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Hospital Scams About To Explode

Hospital Facility Fees Facilitate Rip-Offs

A hospital patient having his blood pressure taken

A patient having his blood pressure taken by a physician. (Photo credit: Wikipedia)

You may not think you use hospitals very much, but you’re about to pay more for them whether you ever set foot inside one or not.

While the nation remains focused on preparatory measures for Obamacare’s implementation next year (see Trisha Torrey’s excellent summation of related issues here), America’s hospitals have stealthily been re-positioning themselves by buying up physician practices.

Doing so allows hospitals to spread their overhead beyond their walls, driving up patient bills in the process that patients themselves will bear much of the burden of paying. That’s because the surge in stripped down high-deductible health plans – all that many Americans can afford – leaves patients holding the bag for more of their often unjustified medical bills.

Case in point: A story in today’s Boston Globe about a patient, Robert Reed, who had some minor dermatology work done in his doctor’s office, only to receive a bill for “operating room” time. He never saw an operating room – because he was never near the hospital. He was in his doctor’s office in a medical office building far away from the billing hospital.

When he challenged the bill, the hospital obliged by relabeling it a “facility fee”, which ended up costing him even more as his insurer covered less of this charge than they would have had he actually been in an operating room.

Say what?

What’s going on here?

It’s part of the expansion of hospitals into their neighboring communities by buying up physician practices and converting doctors into hospital employees. This began in earnest in the 90’s as an attempt to diversify hospitals’ income and capture referrals from the practices they acquired.

This first round of hospitals swallowing up doctors practices was largely a failure. That’s because hospitals operate like bureaucracies with little control of expenses while doctors are notorious for squeezing every nickel until the buffalo weeps. The idea that hospitals were somehow going to impose “efficiencies” on medical practices was laughable from the outset.

We’re now witnessing a rebirth of hospitals acquiring medical practices, but for different reasons. The putative reason is to better position them for the sea change in medical care delivery expected with Accountable Care Organizations (ACOs) that are broadly encouraged under Obamacare.

The theory behind ACOs is sound – better coordinated care in which doctors and hospitals are rewarded for treatment quality rather than for how many services they perform on patients. But the reality may prove far different. The experience to date with ACOs has been a mixed bag – mostly boiling down to some improvements in care coordination and quality, but little or no cost savings.

That does translate into better value, but does little to temper our burgeoning healthcare costs.

And even this better value proposition is in jeopardy as hospitals spread their overhead for things like their emergency rooms and operating rooms over a broader base of services, including those provided in remote doctors’ offices where patients receive no direct benefit from those services.

It takes the form of “facility fees” like those charged Robert Reed in Massachusetts – or even more blatant scams like initially trying to charge him for operating room services he never received.

How Do They Get Away With This?

Well, it’s all perfectly legal – at least the facility fee part. Whether the bogus operating room fees were entirely kosher is another matter better left to lawyers to figure out.

Medicare and most private insurers have generally sanctioned this practice, although it was originally intended for outpatient services provided in clinics on hospital grounds. As hospitals expand into off-campus medical practices, the application of facility fees for hospital-based services to remote doctors’ office visits is simply padding the bill and increasing healthcare costs with no corresponding patient benefit.

It’s accounting gimmickry, in other words. And it’s patients who are left holding the bag for the wrong-headed decisions made by Medicare and their private insurers that permit such shady practices.

There are a host of other issues arising from this expansion of hospital reach in America, including ethical questions posed for doctor-employees now torn between their patients’ interests and the financial objectives of their hospital employers. This is less of a concern historically with traditional hospital-based doctors like radiologists, anesthesiologists and pathologists because these specialties don’t refer patients to hospitals. They’re aligned with hospitals as recipients of referrals from direct patient care practices, whether primary care or specialists.

But this latter group of doctors are in an entirely different position in that they control the flow of patient referrals, whether to a given hospital on whose staff they’re on (or not) or to ambulatory services that compete with those hospitals. This suggests that one consequence of the increased employment of doctors by hospitals will be less competition that signals higher prices, including the shuffling of overhead costs to outpatient visits at doctors’ offices.

Consolidation among hospitals and among hospitals and physician practices isn’t a new phenomenon. It’s largely responsible for Massachusetts’ continuing status as one of America’s high-cost states for healthcare. But it’s still largely under the radar for most patients and consumers – until they get hit with an unexpected bill for thousands of dollars for “services”‘ they never received.

And with hospital acquisitions of physician practices accelerating in preparation for Obamacare, expect this shifty cost-shifting practice to accelerate as well. Indeed, it’s likely to virtually explode as newly-empowered hospitals seek to capitalize on their growing market muscle – a hidden downside and unintended consequence of Obamacare that will prevent any real progress in containing our healthcare spending.

A Day of Reckoning?

These kinds of accounting gimmicks were devised when health insurance covered more things than it does today, at least for the growing ranks of those with high-deductible insurance plans. What may have been an acceptable practice when it was assumed insurers were picking up the tab has an entirely different connotation now that patients themselves are picking up more of the tab.

Legal or not – and posting a notice in the medical building lobby hardly qualifies as truly informing patients before the fact, as required by law – that’s a scam. Scams and rip-offs aren’t always illegal, after all. They can merely skirt the letter of the law with unethical practices based on deceiving consumers into accepting terms they don’t fully understand.

This is true of much of our healthcare today, as I explore in detail in Our Healthcare Sucks.

But it’s becoming more obvious as more patients feel the “sticker shock” of these practices well after the fact when there’s little they can do about it.

Well, maybe they can do something about it. Robert Reed did and it landed on the front page of the Sunday edition of the biggest newspaper in his region. You can bet the affected hospital will be squirming to do some damage control in its wake.

You don’t need to be a seer to see that this is headed for a patient revolt in which patients vote with their feet. Nobody likes being taken for a fool and, once burned, many will take extra precautions to avoid being taken advantage of again.

You can start by confirming that any doctor’s office you’re referred to and not already familiar with isn’t owned by a hospital that will tack on this facility fee. Simply ask when scheduling your appointment whether there will be any hospital facility fees charged for your office visit. If there are, consider asking your primary doctor for a referral to a different physician where this hidden charge won’t apply.

The doctors and hospitals engaging in these practices are inviting such a backlash. And no amount of hiding behind their lawyers to justify such screw-the-patient behaviors will save them from a richly-deserved comeuppance.

You have every right to assert your right of free choice in your healthcare as you do in other aspects of your life. Voting with your feet – and your pocketbook – may be the only way to send the message that you won’t passively accept such rip-off practices when it comes to the healthcare of you and your family.

If enough of us do so, they’ll have to find other ways to maximize their revenues without sneaking bogus fees into basic office visits.

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2 Awesome Comments So Far

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  1. Lucas
    February 1, 2013 at 3:18 am #

    This is why we should keep all our medical records, receipts and bills and make sure that we all aware of what we are paying over the counter to avoid this kind of hospital scam. Hospitals should be institutions that protect citizen’s interests, not take advantage of them.

  2. Erick Kinuthia
    January 28, 2013 at 11:57 am #

    Great post John.Hope marketing of medical services will also be filtered in.

    Erick Kinuthia
    Team MDwebpro.com

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