NYT & Washington Post Spotlight How Hospitals Flourish While Consumers Struggle

By Consumers For Quality Care, on September 11, 2019

While hospitals have largely escaped the scrutiny of other health care players in recent years, they are “arguably a primary culprit behind runaway medical inflation,” writes Elisabeth Rosenthal, the editor in chief of Kaiser Health News, in a New York Times op-ed published earlier this month:

Data shows that hospitals are by far the biggest cost in our $3.5 trillion health care system, where spending is growing faster than gross domestic product, inflation and wage growth. Spending on hospitals represents 44 percent of personal expenses for the privately insured, according to Rand.

On average, a hospital stay in 2015 cost consumers $5,220 a day. In 2017, hospitals were paid 2.4 times the Medicare rates while treating patients with private insurance, according to a Rand study. Consumers for Quality Care has highlighted that as more systems consolidate, their prices increase.

Most economists think hospitals could do just fine with far less than they get today from private insurance.

Hospital systems often defend high prices by pointing to high costs. However, systems’ thin margins are often due to expensive choices made by the systems themselves, according to Rosenthal:

It would be unseemly for these nonprofit medical centers to make barrels of money. So when their operations generate huge surpluses — as many big medical centers do — they plow the money back into the system. They build another cancer clinic, increase C.E.O. pay, buy the newest scanner (whether it is needed or not) or install spas and Zen gardens.

While hospitals around the country are raking in profits, they are also aggressively trying to recoup unpaid bills from consumers. These practices often come with severe consequences for consumers. Consumers for Quality Care has previously highlighted a number of such instances. Now, the University of Virginia’s hospital is coming under scrutiny as well, according to The Washington Post.

UVA is a taxpayer-supported hospital, which does not pay federal, state, or local taxes. Nonprofit hospitals are given tax breaks under the presumption that they will provide the community with charity care. Nevertheless, the hospital earned $554 million in profit over the same six year period ending in June 2018. The Health System’s financial statements list stocks, bonds and other investments worth $1 billion.

In 2017, Heather Waldron received emergency surgery at UVA’s hospital. Waldron had an intestinal malformation that could have killed her. Because of the surgery, Waldron lived. But in the years since, she and her family have undergone a different sort of ruin, according to The Post.

After the surgery and hospitalization, Waldron learned that a computer error had resulted in a lapse in her insurance policy. The care racked up $164,000 in charges from the University of Virginia Health System.

Waldron says that the hospital system’s actions since have led to “devastation” for her family. They wondered how they would pay their electricity bill. Waldron and her now ex-husband say that financial struggles contributed to their divorce. Waldron is now on food stamps and considering declaring bankruptcy. Foreclosure proceedings began on their family home in August.

The Waldron family is far from alone. Over a six year period ending in June 2018, UVA sued consumers more than 36,000 times for bills amounting to $106 million. The health system has seized wages, bank accounts and tax refunds, placed liens on homes and properties, and forced families into bankruptcy. Before July 2017, when UVA began restricting filing lawsuits to those who owe more than $1,000, it sued consumers who owed as little as $13.91.

Beyond its recovery of debts, UVA hit some former patients with an additional 15 percent for legal costs, plus 6 percent interest on their unpaid bills, which over the course of years can add up to more than the original bill.

In one case, UVA went so far as to block the enrollment of a student, Nacy Sexton, who had unpaid medical bills from the hospital for his lupus treatment.

“When you get sick, why should it affect your education?” he asked.

On top of its aggressive debt collection practices, the hospital also offers more limited financial assistance than any other major hospital system in the state.

As Uwe Reinhardt, the revered Princeton health economist who died in 2017, told me, Elisabeth Rosenthal writes, “If you want to save money, you have to pay less.” That means taking on hospital pricing.

Across the board, consumers want lower costs. Research from Consumers for Quality Care and Ipsos found that 88 percent believe that lowering out-of-pocket costs for health care should be a top priority for lawmakers.