Pricing And The Self Pay Patient

"Please explain the reason for charging "chargemaster" rates to uninsured individuals particularly in light of the Secretary of Health and Human Services' letter of February 19, 2004 to the President of the American Hospital Association and also in light of your not- for-profit and tax-exempt status."

"Please explain how fairness or reasonableness of charges to the uninsured can be assured even in instances where you offer discounts where those discounts are discounts from the already high chargemaster rate? What is your discount policy? What is the collection rate for self-pay?"

"If government programs pay for hospital services for its enrollees without regard to the chargemaster rate and commercial insurance carriers throughout the country likewise pay not based on the chargemaster rate, please explain why the uninsured continue to be charged the chargemaster rate?"

"Please explain what is the economic benefit to your hospital of charging uninsureds the high chargemaster rate when uninsured people generally have less of an ability to pay hospital charges and do in fact generally pay only a fraction of what has been charged? Does this benefit justify your action particularly in light of your not-for-profit tax-exempt status?"

"It has been suggested that one of the reasons that a hospital may have maintained these high chargemaster rates is that it allows the hospital to obtain more in the way of Medicare outlier payments thus further costing the government additional money for the care of the uninsured. Please explain why your hospital, as a tax-exempt not-for-profit hospital, feels that this is appropriate or inappropriate. What was the growth rate in your Medicare outlier payments from 1998 to 2002?"

"Do you agree that the chargemaster method of charging uninsureds should be discontinued? In answering, I would ask that you consider the statement of Mr. Jack Bovender, the Chairman and CEO of Hospitals Corporation of America, one of the largest for-profit hospitals in the country. Mr. Bovender has stated, "the chargemaster system on which hospitals rely to set pricing and billing codes have a 40 year history of changes that have distorted the relationship between price and cost. It grew out of a time when decreasing Medicare reimbursement prompted cost shifting to the private sector and this was exacerbated in the 90's by aggressive managed care discounting. I am not here to try to justify this and it really needs to be fixed."

Now, notwithstanding the questionable way the good senator is using the term, the fact is that more and more legislators are trying to take a look at how hospitals charge for services being given to the uninsured, and it's probably time for both hospitals and physicians to give greater thought to their pricing structure. If I just answered the senator in saying that the charge master itself has absolutely nothing to do with how much self pay patients are being charged, well, it would be a partial truth in that charge masters aren't geared towards self pay patients, but it wouldn't be a very satisfying answer overall.

At a revenue cycle seminar yesterday, I waited through four presentations on all sorts of subjects before I finally broached the conversation as to whether any hospitals in my area have started looking at this topic of how self pay patients are being billed. The reality is that self pay patients, at least for outpatient services, have always been responsible for higher payment rates than insurance companies, because insurance companies have leverage behind them to be able to tell hospitals and physicians what they're going to be paid if they want any access to patients whose policies they carry, whereas self pay patient have always been on their own.

This is becoming a big deal, as more and more class action lawsuits are being allowed across the country, mainly going after non-profit hospitals, saying that, in effect, they're not acting like non-profit hospitals as it concerns the population that has the least ability to pay their outstanding claims, especially because their totals are always higher than those totals for people with insurance. There are now many hospitals who are coming up with price reduction plans for self pay patients, actually considering them as an insurance company of sorts, so that they can preemptively protect themselves from the onslaught that's going to come, and trust me it will. Some hospitals aren't waiting to quality patients for charity care, instead coming up with ways to immediately reduce the patient's liability to, in essence, try to give them, the hospitals, some leverage when it comes time to contact these patients for payment. If a patient can't stand on the soapbox and say that they're being billed more than so-and-so insurance company, then the hospital is in a nice position indeed. This doesn't mean they won't go through the charity care process on the back end; it just means that, for those who don't fit the charity care guidelines, hospitals will be able to confidently go to court to try to obtain judgments against outstanding balances.

Of course, me being me, it doesn't mean I don't look at how Senator Grassley refers to the charge master without some humor. The way he describes it, I imagine this green and brown money dragon with a long tongue that reaches into the pockets of consumers that don't have insurance and just snatches the money from them, because it has a life of its own, and the hospitals and physicians are just animal tamers trying to make it behave. The good senator even misinterpreted the statements of Mr. Bovender, who didn't quite say what the senator believes he said.

But that's okay. There are people in healthcare who also don't understand how prices are created, and don't understand that the cost of healthcare isn't static. Depending on region, hospital prices are change dramatically, regardless of whether reimbursements do or not. I even wrote an articles titled "How Hospitals and Physicians Set Prices" just to try to offer a very high level description of how it happens many times, to try to help out. It seems to beg more questions than it answers, but sometimes that's just the nature of our work.