New bill in N.C. legislature would take mystery out of hospital prices

aalexander@charlotteobserver.comMarch 27, 2013 

  • The story so far

    In 2012, The News & Observer and The Charlotte Observer published a five-part investigation showing how major nonprofit hospitals in North Carolina have become hugely profitable.

    The investigation and subsequent stories revealed that hospitals have:

    •  Recently generated record profits and amassed billions of dollars in reserves. •  Inflated prices on drugs and procedures, sometimes as much as 10 times over costs. •  Paid top executives millions. At least 25 North Carolina hospital executives have received total annual compensation exceeding $1 million. •  Regularly sued uninsured or poor patients having trouble paying their bills or sent their accounts to collection agencies, ruining the patients’ credit. •  Dramatically inflated prices on chemotherapy drugs at a time when hospitals are cornering more of the market for cancer care.

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

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

The legislation would also set up financial rewards for hospitals that 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 a series of stories last year in The News & Observer and The Charlotte Observer, “Prognosis: Profits,” which found that nonprofit hospitals in North Carolina are inflating prices on drugs and procedures, sometimes as much as 10 times over cost.

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

Rucho and Brown 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 legislation’s fate will likely hinge in large part on how it is received by the state’s hospital industry. With a squad of lobbyists at the General Assembly and a history of giving generously to elected officials, the North Carolina Hospital Association is one of the most powerful interest groups in state politics.

‘Comprehensive package’

Officials with the 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 hospitals to report prices for their 50 most common “episodes of care,” such as tonsillectomies. The information would be sent to the nonprofit North Carolina Health Information Exchange, which would make the information publicly available on its web site. 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.

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 has been battling hospitals over that practice.

• Reward hospitals that have low Medicaid costs. Under a system used to maximize federal Medicaid funding, North Carolina requires most hospitals to pay an up-front 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.

• 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 have this power. “It’s a fairness issue,” said Brown, who co-chairs the Senate Appropriations Committee. “…We’re trying to level the playing field so everyone is treated the same.”

• Encourage a change in leadership at Community Care of North Carolina, a much-praised program aimed at helping Medicaid recipients stay healthy and avoid trips to emergency rooms.

Restricting CCNC board

The legislation’s sponsors say that leaders of the state-funded 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.

Most hospitals voluntarily report their charity care spending and policies to the North Carolina Hospital Association, which posts the information on its web site:

Hospitals say they’ve been working with patients in advance to help determine costs. The 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 what their actual costs will be.

Other states

At least 14 states – but not North Carolina – require collection of health care cost data for use by consumers. New Hampshire and Maine have published estimates online.

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 patients with few resources. The newspapers’ investigation found that some hospitals routinely sue those who don’t pay their bills, and place liens against their property.

At least 14 states have set rules about what hospitals can and can’t do to collect on debts. North Carolina is not among them.

Most North Carolina hospitals are nonprofits, and as such are exempt from sales, income and property taxes. Some former lawmakers have proposed limiting sales tax refunds that go to the largest and most profitable hospitals. Those proposals died after opposition from the hospital industry.

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

Charlotte Observer staff writer Karen Garloch contributed.

Alexander: 704-358-5060

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