One of the great undercovered stories in American healthcare right now—in American business, for that matter—is the slugfest between hospital systems and insurers, as they fight for leverage and pricing power in the reformed healthcare marketplace. In this bloody battle, hospitals often have the upper hand, “narrow networks” are the insurers’ common counterattack, and patients are often caught in the crossfire. And while it can be a challenging story to cover, some recent local reporting from northern New Jersey and Pittsburgh offers a good road map.
Lindy Washburn, the healthcare writer for The Record of Bergen County, NJ, has made something of a specialty of covering hospital billing practices, and she recently delivered a compelling report on the raging price war between the for-profit Meadowlands Hospital and the giant insurer UnitedHealthcare. (The article was supported by The Commonwealth Fund, which also supports The Second Opinion.) Washburn’s story opened with the tale of computer programmer Ashok Vaidya, who received a collection notice for $86,846 for two cortisone shots he got at Meadowlands Hospital in 2011. Yes, you read that right. The bill reflected Meadowlands’ out-of-network prices, which are among the highest in the country, and are more than 30 times higher than the discounted rate the hospital had negotiated with United, Vaidya’s insurer.
The catch: The hospital was purchased in December 2010 by an investment group, which argues that it never agreed to accept the contracts entered into by the previous owner, and so all care between that point and November 2011—when it reached a new deal with United—is “out-of-network” for the carrier’s customers. Meadowlands says United owes the hospital more than $200 million, United refuses to pay list price, and now the hospital is billing patients directly. (Who knows if the hospital actually expects to collect from patients, or is just trying to turn up the heat on United. Either way, Vaidya tells Washburn, “I thought this was all taken care of… it’s not right for the hospital to go after the patients.”) There’s a hearing today at which the insurer will ask a state court to order Meadowlands to stop sending the patient bills, Washburn reported.
As she sums it up: Vaidya’s dilemma is the “latest illustration of the strategies New Jersey’s for-profit hospital operators use to maximize their income. His case shows how some hospitals try to increase revenues by claiming services were provided to out-of-network patients and then charging the list price for those services.”
Meadowlands went from being in the red to an operating profit of $11 million in 2011; in less than three years under for-profit ownership, investors got a return of more than $14 million. There are similar tales at other hospitals in the state, which means this story points to another one: What is it about New Jersey laws and regulations, or its medical market, that makes the state especially susceptible to price-gouging? State regulators are concerned about what’s happening, and tried to prevent Meadowlands from doing exactly what it’s doing, so why do the hospital’s owners think they can get away with being so aggressive?
The situation in Pittsburgh isn’t as outrageous, but it’s still threatening out-of-network headaches for scores of patients, many of whom may not even know what could happen to them. At issue is a dispute between Highmark, which has 60 percent of the insurance market in the area, and University of Pittsburgh Medical Center, a nonprofit behemoth with about 20 hospitals and 3,500 doctors. The current reimbursement contract between the two sides expires at the end of the year, and UPMC has refused to negotiate a new deal in retaliation for Highmark’s 2013 purchase of the West Penn Allegheny health system, which included five hospitals and about 1000 doctors. “UPMC’s argument is that Highmark now has an incentive to steer patients to Allegheny,” Alex Nixon, a business writer who has been following the story for the Pittsburgh Tribune-Review, told me. The upshot: UPMC will be out-of-network for Highmark customers, which means out-of-pocket costs for care there will skyrocket.