform work out? In 1983, health care accounted for just
under 10 percent of GDP in the U.S. Today, it is almost 20 percent.

The hospitals’ response to DRGs was more corrupt upcoding. One
Boston-area hospital offers physicians incentive payments of up to
$41,000 per year for upcoding. Here is a handy chart based on
materials sent by the hospital to doctors explaining how the
incentives work (thanks to Drs. David Himmelstein and Steffie
Woolhandler).

Expand

[Kuttner 112222 graphic.png]

Until recently, advocates of single-payer health care have focused on
comprehensive coverage but less so on the abuses of profit-maximizing
medicine. If we went to Medicare for All but did not reform these
billing practices and did not end the system of profit-maximizing
medicine entirely, these excess costs would simply be piled onto
taxpayers.

Rep. Pramila Jayapal’s current Medicare for All bill does best at
addressing these abuses, and Bernie Sanders’s latest version
[[link removed]] is
more attuned to them than his earlier bills.

Under Jayapal’s bill
[[link removed]],
co-sponsored by about half of the House Democratic caucus, the system
would keep some elements of fee-for-service medicine and
diagnosis-related coding, but hospitals would operate under
“global” budgets. That is, they would receive an annual flat sum
from the government that would be adjusted regularly to reflect
caseloads. Medical education—one of the ways that teaching hospitals
pad bills—would be its own separate budget item. Capital outlays and
staffing ratios would be regulated. Incentive compensation aimed at
gaming the system would be prohibited. There would be much greater
emphasis on primary care.

This legislation, which merely reflects common practices in most
European nations, is at the outer fringe of what is even debated in
the U.S. It is a reminder of how inefficient as well as unjust is
market-led medicine, and how incremental reforms can never repair our
broken health system.

_ROBERT KUTTNER is co-founder and co-editor of The American
Prospect, and professor at Brandeis University’s Heller School. His
latest book is Going Big: FDR’s Legacy, Biden’s New Deal, and the
Struggle to Save Democracy
[[link removed]]._  

_Read the original article at Prospect.org.
[[link removed]]_

_Used with the permission. © The American Prospect, Prospect.org,
2022. All rights reserved. _

_Click here to support the Prospect's brand of independent impact
journalism. [[link removed]]_

* hospitals
[[link removed]]
* Medical Costs
[[link removed]]
* corruption
[[link removed]]
* profiteering
[[link removed]]

*
[[link removed]]
*
[[link removed]]
*
*
[[link removed]]

 

 

 

INTERPRET THE WORLD AND CHANGE IT

 

 

Submit via web
[[link removed]]

Submit via email
Frequently asked questions
[[link removed]]

Manage subscription
[[link removed]]

Visit xxxxxx.org
[[link removed]]

Twitter [[link removed]]

Facebook [[link removed]]

 




[link removed]

To unsubscribe, click the following link:
[link removed]