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HOSPITALS: And while we’re on the subject of making too much money

If you read the Bruce Bodaken interview referenced in my other post today you’ll see that he complains about a certain hospital organization pricing too aggressively and being cut out of part of the CalPERS HMO network that Blue Shield runs. That unnamed organization is of course Sutter Health, which has used it’s local oligopoly power gained by a series of quasi-mergers in the mid-1990s to raise its prices and its profits considerably.

Now I’m not clever enough to really understand who is accountable for what in a big non-profit hospital, and by the time you add into that mix a "system" made up of all types of different management and ownership arrangements, without any clear stockholding ownership, then I’m lost completely. Back in the mid-1990s when it joined Sutter, Cal Pacific medical center was bleeding money. I speculated to my clients back then that I wasn’t sure that other parts of the Sutter system would have bailed it had it gone under. But Sutter took advantage of its bargaining power to push up costs, and the plans took it in the shorts for a few seconds until they realized that they could turn round and stick that cost onto their clients, and still make record profits. (Actually that’s not exactly how this long 2003 article on Sutter’s integration describes Sutter’s strategy, so you might read it for a more balanced view!) So everyone was happy.

Or almost everyone. Now Cal Pacific is making too much money. So much that the City of San Francisco, which I assume is pretty broke given the way it comes after me for egregious property taxes and parking tickets, and is increasing bus & train fares for its poorest residents again, is revoking its non-profit classification and is going after Cal Pacific for property taxes.

Which leads us to the old age question of, what exactly is non-profit about wealthy hospital systems that throw off a ton of margin? Or for that matter similarly profitable health plans? I suspect this question will come back again.  But don’t worry guys, my in-depth analysis of oil companies seems to indicate that you won’t have to pay any tax on all those profits anyway.

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  1. If the link didn’t fit, Google “Hospital Giving is a Local Matter” from The Naperville Sun for the article where they blame the SEIU.

  2. Look at how the hospitals are trying to blame the unions, like the SEIU, on this whole charity care issue:
    http://www.suburbanchicagonews.com/sunpub/naper/editorials/6_4_NA07_EDITORIAL_S1.htm
    From the report: “The latest development is a survey – funded by a union with its own agenda against the hospitals – that looked at 21 hospitals in Cook County and reported they enjoyed $326 million in tax breaks while making only $105 million in charitable contributions.”
    FACT
    Non-profit hospitals are under fire not only from unions like the SEIU and trial lawyers like Richard Scruggs, but all of the following are on the case as well.
    The Senate Finance Committee
    http://www.senate.gov/~finance/press/Gpress/2005/prg052505.pdf
    The House Ways and Means Commitee
    http://waysandmeans.house.gov/hearings.asp?formmode=view&id=2719
    The IRS
    http://www.nytimes.com/2006/06/19/washington/19tax.html?ex=1151553600&en=11585168fd6ccb4d&ei=5070
    The GAO
    http://64.233.167.104/search?q=cache:u7EOxmVZw9EJ:www.gao.gov/new.items/d05743t.pdf+GAO+non-profit+hospitals&hl=en&gl=us&ct=clnk&cd=1
    In Illinois, The Illinois Department of Revenue (Provena case)
    http://www.ahp.org/other/021904-wsj-article.php
    At the national level, there are NUMEROUS state attorneys general who are investigating non-profit hospitals on the charity care/billing/collections issue.
    And then, of course, you have groups like Consejo de Latinos Unidos, wherethemoneygoes.com, The Fairness Foundation, citizen and community groups like the one downstate in Illinois, as well as numerous others throughout the nation.
    You also have CBS 60 Minutes on the issue…
    http://www.cbsnews.com/stories/2006/03/02/60minutes/main1362808.shtml
    Lawyers, labor unions, Dan Rather, the IRS, the GAO, Senator Charles Grassley, citizen/community groups, and state attorneys general? And they’re trying to blame a report from ONE union that is engaged in a knock down, drag out fight with the hospitals?
    Look, whenever there is an adversarial relationship between opposing sides, they try to dig up dirt on each other, but citizens, and most importantly TAXPAYERS, need to look at the END RESULT. What did the report uncover? What have OTHER reports uncovered? You know, the ones that were done by people with a hell of a lot more clout than some union?
    What these so-called non-profit, often religiously-affiliated hospitals are doing is a disgrace! In many instances, poor patients were never helped through the process of applying for charity care. They were given the run around instead.
    Even worse, we have so-called non-profits sitting on cash reserves, some of which are apparently stashed in offshore bank accounts!
    http://www.businessword.com/index.php/weblog/comments/1023/
    This is about more than some self-interested unions and trial lawyers. We have poor people being hauled into court via the use of “body attachment” over bills that aren’t all that large (check the Champaign County citizen group for the research they conducted). We’re not talking $50,000 hospital bills in some cases, but much smaller amounts, and yet hospitals dragged them in via a writ of body attachment (which is basically a warrant for forcible arrest).
    Also, the collection agencies that some of these hospitals use are run by greedy people who psychologically abuse the employees. At one Illinois business, employees were made to work in a freezing cold office where they turned the heat down to save money over the weekends, but on Mondays, it was freezing cold until the office finally got heated up. People were getting sick all the time, but then when they called in sick, the managers would threaten to write them up for the unexcused sick day. And yet THIS COMPANY WAS AT FAULT for the freezing temperatures! What scummy, sleazy, slimy people. And that is EXACTLY who runs these collection agencies, mind you. Sleazy and greedy slimeballs.
    Let the investigations into this scandal of national significance continue!

  3. Hospitals are not so innocent themselves, even though they are harassing poor and indigent people over debts owed when many of those people ought to qualify for charity care.
    http://www.usdoj.gov/opa/pr/2002/May/02_civ_257.htm
    Look at this! Settling Medicare fraud allegations! Terrible. What a disgrace when you consider that hospitals should be about CARING.
    These scoundrels take the word “care” OUT of healthcare.

  4. Yes, there is one hospital billing and collections firm in Illinois where you have to go hang out and party in bars or go to parties with the supervisors and managers to get ahead. It was mostly immature 20-something people in charge, and they would invite staff they liked to go hang out and party or go out to eat on non-work time.
    If you weren’t on the goofy Let’s Go Party list, you didn’t get promotions or raises. Most people left within a year, because it was very unprofessional.
    That’s who is handling medical records and UB92’s for some of these hospitals, party people who get drunk together and make fun of the patient diagnosis. It was awful. Even managers were making fun of the patient diagnosis. Nice way to set an example, right?

  5. I worked insurance follow-up for one company that hospital clients outsourced to, and the men acted like they expected the women to be the entertainment at the company picnic, or something. They had on dance music and kept push push pushing some of the more attractive and young women to attend (one didn’t want to and was trying to get out of it).
    They also spent time in Las Vegas where the industry holds many conventions, so I think these guys thought that hey, since they see young women acting all provocative in the casinos out there, then maybe the ones who worked for them would dance around at the company picnic, or something. It was so annoying to watch.
    They tried to offer a demotion to one young lady who was so bright that she got into Northwestern University. They were offering some paper-shuffling, general clerical, mail-sorting/reception job to her when she didn’t like handling insurance follow-up.
    Not a move into something more suitable to someone with a brain, but these clowns offered her a demotion. But yet they were trying like heck to get her to attend the silly company picnic, right? Dance around and entertain the men, but if you don’t like your current position, we do have this demotion here (sarcasm).
    These people who run these agencies, at least from past personal experience, are just sleazy beyond belief. You can just imagine how they must treat the collections accounts that come in over patient debt if that’s how they treat the employees. Turnover was so high that people quit every 6 months or so. Few stayed longer than a year aside from top management.
    Good to see the attention these hospitals and their collections agencies are getting now from the various state attorneys general, the IRS, the GAO, the Senate Finance Committee, the House Ways and Means Commitee, the lawyers, and so forth. It is high time for some reform in the industry.

  6. The hospitals are in the courts. Don’t worry. The mess is getting fixed via the courts.
    Here’s the huge Illinois case that is currently moving forward. The hospital system keeps trying to blame the SEIU, but if it is only the union, then why is the case moving forward?
    http://www.cliffordlaw.com/not-for-profit-hospital-class-action-litigation/press-releases/not-for-profit-hospital-class-action-litigation-press-release
    Also, in Washington, Charles Grassley is supposedly working on legislation to curb some of the more serious abuses, so that is good to know.
    This all came to a head in Washington, by the way…
    http://waysandmeans.house.gov/hearings.asp?formmode=view&id=4018
    http://waysandmeans.house.gov/hearings.asp?formmode=view&id=2719
    http://biz.yahoo.com/prnews/060518/dcth063.html?.v=41
    Illinois is THE hot spot for this whole issue, and it is really really heating up.
    Supposedly, a health system tried to get a gag order put on the folks at Consejo de Latinos Unidos. Wow!! These hospital people sure are arrogant for a bunch of so-called religiously affiliated, non-profit hospitals!
    It is reported throughout Illinois that it is getting harder and harder for the billing/collections companies to find good quality people due to the whole scandal going on with the charity care/price-gouging allegations flap, so perhaps that is why some places are dragging them in from the local mall? I mean, think about it. Sales people work with numbers all day long. Billers/collectors work with numbers all day long.
    Maybe the companies just figure that this is the best they can do to pull in some bodies to do the work in light of the fact that it doesn’t seem too prestigious to work in a job where you harass poor people for money they do not have after they were overcharged in the first place? Just something to think about.
    Sounds like those companies are desperate. I think we can see why, too.
    It’ll get cleared up via new legislation, though, and then things will pipe down, I’m sure. At least I hope so! This is taxpayer subsidy for these non-profit hospitals, here. It had BETTER pipe down sooner or later!

  7. http://www.consejohelp.org
    http://www.wherethemoneygoes.com
    Take a closer look at our so-called non-profit hospitals.
    And these overpaid executives also hold frequent conventions in Las Vegas, Nevada. Gee, aren’t there legal prostitutes just outside of Vegas? I’ve always wondered why Vegas was such a popular convention spot for the hospital execs and their trade associations!

  8. The hospitals do use sleazy collections agencies to outsource a ton of the work to, which is why you wonder why they are tax exempt when they send out work to for profit firms that basically handle so much of their work for them when it comes to the financial/billing stuff.
    Total scam. Not to mention that one firm in Illinois (a collections company) drags in these people whose past work experience consisted of being a bartender, working at McDonald’s, or at the local mall. Some were totally drugged-out types who could barely spell properly, and yet there they were handling the medical records of patients. This whole industry needs much more regulation, perhaps even a licensing requirement if they are just going to drag any riff raff in the front door to work on the hospital’s outsourced business.
    Check out wherethemoneygoes.com for more on the hospitals. Interesting website.

  9. Does anybody else picture “rdf” as a used car salesman in a really bad suit?
    Sure. just go get a primary care doc. It’s that simple! if only all those 44 million dumb suckers would just go out and get themselves some health insurance, we’d be fine.

  10. gadfly, you just don’t get it! Find a primary physician/clinic to handle your primary care needs and leave the hospital emergency rooms for real emergencies.
    As to Sutter E.R. physician billing, look at the conditions of admissions form which you signed (but obviously didn’t read)and were give a copy of. It clearly states that the physicians charges are seperate from the hospitals charges.
    As to your fear of collection agencies, I suspect you have been down this road before, once or twice. My advice is to pay your bill.

  11. //didn’t get what he paid for in the hospital emergency room//
    The first time I definitely didn’t. I was sent home with a cursory examination – and this forced me to return the next day and thus get double-billed for the same problem.
    //collection agencies//
    The issue is that I applied for and qualified for coverage that was supposed to pay the whole bill. Everyone, from the intake clerk to the financial counselor I turned my forms in to let me think this was the case. I didn’t know that physician’s bill was separate until I started receiving calls from the collection agency. I think the fact I would be billed was deliberately hidden. When I called the physician’s group to see if I could work out an arrangement to pay the bill, I was told I had to deal with the collection agency. This is something I refuse to do, especially since it appears to me that the physicians are deliberately trying to hide the bill long enough to slip the it to collection agencies, who can resort to dirty tactics – therefore, allowing the physicians to continue to look moral and humane. By the way, this is why I laugh every time a physician talks about how charity care should be handled through physician voluntarism: in Sutter’s case, the physician’s do not offer any contact information besides their call center, and then all you get is that you have to deal with the collection’s agency. The physician can’t be both “humanely” dealing with individuals while not offering a point where poor people can make arrangements for the billing and then slipping the billing process to people with no moral compunction. I’d also like to point out if a person really can’t pay, then all the physician has accomplished is adding a black mark to their credit record and making it harder to pull out of poverty: and they might be doing this to someone who is critically ill or disabled, so that this cruel treatment makes their condition worse and lessens their ability to contribute to society.
    If Sutter had been up front about the bill when I went to the Emergency Room in the first place, I might have had a reason to complain about how poverty limits my access to health care, but I would be less angry about it than I am now. I’m angry because Sutter engaged in deception, and they’re doing it to make their billing process easier and less hand-dirtying (by using the collection agency for primary billing)at the expense of people who are poor enough to qualify for charity care. I can’t imagine anything more low and sleazy.

  12. I am new to your blog but thus far find it entertaining. I am amused that gadfly feels like he didn’t get what he paid for in the hospital emergency room and thinks collection agencies are slezzy because he hasn’t paid the doctor. I wonder why hospital emergency department bills are so expensive?
    As to Sutter, they have managed to do what has eluded 70% of other hospitals in the state, make a buck! Would it be better to raise the sales tax or assess a parcel tax to support an inefficient but necessary hospital system (Alameda County)? It is my opinion that if it wasn’t for Sutter’s financial strength, all of the Bay Area would be Kaiser members. Excess revenue over expenses is a good thing, even at not-for-profit hospitals.

  13. >Profitable non-profits aren’t bad unless they’re (passively or actively) exploiting the system.<
    Of COURSE they're exploiting the system! Where do you think those profits go? In Kaiser, 50% goes to the pension plan of the for-profit doctors of the Permanente Medical Group.
    In the others, it goes to obscene executive salaries and perks.
    And, of course, they ultimately sell out or convert to a for-profit status, pulling billions out of the conversion for the execs.
    It's an outrageous scam on the taxpayers and the community.
    Harvey

  14. //”how did the hospital earn the profit?”//
    Yes, feel free to put those words in my mouth. 🙂

  15. Profitable non-profits aren’t bad unless they’re (passively or actively) exploiting the system. In fact, shouldn’t we be rooting for profitable hospitals? So many good hospitals need some profit year over year to fix up their dingy 40-year-old buildings and get some 21th Century IT.
    trying not to put words into gadfly’s mouth, but he eluded to it. the question isn’t: “how much profit is considered excessive?” more so, it’s “how did the hospital earn the profit?” I’m sure we would give much more leeway for well-managed hospitals that make their patients and their communities happy.

  16. Sutter is the one that forced me to come to the Emergency Room twice by not dealing with me properly the first time, and then did something very sleazy with the billing. I qualified for a “charity” program going in the door, but then the physician fees were treated as a separate bill. And instead of working with me to get the bill paid (and perhaps reconsidering their policy of hiding the separate physician’s bill when people are admitted to the emergency room), the physicians just gave their bills to a collection agency and told me that I had to deal with them. No way am I going to deal with the sleazy and invasive tactics of a collections agency, especially when it’s being used as a substitute for regular billing.
    This issue is still outstanding, and I’ve had other things on my mind. But I’d like to send a big shout out to Sutter for screwing over poor people with their deliberately obscure billing techniques and unnecessarily sticking me with black marks on my credit record. As if my life didn’t suck enough. Geez.

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