Prognosis Profits

April 22, 2015

Bill would take mystery out of hospital prices

Taking aim at hospital billing system that is shrouded in mystery, two N.C. senators introduced legislation that they say would make it far easier for patients to shop for best prices on medical procedures.

This story was originally published in the Observer on 3/27/13.

Taking aim at a hospital billing system that is shrouded in mystery, two North Carolina senators introduced legislation Wednesday they say would make it easier for patients to shop for the best prices on medical procedures.

Hospitals would be required to publicly disclose their prices on the most common medical procedures, under the bill sponsored by Republican Sens. Bob Rucho of Matthews and Harry Brown of Jacksonville.

The legislation also would set up financial rewards for hospitals that are able to provide low-cost care – and would ban a type of double billing now common in radiology.

Rucho and Brown say they’re confident about the bill’s prospects. The legislation has the support of Senate leader Phil Berger, who says it would bring “needed transparency.”

“One of the issues that has frustrated me is the inability of consumers to make informed choices,” said Berger, the Senate’s president pro tem.

The legislation was prompted by “Prognosis: Profits,” a series of stories in the Observer and The News & Observer of Raleigh that found nonprofit hospitals are inflating prices on drugs and procedures, sometimes as much as 10 times over cost.

North Carolina hospitals don’t publicly post prices. That makes it all but impossible for patients to comparison shop or to effectively question prices, the newspapers found. Experts say the system also helps hospitals make more money.

The senators say their proposal would begin to correct that.

“You should know what the cost of a procedure is,” said Rucho, a retired dentist who co-chairs the Senate Finance Committee. “You do that with every other purchase. Why shouldn’t you be able to do that in health care?”

The fate of the legislation will hinge in large part on how it is received by the state’s hospital industry. With a squad of lobbyists and a history of giving generously to elected officials, North Carolina hospitals are one of the most powerful interest groups in state politics.

Officials with the N.C. Hospital Association have worked to provide needed information to patients and “recognize the importance of being even more transparent,” association spokesman Don Dalton said.

The association has established a task force of hospital trustees to work through these and other issues, Dalton said.

“The hospital association will look for opportunities to be supportive of the Senate transparency bill,” he said. “This is a comprehensive package. We will work with the legislature to understand the details.”

The bill would:

• Require North Carolina hospitals to report prices for their 50 most common “episodes of care,” such as tonsillectomies. The information would be sent to the nonprofit N.C. Health Information Exchange, which would make the information publicly available on its website. Hospitals would have to report how much uninsured patients, Medicare, Medicaid and the five largest insurers pay for each episode of care.
• Mandate that every hospital conspicuously post its charity care policy – both on its premises and on its website – along with the amount it spent on charity care in the previous year. The newspapers’ investigation found that most North Carolina hospitals were spending less than 3 percent of their budgets on free care for the poor and uninsured.

And while most hospitals have charity care policies, patients don’t always learn about them. More than a third of the state’s hospitals provided no details about their charity care policies on their websites, the newspapers found.

• Prohibit hospitals from charging multiple times for outpatient radiology services that are rendered only once.

Blue Cross and Blue Shield of North Carolina says such overcharging often happens when technicians take several images of a patient during radiology scans. For each image, hospitals often bill identical “technical component” fees – for such things as setting up IV fluids – even though the setup is performed only once. Blue Cross is battling hospitals over that practice.

• Reward hospitals with low Medicaid costs. Under a system used to maximize federal Medicaid funding, North Carolina requires most hospitals to pay an upfront assessment each year. The state then uses that money as a match to draw federal Medicaid dollars, and returns most of the money assessed to the hospitals. If the new legislation passes, the state would return most of the assessment dollars to hospitals with low Medicaid costs.

Under the bill, the state also would get to keep more of the assessment money – $50 million per year, compared with $43 million now. That money would help offset the state’s Medicaid shortfall, which amounted to more than $500 million last year.

• Ban hospitals owned by the state – including UNC Hospitals – from seizing the tax refunds of patients who don’t pay their bills. Only state-owned hospitals currently have this power. “We’re trying to level the playing field so everyone is treated the same,” said Brown, who co-chairs the Senate Appropriations Committee.
• Encourage a change in leadership at Community Care of North Carolina, a state-funded program aimed at helping Medicaid recipients stay healthy and avoid trips to emergency rooms.

The legislation’s sponsors say that leaders of the program may not be the best people to control Medicaid costs because most of its board members are health care providers.

The bill would prohibit the state Department of Health and Human Services from contracting with CCNC unless leadership changes are made. Under the new structure, no more than 25 percent of board members could be providers.

Tax breaks to be studied

Most hospitals voluntarily report their charity care spending and policies to the N.C. Hospital Association, which posts the information on its website,

Hospitals say they’ve been working with patients in advance to help determine costs. The N.C. Hospital Association has collected charge information from each hospital for the top 35 inpatient procedures. But few insurers and patients pay full charges, so that information does little to help patients anticipate their actual costs.

At least 14 states – but not the Carolinas – require collection of health care cost data for use by consumers. The legislation doesn’t incorporate some proposals that advocates have said could help patients. Among them: prohibiting hospitals from putting liens on the homes of needy patients. Some North Carolina hospitals have filed thousands of lawsuits against patients, often putting liens on their homes and damaging their credit.

Some states limit what hospitals can do to collect on debts. North Carolina is not among them.

Most North Carolina hospitals are exempt from sales, income and property taxes. Earlier legislative proposals to limit sales tax refunds that go to the largest and most profitable hospitals died after opposition from the hospital industry.

Rucho, who is leading Senate tax reform efforts, said lawmakers will study whether hospitals should be required to pay some sales tax.

Observer Staff Writer Karen Garloch contributed.

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