Big hospitals’ buck-raking schemes exploit poor and pile on medical debt

richmondcommtyhospital-300x153Big hospitals and hospital chains that enjoy the financial and reputational benefits of nonprofit or charitable status have taken major fire for maximizing profits while piling on patients’ crushing medical debt and exploiting the poorest and most vulnerable of the injured and sick.

Medical economists, in recent times, have zeroed in on hospitals and their opaque pricing schemes and sky-high costs as important contributors to the ever-rising, nosebleed U.S. spending on health care. Americans pay more on average than any consumers on the planet, while seeing some of the worst outcomes among peers in advanced nations. And with a third of U.S. health care spending flowing into hospitals — more than $1 trillion annually — shouldn’t the suits running institutions and big chains have expected greater scrutiny of their business practices?

Kudos to the nonpartisan Kaiser Health News service and NPR for showing how hospitals in the Dallas-Fort Worth area are thriving — by saddling patients in that metropolis with some of the heaviest per capita medical debt to be found anywhere in the country.

Let’s hear it, too, for the deep digging by the New York Times into the sketchy debt collection by the large, West Coast Providence hospital chain. Founded by nuns and enjoying a financially rewarding nonprofit status that gives it significant tax breaks, Providence spends a pittance compared with peers on charitable care. At the same time, it hounds patients with an aggressive debt collection scheme developed with a consulting giant that is seeing its reputation plummet due to odious advice it has offered to rich but sketchy clients.

Profiting from discounted drugs, not patient care

The New York Times also has exposed the buck-raking by Bon Secours Mercy Health, which the newspaper says is “one of the largest nonprofit health care chains in the country [and] has the highest profit margins of any hospital in Virginia.” The chain purports to provide skeletal medical services to a poor, mostly black area of Richmond. It does so with a “hollowed out” facility that the newspaper reported is “little more than a strapped emergency room and a psychiatric ward. It does not have kidney or lung specialists, or a maternity ward …” But as the newspaper also found about the Richmond Community Hospital:

“The secret to its success lies with a federal program that allows clinics in impoverished neighborhoods to buy prescription drugs at steep discounts, charge insurers full price, and pocket the difference. The vast majority of Richmond Community’s profits come from the program … The drug program was created with the intention that hospitals would reinvest the windfalls into their facilities, improving care for poor patients. But Bon Secours, founded by Roman Catholic nuns more than a century ago, has been slashing services at Richmond Community while investing in the city’s wealthier, white neighborhoods, according to more than 20 former executives, doctors and nurses. ‘Bon Secours was basically laundering money through this poor hospital to its wealthy outposts,’ said Dr. Lucas English, who worked in Richmond Community’s emergency department until 2018. ‘It was all about profits..’”

Here is more of what the newspaper reported in its investigation:

More than half of all hospitals in the United States are set up as nonprofits, a designation that allows them to make money but avoid paying taxes. Although Bon Secours has taken a financial hit this year like many other hospital systems, the chain made nearly $1 billion in profit last year at its 50 hospitals in the United States and Ireland and was sitting on more than $9 billion in cash reserves. It avoids at least $440 million in federal, state, and local taxes every year that it would otherwise have to pay, according to an analysis by the Lown Institute, a nonpartisan think tank. In exchange for the tax breaks, the Internal Revenue Service requires nonprofit hospitals to provide a benefit to their communities. But an investigation by The New York Times found that many of the country’s largest nonprofit hospital systems have drifted far from their charitable roots. The hospitals operate like for-profit companies, fixating on revenue targets and expansions into affluent suburbs.”

Hounding the poor to boost the bottom line

With the Providence hospitals, which have a high profile in Washington state, the newspaper reported this:

“In February, Bob Ferguson, the state’s attorney general, accused Providence of violating state law, in part by using debt collectors to pursue more than 55,000 patient accounts. The suit alleged that Providence wrongly claimed those patients owed a total of more than $73 million. Providence, which is fighting the lawsuit, has said it will stop using debt collectors to pursue money from low-income patients who should qualify for free care in Washington. But The Times found that the problems extend beyond Washington. In interviews, patients in California and Oregon who qualified for free care said they had been charged thousands of dollars and then harassed by collection agents. Many saw their credit scores ruined. Others had to cut back on groceries to pay what Providence claimed they owed. In both states, nonprofit hospitals are required by law to provide low-income patients with free or discounted care.”

Providence’s leadership, still unhappy with what they viewed as its excessive spending on care for the poor, lashed at hospital staff to be relentless about extracting every nickel and dime from patients. The hospital at one point hired McKinsey, with the consultant responding with a program that upset rank-and-file staff, the newspaper reported:

“The firm’s assignment was to maximize the money that Providence collected from its patients … McKinsey’s solution was Rev-Up, whose name was an apparent reference to the goal of accelerating revenue growth. Training materials instructed administrative staff to tell patients — no matter how poor — that ‘payment is expected’ … Six current and former hospital employees said in interviews that they had been told not to mention the financial aid that states like Washington required Providence to provide. One training document, titled ‘Don’t accept the first No,’ led staff through a series of questions to ask patients. The first was ‘How would you like to pay that today?’ If that did not work, employees were told to ask for half the balance. Failing that, staff could offer to set up a payment plan. Only as a last resort …, should workers tell patients that they may be eligible for financial assistance.”

While hospitals thrive, patients drown in medical debt

If the New York Times news articles do not provide an infuriating enough view of hospitals’ money grubbing, consider what Kaiser reporter Noam Levey found in his continuing investigation of the U.S. health system’s scandalous saddling of patients with enormous medical debt. As he reported:

“Nationwide, many hospitals have grown wealthy, spending lavishly on advertising, team sponsorships, and even spas, while patients are squeezed by skyrocketing medical prices and rising deductibles. A KHN review of hospital finances in the country’s 306 hospital markets found that several of the most profitable markets also have some of the highest levels of patient debt. Overall, about a third of the 100 million adults in the U.S. with health care debt owe money for a hospitalization, according to a poll conducted by KFF for this project. Close to half of those owe at least $5,000. About a quarter owe $10,000 or more. Many are pursued by collectors when they can’t pay their bills or hospitals sell the debt. ‘The fact is, if you walk into a hospital today, chances are you are going to walk out with debt, even if you have insurance,’ said Allison Sesso, chief executive of RIP Medical Debt, a nonprofit that buys debt from hospitals and debt collectors, so patients won’t have to pay it.”

Levey reported that he and consultants that KHN and NPR worked with found a significant mismatch between hospitals’ finances rising, even while patients, especially in select metropolitan areas, plunged deeper and deeper into medical debt. Patients scrimp, skip meals, forgo medical treatment they may desperately need. But hospitals grow more and more profitable, he found:

“’You might think that hospitals in communities where patients have a lot of debt would be less profitable, but that doesn’t seem to be the case,’ said Anuj Gangopadhyaya, a senior Urban Institute researcher who worked with KHN on an analysis of hospital finance and consumer debt data in U.S. hospital markets … [T]he analysis found … there is no apparent relationship between the profits of hospitals in a market and how much medical debt residents have … Industry experts say the most profitable medical centers — like those around Dallas-Fort Worth — have developed business models that allow them to prosper even if their patients can’t pay. One key is prices. These hospitals maximize what they charge for everything from a complex surgery to a dose of aspirin. Most of those charges are picked up by health insurers, which still pay a much larger share of hospital bills than patients do, even those with the highest deductibles. Across the country, many medical systems have strengthened their market power in recent years by consolidating, buying up smaller hospitals and physician practices, which enable the hospital systems to charge even more. Dallas-Fort Worth has the highest medical prices in Texas, according to the Health Care Cost Institute, a nonprofit that tracks costs nationwide … In addition to charging more, the most profitable hospitals frequently squeeze more savings from their operations, holding down what they pay workers, for example, and securing better contracts from suppliers.”

In my practice, I see not only the harms that patients suffer while seeking medical services, but also their struggles to access and afford safe, efficient, and excellent health care. This has become an ordeal due to the skyrocketing cost, complexity, and uncertainty of treatments and prescription medications, too many of which turn out to be dangerous drugs.

Sure, hospitals and the people in them can provide remarkable care. They can go far beyond the pale, for example, with the valiant efforts by Florida health care facilities to safeguard patients from Hurricane Ian, including with difficult, risky, emergency transfers of the seriously ill and injured. Hospitals, confronted by calamities associated with climate change, must adapt urgently to storms, wildfires, earthquakes and more. And they need to make a reasonable return to do this.

But grinding down patients and their families by hounding them for every penny is a poor way for any enterprise to treat customers. This is exponentially more so with hospitals exploiting the poor to pad their financial statements.

A Texas lawmaker and onetime health care executive told reporter Leavey that he finds hospital economics to be poorly thought through, likening what the institutions are doing to what he once saw with Gulf Coast shrimpers: “They wanted to pull so much shrimp out of the bay that they didn’t think about whether there’d be any there long term. I worry that those of us in health care aren’t asking ourselves enough if this system is sustainable.”

Indeed. We have much work to do to ensure that health care in the wealthiest nation in the world is not a privilege for the rich few but a right for all. Montana lawmakers, like peers in other states, have taken steps to increase the oversight of nonprofit hospitals, so they provide the charitable care they promise.  Our medical services must be safe, accessible, affordable, efficient, and excellent.

Patrick Malone & Associates, P.C. listed in Best Lawyers Rated by Super Lawyers Patrick A. Malone
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