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As hospitals and physicians continue to get squeezed between steeply discounted contract rates from managed health plans and declining payments from government payers, a disturbing new phenomenon is emerging in the U.S. health care system. The highest charges are reserved for those least able to pay: the uninsured.
In return for including a hospital or doctor in its list of preferred providers, managed care organizations (MCOs) often insist on deep discounts for their members. In some cases, the difference between an MCO discounted charge and the provider’s normal fee can vary as much as 45% in some areas.1
Hospitals traditionally make up any losses by charging higher fees to patients covered by traditional fee-for-service plans. However, with most insured Americans now covered by managed health plans, the only group left to cost-shift to is patients without insurance.
"There are essentially no more private insurers that provide indemnity coverage; it is all managed care," explains Robert I. Field, MPH, JD, an associate professor and director of the graduate program of health policy at the University of the Sciences in Philadelphia.
"It is similar to what is happening with pharmaceuticals now. If you have insurance, generally, your plan will go through a pharmacy benefit manager who will negotiate discounts. If you are in Medicaid, Medicaid negotiates discounts. If you are uninsured, there are no negotiated discounts, so you will pay the full price."
For hospitals, it’s important to understand the difference between costs and charges, Field adds. In order to make a profit, a charge will be far more than the actual cost of providing the service. But MCOs have usually negotiated discounts that put the fee they will pay at or below cost.
So, if a surgical procedure costs $5,000 and the charge is $ 8,000, a managed health plan that covers an accountant insured through her employer will pay $5,000 for her surgery, minus a small co-pay from the patient. But an uninsured construction worker receiving the same procedure can be held responsible for the full amount.
Is it ethical for your facility to expect a patient unable to afford health insurance to pay almost twice as much for a procedure as you charge a contracted health plan?
No, say most health policy experts. But because most uninsured patients cannot afford to pay the full charges, hospitals rarely end up collecting any of the money, anyway. And the system of contracted discounts is the only way hospitals and providers can survive in the current market.
"At the basic level, in and of itself, having these contractual relationships are not unethical," says Matt Weinberg, MB, a clinical bioethicist who consults for several hospitals in the Philadelphia area. "Without having them, our health care system would be much more financially strapped than it already is — if that’s possible."
Even if hospitals are unable to recoup costs from poor, uninsured patients, the charges still exist. Fearful of massive medical bills they are unable to pay, uninsured patients often avoid seeking medical care until their condition becomes critical. And many patients don’t get needed care at all.
"I think, as far as elective care goes, people are just not getting it," Field says. "And hospitals won’t give it. If you need an operation and don’t have insurance and can’t prove financial need, most hospitals — nonpublic hospitals at least — just won’t schedule the procedure." Many hospitals will negotiate their charges, but individual patients probably do not realize this, he adds.
"I do think it is ethical to go to a commercial insurance company and say, If you don’t have a special deal with us, you are going to have to pay the full charges for this on behalf of your members," Field notes. "It is another thing to go to an individual who has no insurance and ask for four times what the procedure actually costs."
Although they can’t be asked to evaluate individual cases, ethics committees should be aware of what the hospital policies are regarding those who are unable to pay the full amount, Weinberg says .
The Joint Commission on Accreditation of Healthcare Organizations requires hospitals to set up ethical standards with regard to billing practices, he notes. "In policies that I have developed, they basically require that you treat the person with respect and that you will work with them," he says. "I have certainly heard of, and been involved in, a few horror cases where someone calls the hospital and says, I have this $2 trillion bill that I can’t afford to pay,’ and the person on the other end of the line says, We don’t care, give us the money or we’ll come take your house.’ It’s usually a situation of that particular billing person was having a bad day, not that it is hospital policy."
As long as such situations are the result of individual personnel problems or isolated incidents, they are not really issues for the ethics committee, he says. "If it is a personnel issue, and not a policy or procedure issue, or a dignity issue, then, as an ethicist, I think we ought not to be involved."
The real ethical issues lie more with individual physician practices than with hospitals, which because of their mandate to provide emergency care without a guarantee of payment, are more likely to have established ways of negotiating payment with uninsured and underinsured patients, Weinberg says. "The issues tend to arise when the physician won’t accept Medicare or Medicaid at all, or will only accept certain levels of coverage from different private payers."
Weinberg was recently involved in resolving a dispute between parents of an uninsured child and a physician who refused to perform a service because the parents could not demonstrate an ability to pay. "A child with a broken leg was seen in a local emergency room," he explains. "The break had to be set with pins. The orthopedic group who normally served the hospital had an outside orthopedic group covering for them. The orthopedist on call came in and set the limb and placed the pins."
A few months later, when the pins needed to be removed, the mother called the orthopedist’s office and asked about getting the procedure. Because the parents had recently applied for Medicaid coverage, but did not have the ability to pay for the procedure, the office manager refused to schedule an appointment.
"I think that because physicians go through medical school on taxpayer-subsidized loans, have their internships funded through Medicare, and that medical students and interns are allowed to go into hospitals and learn on people, these things create significant moral obligations to help people who need your specific services, but are unable to pay," Weinberg says.
"Now, if providing a service at a discount, or waiving the charge, presents a significant hardship to your practice, you are certainly not obligated to do it," he adds. "But I think this is an environment where black-and-white rules do not apply."
Physicians cannot simply leave it up to office managers to handle all billing issues without giving them guidelines about when exceptions to payment "rules" can be made. "Where physicians can be morally questionable is when they turn a blind eye to the billing people and don’t give them a clear set of guidelines of when to say yes, when to say no, and when to come to me’ for the judgment call," he says.
1. Kolata G. Medical fees are often higher for patients without insurance. New York Times. April 2, 2001.