Written by: Ruth McCambridge

Source: Cleveland Plain Dealer

As health care systems prepare for all of the many changes that the Affordable Care Act will entail, there is one that is relatively hidden from view: the ten-fold increase in billing codes that the federal government is planning to roll out next year (pushed back from a planned launch this year).

Stephen Parente, a professor of health finance and insurance at the University of Minnesota, claims that his research on medical billing found that up to 40 percent of claims sent between insurers and hospitals have errors. These errors, often caused by human error but sometimes the result of alleged fraud, may include double billing, billing for the wrong treatment, unexpected costs, or billing that is more than what an insurance contract allows. The American Medical Association claims these mistakes cost health care providers $17 billion last year and it blames insurance company practices, but others say the blame can be shared, and this article details many problems with hospital billing practices as well.

According to Kevin Theiss, a vice president at the Summa Health System, at the Summa Akron City Hospital, as many as 250 people may take part in the billing process, including intake workers, doctors and nurses and those who assign billing codes. He says that the potential for mistakes at the hospitals is “astronomical.” In the midst of all of this, a change is brewing that is likely to make the whole system even more impenetrable for consumers. That is, the federal government, which requires that all medical billing use the same set of 16,000 universal codes (called ICD-9 codes) to identify medical problems and treatments, is planning to increase the number of codes to 155,000. While rolling out these new codes has been delayed by a year, the project is apparently moving forward apace. Some, including the American Medical Association, are heralding the delay. Even before new codes are introduced, the complexity of the current system has created what the article describes as a “cottage industry” of experts that are there to advocate between institutional players.

“There are certified coders, ‘revenue cycle’ consultants, auditors who check claims, ‘denial management’ experts who step in for hospitals and doctors to help negotiate with payers for more money, and debt collectors who specialize in ‘accounts payable,’ or the bills hospitals and doctors think they can get the patients to pay if they press hard enough.

Consumers, in contrast, have no army of experts. They pretty much just have themselves and their bills.”

Doug Benz / The New York Times

Despite a landmark settlement that was expected to increase coverage for out-of-network care, the nation’s largest health insurers have been switching to a new payment method that in most cases significantly increases the cost to the patient.

Jennifer C. Jaff, founder of Advocacy for Patients with Chronic Illness. She has Crohn’s disease.

The settlement, reached in 2009, followed New York State’s accusation that the companies  manipulated data they used to price such care, shortchanging the nation’s patients by hundreds of millions of dollars.

The agreement required the companies to finance an objective database of doctors’ fees that patients and insurers nationally could rely on. Gov. Andrew M. Cuomo, then the attorney general, said it would increase reimbursements by as much as 28 percent.

It has not turned out that way. Though the settlement required the companies to underwrite the new database with $95 million, it did not obligate them to use it. So by the time the database was finally up and running last year, the same companies, across the country, were rapidly shifting to another calculation method, based on Medicare rates, that usually reduces reimbursement substantially.

“It’s deplorable,” said Chad Glaser, a sales manager for a seafood company near Buffalo, who learned that he was facing hundreds of dollars more in out-of-pocket costs for his son’s checkups with a specialist who had performed a lifesaving liver transplant. “I could get balance-billed hundreds of thousands of dollars, and I have no protection.”

Insurance companies defend the shift toward Medicare-based rates under the settlement, which allowed any clear, objective method of calculating reimbursement. They say that premiums would be even costlier if reimbursements were more generous, and that exorbitant doctors’ fees are largely to blame.

But few dispute that as the nation debates an overhaul aimed at insuring everybody, the new realpolitik of reimbursement is leaving millions of insured families more vulnerable to catastrophic medical bills, even though they are paying higher premiums, co-payments and deductibles.

“They’re not getting what they think they’re paying for,” said Benjamin M. Lawsky, the superintendent of the New York State Department of Financial Services, whose investigators recently found that under the switch, 4.7 million New York State residents — 76 percent of those with out-of-network coverage — are facing reimbursement reductions of 50 percent or more.

The switch “certainly creates the appearance that insurers are trying to end-run the settlement and keep out-of-network payments low,” Mr. Lawsky said.

Mr. Lawsky, who worked for Mr. Cuomo when he was attorney general, is seeking legislation in New York State to require that minimum reimbursements be linked to the new database, known as Fair Health.

In the 2009 settlement, the insurers did not admit wrongdoing. But they paid to set up Fair Health as a replacement for Ingenix, a database owned by the insurance giant United Healthcare. Mr. Cuomo said Ingenix had consistently understated local “usual and customary” rates — so-called U.C.R.’s — that were used nationally to determine how much of a bill was paid when a patient used an out-of-network doctor.

Fair Health collects billions of bills from insurers to calculate a usual fee for each medical procedure in a given locality. But increasingly, reimbursement is not based on such prevailing rates.

“This shift is mirrored across the country, and the implications in terms of declines in reimbursement are similar,” said Rob Parke, a benefits expert at Milliman, an international actuarial and consulting firm.

The level of reimbursement varies by plan, pegged to benchmarks unknown or misunderstood by many consumers. The traditional benchmark was 80 percent of the U.C.R., while newer ones mostly range from 140 percent to 250 percent of Medicare rates. That sounds like more, but typically amounts to less, and is drastically below charges in large, emergency out-of-network bills.

Depending on the plan, insurers may cover 60 percent to 80 percent of the benchmark sum; the patient is not only responsible for the rest but also for any outstanding balance, to which out-of-pocket maximums do not apply. The average emergency bill that insurers reported to state investigators, for example, totaled $7,006, or 1,421 percent of the Medicare rate, and left patients owing an average of $3,778.

Fair Health’s Web site allows consumers to compare likely out-of-pocket costs. Mr. Glaser, who joined Fair Health’s consumer advisory board last month after seeing his reimbursement drop, gained his knowledge of health insurance the hard way.

When his son, Ethan, was a baby, doctors said he had a rare liver disease. The family, which was in a health maintenance organization, had to appeal three times to get approval for the out-of-network surgery that saved the boy, now 10. So Mr. Glaser was overjoyed two years ago when his employer switched to a preferred provider organization that promised out-of-network coverage. Including premiums and deductibles, he and his employer pay about $14,600 a year for family coverage.

But he discovered that at 150 percent of Medicare rates, it fell far short. In the case of a $275 liver checkup, for example, the balance due was $175, almost three times the patient share under Fair Health’s customary rate, and three and a half times what it was five years ago under Ingenix.

If Ethan had to repeat the $200,000 transplant, which used some of his father’s liver in 2003, the plan would pay little of the cost under the Medicare formula. Laws protecting consumers from extra out-of-pocket costs apply only to H.M.O.’s, which require prior approval to go out of network.

“I wish I could tell you that’s a unique case,” said Sandy Praeger, who is chairwoman of the health insurance committee of the National Association of Insurance Commissioners and is Kansas’ insurance commissioner. She said consumers were caught in the middle of a battle between insurers demanding discounts and doctors who resist by billing more than they expect to get paid — a conflict intensified because Medicare tilts its payments toward primary care, while most people go out of network for specialists.

“For some things, Medicare is really a poor payer,” she said. “So if that’s the benchmark, that just magnifies the problem.”

United Healthcare referred questions about the switch to the New York Health Plan Association, an insurance trade group, whose president, Paul F. Macielak, said the Fair Health database was inflated by a subset of physicians. “In an ideal world, everyone would be in network, subject to a contracted rate,” Mr. Macielak added.

Doctors, however, complain that insurers are pressuring physicians to join networks by slashing outside reimbursement.

“They want to get them trapped, and then limit care,” said D. Brian Hufford, a lawyer who represented physicians in major class action lawsuits against Ingenix. “They’re simply trying to shift all the risks to the doctors while they take all the profits.”

Mark Wagar, the president and chief executive of Empire Blue Cross, which is rapidly switching to Medicare benchmarks, said the concerns were exaggerated, since all but 5 percent of medical care takes place in network.

“It’s the tail wagging the dog,” he said of Mr. Lawsky’s proposed legislation to set minimum reimbursement.

Jennifer C. Jaff, founding director of Advocacy for Patients with Chronic Illness, uses her own case as an example of the fallout.

Ms. Jaff, 54, said she maintained out-of-network coverage with $14,000 in annual premiums because she has Crohn’s disease and is at high risk of colon cancer, which killed three of her grandparents. Last year, after a terrible experience with an in-network doctor in 2010, she said, she returned to a top specialist at NewYork-Presbyterian Hospital who had performed her colonoscopy and upper endoscopy in 2008, coping with scar tissue from her eight abdominal surgeries.

Even with 250 percent of Medicare rates as the benchmark, Ms. Jaff owed four times more than she had paid when Ingenix rates were in effect, or $3,137 of a $4,200 doctor’s bill that had increased by only 13 percent.

Separately, her insurer, Anthem Blue Cross of Connecticut, paid a $7,806 “facilities fee” to the hospital, about double what the hospital had billed, under a flat rate negotiated by Empire, Anthem’s affiliate in New York.

“Is that not nuts?” Ms. Jaff asked.

Mr. Wagar, of Empire, defended the practice, saying it kept down premiums over all. An Empire spokeswoman noted that Ms. Jaff’s specialist had charged double the median price of a colonoscopy in New York City, which the Medicare formula almost covers.

As for the upper endoscopy, the Medicare formula covered only half the median price; it was halved again, Empire said, to $220 of the $1,860 bill, under new rules that restrict payment when two procedures are done at the same time, to prevent overbilling for patients prepared and sedated only once.

“There’s not a doctor in Manhattan that would have done that endoscopy for $220,” Ms. Jaff protested. “They’re not using anything that’s tied to reality.”

Issac J.Bailey | The Myrtle Beach Sun

“Now, it is as plain as the spectacles on Antonin Scalia’s nose that opting out of the health-care market is about as realistic as opting out of dying.” – John Cassidy of the New Yorker.

Following the debate over the Affordable Care Act has reminded me of that old saw, everybody wants to get to heaven but nobody wants to die.

The public doesn’t want private insurance companies to be able to throw people off their rolls for the sin of getting too sick, or for denying them coverage because of a pre-existing condition, something they will no longer be able to do under the Affordable Care Act come 2014.

The public wants to keep in place the Reagan-era federal law that compels emergency rooms to treat whoever shows up, no matter if that person has not a dime to his name and won’t pay no matter how many harassing phone calls bill collectors make to their home.

But the public doesn’t want to be compelled to pay for those rights.

According to a variety of studies, from the independent Congressional scorekeeper the Congressional Budget Office to independent health care industry analysts, those with insurance are subsidizing those without to the tune of maybe $43 billion every year.

The annual premiums for those with health insurance are roughly $1,000 higher to make up for the unpaid bills of the uninsured.

According to the National Coalition on Healthcare, hospitals lose about $34 billion a year providing unpaid for care – services they are required to render because of federal law dating back to 1986. The group also said that “private insurance and some public payers pay an additional $37 billion on behalf of those with no insurance.”

What’s worse is that this is probably the least efficient, most wasteful way to operate the world’s most expensive health care system.

Justice Antonin Scalia alluded to it during this week’s debate when he said that one way to solve the problem would be to simply allow insurance companies the to right to throw sick patients off their rolls.

In fact, it is. Another way to solve the problem is to no longer guarantee access to emergency medical care, meaning that if you get into a car accident and can’t speak and your insurance card isn’t visible – or you don’t have insurance – medical officials should be able to deny you care, no matter how urgently you need it.

That’ll learn Americans who are not responsible enough to either purchase insurance without being compelled or have their insurance information tattooed to their forehead in case of an emergency. (Of course, if you suffer an ugly head trauma, that tattoo wouldn’t do any good.)

The Affordable Care Act has already done a variety of things, including slowing the rise in health care costs, convincing more medical institutions to go to a pay-for-quality rather than pay-for-quantity of care model, saving seniors tens of billions of dollars in drug costs and uncovering billions of dollars in fraud.

Because it has become a political lightning rod, all of those things and the contradictions being made by opponents are being overshadowed.

Conservatives have long claimed that they are the party of personal responsibility, yet conservatives have joined with a sizable number of liberals in opposition to the individual mandate, which will require everyone above a certain age who can afford it to buy health insurance.

The individual mandate is designed to make sure as many Americans as possible are paying into a system for which each of us is benefitting, to defray some of that $43 billion bill of annual uncompensated services, to assure that the insured no longer have to pay an extra $1,000 a year to pay for the uninsured.

If not the individual mandate, then something needs to be implemented that will accomplish the same goal – something those same conservatives seem to not want to do.

Or, we can take Justice Scalia’s advice and repeal all federal laws that compel medical officials to provide services to people who can’t pay for them, emergency or not.

The problem we’ve long had with balancing our books is that we too frequently demand things for which we don’t want to pay.

The individual mandate is unpopular largely because it threatens to shift that paradigm.

Greg B. Smith / NEW YORK DAILY NEWS

Big insurance companies and some greedy doctors are to blame for the growing number of New Yorkers whacked with “surprise” medical bills, a state inquiry has found.

Department of Financial Services Superintendent Benjamin Lawsky Wednesday released the results of his probe into the unanticipated bills that are slamming consumers.

“Simply put, surprise medical bills are causing some consumers to go broke,” the report states.

The Daily News has highlighted this problem with a series of stories over the last two months. Lawsky promised to push for reforms.

“Every time I have mentioned this issue to a crowd of people, I see nodding heads,” he said. “If that’s happening, it is a huge issue.”

His agency reviewed 2,000 complaints from 2011 and surveyed the 11 big insurers and HMOs who cover 95% of the New Yorkers who have health insurance.

The review found that patients who went out of their way to make sure the non-emergency treatment they sought was covered by their plan still wound up with bills from specialists — such as assistant surgeons, anesthesiologists and radiologists — who were outside their plan.

That’s because insurers often don’t make clear who will be involved and how much it will cost, the report found.

One patient who complained to the Financial Services department made sure to go to an in-network hospital for brain surgery but wound up with a surgeon who wasn’t in his plan. The surgeon billed him $40,091 and the insurer covered only $8,386 – leaving him to cough up $31,704.

Sherry Tomasky, advocacy director of the American Cancer Society, praised the report and criticized the “undue financial burdens that are often placed on (patients) at a time when they are least able to handle it – both financially and emotionally.”

DFS quoted ridiculously complex language one insurer cited in claiming it met its disclosure requirements: “reimbursement is based on a percentile of national prevailing charge data compiled for a specific procedure and adjusted for geographic differences.”

“Unfortunately, language such as this does not provide consumers with meaningful information,” the department wrote.

The review also documented complaints that a “small but significant number” of doctors “appear to take advantage of the fact that emergency care must be delivered” by inflating bills for treatment that’s not covered.

The survey found out-of-pocket costs for out-of-network radiology or x-ray services during emergency care averaged $2,910; for anesthesiology it was $1,794.

The Health Plan Association, the lobby group representing insurers, praised the report for shining a light on excessive bills by doctors for ER care.

“These egregious practices contribute to the rising cost of health insurance for New Yorkers,” Paul F. Macielak, HPA president, said.

The report also noted that insurers have been reducing coverage for out-of-network care and making it tougher to file claims.

By Lindy Washburn – The Bergen Record
First Posted: January 27, 2012

HACKENSACK, N.J. — Frances Giordano found out she had lung cancer in June. After that, the bad news just kept coming.
First, she discovered that even with a good job and health insurance, her medical expenses were more than she could afford on disability.

Then she started slipping into debt, like millions of other Americans who don’t have the cash to cover their medical bills. Hospitals expect to be paid promptly and offer little leeway to insured patients. Unpaid bills go to collection agencies, damaging a person’s credit history for years.

Finally, she learned that fighting for her life was not her only battle or maybe even her toughest. When she finished her chemotherapy in December, she was fired. “Due to changes in business operations,” wrote her employer of more than six years, “We can no longer hold your position open.”

It arrived nine days before Christmas.

“I’m a good person,” the 58-year-old Giordano said in an interview, crying. “I worked hard. Isn’t having cancer enough?”
The crisis in American health care is not limited to hospital emergency rooms where uninsured people wait for care. It also is found in a neat, three-bedroom house in Dumont, N.J., occupied by a widow who worked full time, raised two kids and likes to get her nails done occasionally.

In less than a year, Giordano lost her health and her job. Now, she’s afraid she’ll lose her good credit and her health coverage.

In the lonely hours of the night, she said she thinks about giving up.

Giordano had health insurance throughout her illness. She didn’t have to beg for treatment and was not denied it. She loves the surgeon and oncologist and nurses whose care, she hopes, will give her many more good days with her first grandchild, born in July.

But she may be ruined financially. In this country, people can go broke if they get sick.

A cancer diagnosis “is a catastrophic double whammy” for many patients, said Blair Horner, an American Cancer Society vice president, “bad news on their health and potentially catastrophic news for their finances.”

Despite the passage of national health care reform in 2010, many of the changes intended to protect people from situations like Giordano’s haven’t been implemented yet.

Without a salary, she can’t afford to extend her coverage. She doesn’t know how she’ll pay off her hospital debt. She is desperate to keep her bills from going to a collection agency because a mark on her credit history could make it hard to buy a smaller place to live when she’s ready.

And then there’s the unsettling “activity” near her esophagus, spotted on a recent PET scan. Her doctors say it should be biopsied; Giordano says she can’t afford the copay and doesn’t want to hear more bad news.

“How does my body recover from chemotherapy with all this anxiety and stress?” she said.
“Bottom line? People can’t get sick. They can’t get cancer.”

Each week, more than 31,000 people are diagnosed with cancer nationally, according to the American Cancer Society.
Giordano’s Stage 2 lung cancer was detected when doctors ordered a scan for a lump that seemed perpetually stuck in her throat. Because she’s short, the imaging machine circled lower and inadvertently caught a picture of a tumor at the top of her lungs.

She was stunned. Afterward, she couldn’t find her car in the parking lot and didn’t know whom to call, her son or daughter. Their father, her husband, had died five years earlier of the same disease.

In July, a surgeon at Hackensack University Medical Center removed part of her left lung; she stayed in the hospital for six days. After her recovery, cancer-fighting drugs were pushed through a portal in her chest each week from August to December.

These treatments extend life for thousands of cancer patients. In 2000, the five-year survival rate for lung cancer patients was 25 percent higher than it was 20 to 25 years earlier. Giordano was told she had a 30 percent chance of living five years — more than twice what her husband had been told. Both of them had been smokers.

But the treatment is costly. Recurring charges for chemotherapy and/or weeks of daily radiation — combined with copayments for lab work and imaging to check progress — bury many cancer patients in medical debt.
Cancer “is one of the most expensive illnesses to have,” said Barbara Hoffman, founding chairwoman of the National Coalition for Cancer Survivorship and a law professor at Rutgers-Newark. “It results in a lot of personal financial stress and can lead to personal bankruptcy.”

Even when patients have coverage, they “may not be protected from high out-of-pocket costs when they are diagnosed with cancer,” according to a 2009 report by the Kaiser Family Foundation and the American Cancer Society. Along with high insurance premiums, those costs may force patients to pile up debt to pay for the care they need — or postpone or skip life-saving treatment.

“Having insurance increases people’s ability to access care,” said Mark Rukavina, an expert on medical debt and the executive director of The Access Project, a Boston-based health care advocacy group. “The good news is that they get the care, but the bad news is it’s unaffordable.”

As medical costs rise, employers have shifted more of the burden to employees through premiums, copayments and co-insurance.
“The days of Cadillac health plans are pretty much over,” said Peter Cunningham of the Center for Studying Health System Change in Washington.

Each year, an increasing share of Americans spend more than 10 percent of their income on premiums and out-of-pocket costs for health care, the standard used to define a “high medical cost burden,” he said. Surprisingly, that trend has “been increasing the most for people with employer-sponsored insurance,” he said.

It’s especially marked among small businesses, like the one for whom Giordano worked.

Premiums for New Jersey companies with fewer than 50 employees have climbed steadily, most recently by more than 10 percent from 2010 to 2011.

Giordano’s share of her medical expenses included: $125 for each same-day procedure, such as a biopsy or the implantation of her chemotherapy port; $100 for each MRI, CT or PET scan; $40 for each visit to the specialist; and $250 a day, to a maximum of $1,250, each time she was hospitalized. Her policy, from Oxford Health Plans, placed no limit on out-of-pocket expenses.

And she is one of the lucky ones. A growing number of New Jersey residents — more than one in eight — do not have health insurance at all.

“We’ve seen a pretty substantial erosion over the past 10 years in people who work for small employers who even have coverage from their employer,” Cunningham said.

Ellen Stovall, a three-time cancer survivor and senior adviser at the National Coalition for Cancer Survivorship, said survivors already face daunting choices as they make treatment decisions.

“The last thing they need is to worry about losing their health coverage or paying high cost-sharing or premiums,” she said. “Yet the fact is that … many Americans are underinsured — something they often don’t realize until they have a devastating diagnosis.”

Giordano worked until the day before her lung surgery in July. Then her income was slashed — from a monthly paycheck of $4,670 to a monthly disability check of $2,215, which ended in December.

With a mortgage payment of $1,700 and a $460-a-month car payment, disability didn’t go far.
The first hospital bill for $1,250 arrived, and Giordano didn’t have the money to pay it.
She called the billing office and negotiated an $85-a-month payment plan.

Then Giordano came down with pneumonia and spent another week in the hospital. Again, her share was $1,250. Again, she didn’t have the money. And again, she asked for consideration: could she extend the $85 monthly payments for another 15 months?

The answer was no. A separate bill meant a separate payment plan, she said Hackensack’s billing department told her. She found the pressure to be intense.

“When people are stricken with a life-threatening disease, and they have copayments, and they call up in good faith — then they (hospitals) try to intimidate me?” Giordano said.

She finally worked out an additional $50 monthly payment plan. It was more than she could afford, she said, but she wanted to avoid going to collections.

After that, she said, she rarely left her house because she feared getting sick and needing to be hospitalized again.
More than one in five American families experience problems paying medical bills, the Center for Studying Health System Change reported in November. Some 44 million Americans are paying off medical debt, the Commonwealth Fund said, up from 37 million in 2005. Congress reported in 2010 that 30 million Americans of working age were contacted by a collection agency for unpaid medical bills.

One survey periodically asks people how they have been affected because of their medical bills. “Two-thirds of people say … they’ve had problems paying for some of the basic necessities — food, rent, mortgage, clothes, basic stuff,” Cunningham said. “They’ve put off major purchases. They’ve taken money out of savings or borrowed money. An increasing number consider filing for bankruptcy.”

In fact, medical bills and illness contributed to nearly two-thirds of all personal bankruptcies in 2007, a 50 percent increase over 2001, according to Steffie Woolhandler, a physician who co-authored several studies on health care debt. Most of those bankrupted were middle-class homeowners, she said.

“The overwhelming majority of those bankrupted by illness” had health insurance, she testified to Congress in 2009. “These families had done everything right. They worked hard, paid their premiums and thought they were covered. Yet when illness hit, they found themselves unprotected, ruined by copayments, deductibles and bills.”

The Affordable Care Act, if enacted as planned in 2014, is supposed to help these patients. One provision aims to make sure every health insurance plan delivers good value — “a better bang for the buck,” as one expert said — by requiring that 85 percent of the premium dollar go toward health care.

“Had she (Giordano) ended up without health insurance two years from now, there would have been a way to help her,” said Blair Horner of the American Cancer Society. Subsidies would be available to help purchase insurance coverage, he said.
Giordano knows what can happen if she doesn’t pay her hospital bills: She worked as a leasing agent for a property management company and regularly checked the credit histories of prospective tenants.

“That’s where I learned that medical bills can ruin your credit,” she said. “It shows up all over the report, automatically lowers your FICO score and instantly gives you bad credit.” She used to turn down potential tenants with bad credit. Some employers even check a potential employee’s credit history before offering them a job.

Medical bills account for more than half of all collection actions reported to consumer credit reporting agencies, a 2003 report by the Federal Reserve said.

Many of those bills are for less than $500, yet each one contributes to a poor credit score. A single surgery can generate separate bills from a surgeon, anesthesiologist, hospital, pathologist and other professionals, quickly overwhelming a sick person’s ability to understand and keep up. A dispute about whether a service is covered can leave the patient and insurer arguing while the hospital sends the bill to a collection agency.

“Once it goes to collections, even if paid promptly, it’s a stain on their credit report,” Rukavina, the expert on medical debt, said. “It can remain there for seven years, even with zero balance due. … Your credit score goes down and the cost of borrowing increases: It can cost tens of thousands of dollars on a mortgage.”

Some members of Congress became so concerned about the issue that a measure to change the reporting of medical debt by collection agencies was introduced last year with bipartisan sponsorship. It would exclude from credit histories medical debt that has been paid in full.

When Giordano dares to hope for a future after a full recovery, she talks about moving to a smaller place or a town house down the New Jersey Shore or to Florida. It would require a new mortgage “I care about my FICO score,” she said.
She couldn’t understand why the hospital wouldn’t set up a payment plan she could afford. “Anything I vowed to pay them, I’ve always paid them,” she said, referring to bills in the past for her husband and daughter. “I’m not asking for charity.”
To Robert Glenning, the chief financial officer at Hackensack University Medical Center, hospitals are no different than other businesses.

Francis Giordano, 58, of Dumont, has been undergoing treatment for stage 2 aggressive lung cancer. She’s on short-term disability and has a hard time making payments, yet the hospital insists on an unaffordable amount from her each month. (Leslie Barbaro/The Record/MCT)

“The employees get paid every two weeks, the mortgage gets paid every month, the vendors want to get paid within 30 days,” he said.

Bills are issued to patients with the expectation of prompt payment. They’re told that upfront. Even when patients negotiate a payment plan, Hackensack, like most area hospitals, seeks payment in full within 12 months.

“The larger point is that there’s a problem nationally with health care,” Glenning said. “Singling out one hospital, one physician or one patient certainly highlights it but misses the point that it’s a national problem. It’s not that people don’t care around here or that people are deliberately being a Scrooge on it.”

No hospital could survive without collecting the portion of the bill that is the patient’s responsibility, he adds.
Despite the recession of the past two years, Hackensack has seen no surge in delinquencies or even an uptick in the number of insured patients having trouble paying their share, he said.

But other New Jersey hospitals report a different experience.

“Over half of our bad debt now is co-insurance and deductibles,” said Joseph M. Lemaire, the chief financial officer at Holy Name Medical Center in Teaneck. Five years ago, it was only 10 or 12 percent. “It’s a sign of the economy. … and the fact that employers are pushing more of the burden onto employees. People just can’t pay.”

Similarly, Anthony Orlando, CFO of Englewood Hospital and Medical Center, said “We’re seeing more bad debt from our insured population.”

And The Valley Hospital in Ridgewood also “has experienced an increase in people having difficulty paying their bills for quite some time,” said Ken Parker, a spokesman.

Most hospitals send unpaid accounts to collection agencies after three billing cycles, their executives said — unless a payment schedule has been set up. They haven’t varied the procedure because of hard economic times.

Giordano described the insistence of Hackensack’s billing office on a second monthly payment — even as she struggled to pay her first — as cold, heartless and rude.

Glenning challenged that characterization.

“We do extensive training of our staff,” he said. “It’s a very stressful time for the patients. They don’t know the certainty of their future. They’re getting bills and trying to work things out. Hospital billing is very complicated. Every health plan has its own rules, and every hospital has its own application of those rules. It’s understandable, he said, if patients become emotional.”

Giordano had planned to celebrate the completion of her long, aggressive course of chemotherapy with her friends on Dec. 16. Instead, she opened the letter announcing that her job was gone.

The letter explained why her position couldn’t be held open. “Small companies … are not obligated to hold positions open for an employee on a leave of absence,” it said. The letter noted that the company had held her job for almost five months, which far exceeded its normal policy of 90 days’ medical leave.

However, the letter went on, “Because of our continuing concern for your welfare,” the company will extend and pay for her health coverage through April.

Giordano was devastated.

“Let me tell you something,” she said, “if the cancer didn’t kill me, this will.”

Her lustrous long brown hair had just begun to fall out. She was thin and easily winded but spoke furiously about the letter’s effect.

A generation ago, it was common for workers diagnosed with cancer to lose their jobs, said Hoffman, the Rutgers law professor. People with “the big C” weren’t expected to survive. There was no Americans with Disabilities Act. State anti-discrimination laws weren’t in place to protect cancer patients or those with chronic conditions.

But medical progress, new laws and a sea change in attitudes toward cancer survivors have greatly reduced the instances of discrimination, she said. Disabled employees now have a right to reasonable accommodation for their disability when their employer is covered by federal and state disability law. Small firms are exempt from the ADA, but not the New Jersey law.
Giordano responded to the letter fiercely, with a round of telephone calls to anyone who might be able to help. Then, her immune system weakened by the chemotherapy, she developed an infection and a fever. Christmas, even with a 6-month-old grandson, was ruined.

“I feel broken inside,” she said. “You’re fighting one thing, and you sort of conquer that journey, and this happens. … Who do you think is going to hire a 58-year-old woman?”

She has received the last of her disability checks. She is waiting for a state determination of whether she’s eligible for unemployment pay.

With no income, she doesn’t have the money to extend her health coverage; the subsidies through the Affordable Care Act to buy insurance won’t begin for two years.

Her doctors want her to have further tests, but she can’t afford the copays. And, frankly, she doesn’t want to know the results.

“Don’t sugarcoat this,” she said. “You know my husband died from this. I came to the end of one part of my journey, now I’m on another part. I don’t know what’s next.”

She fingers her rosary beads — at this point, her only source of strength, she said.

“If I succumb to this,” she said, she doesn’t want people to send flowers or donate to cancer research.

“I’d want a relief fund started — something where, if somebody’s in trouble with a copay, or needs a scan, or somebody’s in trouble with their rent or mortgage, they’d have some help. It would be one less thing to worry about, and they could just focus on getting better.”
———
SQUEEZED BY HEALTH BILLS
Problems with medical bills or accrued medical debt increased, 2005-10:
Percentage of adults ages 19-64, 2005: vs. 2010
In the past 12 months:
Had problems paying or unable to pay medical bills: 23 percent (39 million) vs. 29 percent (53 million)
Contacted by collection agency for unpaid medical bills: 13 percent (22 million) vs. 16 percent (30 million)
Had to change way of life to pay bills: 14 percent (24 million) vs. 17 percent (31 million)
Any of the above bill problems: 28 percent (48 million) vs. 34 percent (62 million)
Medical bills being paid over time: 21 percent (37 million) vs. 24 percent (44 million)
Any bill problems or medical debt: 34 percent (58 million) vs. 40 percent (73 million)
Source: The Commonwealth Fund Biennial Health Insurance Surveys (2005 and 2010)
———
FACTS BEHIND MEDICAL DEBT
— 62.1 percent of all bankruptcies have a medical cause.
— Most medical debtors were well-educated and middle class; three-quarters had health insurance.
— The share of bankruptcies attributable to medical problems rose by 50 percent between 2001 and 2007.
Source: “Medical Bankruptcy in the United States, 2007: Results of a National Study,” by David U. Himmelstein, et al., in the American Journal of Medicine, August 2009
———
COSTLY BURDEN
More adults are spending large shares of income on out-of-pocket medical expenses, 2001-10. (See note.)
Percentage of adults ages 19-64 who spend 10 percent or more of household income annually on out-of-pocket costs and premiums (See note.)
2001 vs. 2005 vs. 2010
Total:
21 percent vs. 23 percent vs. 32 percent
Insured all year:
19 percent vs. 23 percent vs. 31 percent
Uninsured during year: 27 percent vs. 22 percent vs. 35 percent
(Note: Respondents who specified income level and private insurance premium/out-of-pocket costs for combined individual/family medical expenses.)
Source: The Commonwealth Fund Biennial Health Insurance Surveys (2001, 2005 and 2010)

By Anna Sommers and Peter J. Cunningham

More than one in five Americans were in families reporting problems paying medical bills in 2010—about the same proportion as in 2007,according to a new national study by the Center for Studying Health System Change (HSC).
Given the severe 2007-09 recession, the sluggish economic recovery and health care costs continuing to increase faster than incomes, it is somewhat surprising that the rate of medical bill problems did not increase between 2007 and 2010.
The steady rate of medical bill problems may be a byproduct of decreased use of medical care—both by people who lost jobs and health insurance during the recession and others who cut back on medical care in the face of uncertain economictimes. While problems paying medical bills stabilized in recent years, the proportion of Americans in families with medical bill problems remained significantly higher in 2010 compared with 2003—20.9 percent vs. 15.1 percent. And, in 2010, many people in families with problems paying medical bills continued to experience severe financial consequences, with about two-thirds reporting problems paying for other necessities and a quarter considering bankruptcy.

By ANNA WILDE MATHEWS

Call it the united state of health care.

Amid enormous pressure to cut costs, improve care and prepare for changes tied to the federal health-care overhaul, major players in the industry are staking out new ground, often blurring the lines between businesses that have traditionally been separate.

Hospitals are bulking up into huge systems, merging with one another and building extensive new doctor work forces. They are exploring insurance-like setups, including direct approaches to employers that cut out the health-plan middleman.

On the other side, insurers are buying health-care providers, or seeking to work with them on new cooperative deals and payment models that share the risks of health coverage. And employers are starting to take a far more active role in their workers’ care.

Such shifts have been gathering force for a while, but the economic downturn has accelerated the push for efficiency. The federal legislation, which creates new health-insurance marketplaces and requires most people to carry coverage, may unleash additional demand for health care once it fully takes effect in 2014. Even if the Supreme Court unwinds part of the law, the changes occurring now aren’t likely to stop because the pressure to reduce the price of health coverage won’t go away.

It Has All Been Tried Before, Experts Warn

“We’re seeing a marketplace reacting to an economic imperative,” says Michael O. Leavitt, a former U.S. Secretary of Health and Human Services who is now chairman of a health-information company. “The new delivery models are far more integrated.”

The trends have crystallized over the past year in a series of high-profile deals and quiet, under-the-radar developments. For a close look at what they mean, here are snapshots of five people—a doctor, a hospital CEO, an insurance-company official, a human-resources executive and a patient—on the front lines as much of the $2.6 trillion U.S. health-care industry tries to remake itself.

Their stories show where health care is trying to go. The picture wouldn’t be complete without a reminder of where it has been. Many of these same efforts were attempted in the 1990s, and they often failed. Experts caution that there are many signs the current flurry of activity could result in the same problems, with less margin for error in today’s unforgiving economic environment.

Getting the Doctors On Board

Ultimately, the success or failure of efforts to change the health-care system may hinge largely on doctors like Dan McCullough.

McCullough is on the front lines of efforts to increase preventive care and cut costs.
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As a family physician, Dr. McCullough, who works for a hospital system in Beverly, Mass., is on the front lines of efforts by health-care providers and insurers to boost preventive care and rein in costs. Hospitals and insurers are both rushing to employ and ally with primary-care doctors in all of their new schemes to blend their various functions and integrate the health-care system.

But doctors, the gatekeepers of the system, often react sharply to efforts to control their practice styles. A survey this spring of medical administrators and doctors by health-staffing firm AMN Healthcare found that doctor and staff cooperation was the most frequently cited “serious obstacle” to creating accountable-care organizations.

In Dr. McCullough’s case, around 28% of his pay for the fiscal year ended in September was tied to patient-satisfaction, quality and efficiency goals, a mix of his own results and those of the entire physician group affiliated with the hospital. The quality portion involves measures like patients’ blood-pressure control and preventive care like mammograms. The efficiency part is tied to statistics including how often doctors refer patients to specialists outside the system and how often their patients go to the emergency room. But much of the rest of Dr. McCullough’s pay is still tied to his productivity, a typical style of doctor compensation that parallels the traditional fee-for-service model.

Dr. McCullough’s current pay structure took effect last year, when he started working under a contract with the state’s biggest insurer, Blue Cross Blue Shield of Massachusetts, that enables providers to effectively earn more if they keep costs down and meet quality goals. Upping the ante, Dr. McCullough’s employer, Northeast Health System, ties an additional chunk of his pay to quality and patient-satisfaction measures.

Dr. McCullough, 44 years old, says he likes the incentives. It used to be true that “quality doesn’t pay the bills,” he says. Now he focuses more on closely tracking the care of patients with chronic conditions, including hiring a new case manager. He says the new payment method also makes him think twice about allowing some services or specialty care from doctors outside his hospital’s network. In the past, he “would just rubber-stamp the referral,” he says.”

Recently, he got a call from a doctor’s office because one of his patients had gone there seeking surgery for chronic heartburn. Dr. McCullough refused to sign off. Instead, he called the patient and asked him to come in for an appointment. After he prescribed a stronger heartburn medication, the man, who had seen the surgery advertised, decided he no longer needed the procedure.

Dr. McCullough, who has a master’s degree in medical ethics, says he doesn’t skimp on care that he believes will help patients. Indeed, many aren’t even aware that his compensation has changed. Sometimes, though, patients question his motives. One woman wanted an ovarian-cancer test because a friend of hers had suffered from the disease, but Dr. McCullough refused to order it. The patient was “a little miffed,” and she said “it’s because the insurance company doesn’t want to pay for it,” Dr. McCullough says. He responded that there was no evidence she needed it. Still, he says, such encounters are “not the highlight of my day.”

An older, recently widowed patient who kept going to the emergency room when he ran out of his asthma medication got a house call from Dr. McCullough, whose office then helped get the man into adult day care. The traditional fee-for-service model has no reward for that, he says. But “we got really aggressive with him not just because it’s the right thing to do, but because we were incentivized to do it.”

Mergers Help Hospital Bulk Up

Jim Taylor, the chief executive of the University of Louisville Hospital, says his institution’s future depends on an ambitious statewide merger with two other hospital systems. Now, he has to persuade others that he’s right.

In June, Mr. Taylor helped unveil a plan to merge with nearby competitor Jewish Hospital & St. Mary’s HealthCare and Saint Joseph Health System, an eight-hospital group based in Lexington, Ky., that is part of Catholic Health Initiatives of Englewood, Colo.

If the deal is approved by the state’s governor and the local Catholic archbishop, the nonprofit Catholic Health Initiatives will provide a $320 million infusion of cash and will hold 70% of the combined system. The merger would create Kentucky’s biggest hospital network, with 14 facilities stretched across the state and $2.5 billion in annual revenue. It would also account for 22% of the acute-care beds in Louisville and 13% of those statewide.

Mr. Taylor says the money, along with the better bond rating the merged combination will get because of Catholic Health’s backing, will provide a vital buttress for University Hospital. “We couldn’t grow, and our role was going to decline as we face revenue pressures” from declining government reimbursement, says Mr. Taylor, 64, a second-generation hospital executive.

Mr. Taylor says University is in the black now but can’t afford to buy advanced electronic medical records or upgrade and expand its main facility, built in 1980. University, which is the region’s only adult trauma center and main safety-net hospital, is routinely overcrowded, particularly its emergency department, a spokesman says. Over the years, executives have drawn up plans to build a new $150 million patient tower and spend $33 million to expand emergency capacity, among other options, but had to shelve them. Mr. Taylor and other executives say the merger will achieve savings when duplicated functions are consolidated.

Nonprofit hospitals had their slowest revenue growth in at least two decades last year, according to Moody’s Investors Service. The financial challenge is leading many to merge in hopes of cutting expenses and gaining leverage in negotiations with insurers. In the first three quarters of this year, there were 71 hospital mergers, compared with 53 at that point last year. The full number for 2010, 75, was already the highest since 2001.

Hospital deals can touch a nerve, because of the institutions’ central economic and emotional position in their communities. Often, the debate centers around whether a for-profit company based elsewhere will continue to provide charity care and meet other local needs.

In Mr. Taylor’s case, the controversy has mostly focused on whether University Hospital will be affected by Catholic care guidelines, which ban or restrict various reproductive procedures including abortion and sterilization. The buzz-saw of resistance has put Mr. Taylor in an unaccustomed spotlight after 15 years as the hospital’s CEO. A community forum on the deal drew more than 200 questions. There are also dueling lawsuits over whether University Hospital merger documents are covered under state public-records laws.

“I don’t think a hospital that belongs to the people of Kentucky should be merged and be dictated to by people who put restrictions on certain procedures,” says Rep. Tom Burch, a Democrat who chairs the health and welfare committee in the state’s House of Representatives. “It has hit a sore spot with people.”

Mr. Taylor says the merger won’t significantly affect service offerings at his hospital, which doesn’t currently provide elective abortions. University Hospital has made arrangements for women who want tubal ligations to get them at a different facility, he says.

The new network will have more than 3,000 doctors. Though University Hospital doesn’t employ its own physicians, the other two merger partners have significantly expanded their employed doctor staffs in recent years, including primary-care doctors, a common pattern in U.S. hospitals recently.

The new system will be able to integrate patients’ care and to take on the financial risk tied to overseeing groups of patients, says Paul Edgett III, a Catholic Health Initiatives senior vice president. It will look at “warranty”-style payments, he said, under which a set sum is paid for an episode of care, including any complications. Such setups, under which hospitals can sometimes lose money if costs run too high, move hospitals into a space that has largely been the purview of health insurers.

Mr. Taylor said that on its own, his hospital is “poorly positioned” to do such deals, because it’s “too small, too limited.”

An Insurer Partners With Hospitals

Negotiations between health insurers and hospitals typically focus on clashes over payment rates. Chris Day, an executive with Aetna Inc., is supposed to change that.

Mr. Day, 36, spearheads Aetna’s efforts to create new cooperative deals with health-care providers. The details vary, but the main idea is that Aetna and the provider try to work together to trim costs and track the quality of care. In the most ambitious cases, they are creating jointly marketed health plans that effectively blur the line between insurer and provider.

Instead of Aetna simply paying the hospital for services, the two exchange patient data and may share the risk of coverage, acting more like an integrated company. These plans aim to leverage the hospital’s local brand-name recognition and the insurer’s back-office know-how.

They also may be the insurer’s best shot at competing in many of the new state-based health-insurance marketplaces where some 24 million people are eventually expected to buy coverage. Chief Executive Mark Bertolini recently highlighted the new “HMOs on steroids” as a key Aetna initiative at an investor conference.

But after years of head-butting between the two industries, a warm-and-fuzzy partnership isn’t always an easy sell. “When I walk in that room, I’m seen as a health-plan person,” says Mr. Day, who estimates that he has met with more than 100 medical providers around the country. Sometimes he breaks the ice by referring to his own background, which includes running a sleep clinic and an early stint as a hospital data-entry clerk.

Aetna recently unveiled a jointly marketed health plan with Banner Health, a not-for-profit 23-hospital system based in Phoenix, Ariz., after more than a year of talks. At one point early on, Mr. Day had to keep some locally based Aetna executives out of key strategy meetings with Banner. After one of them raised the idea that Banner might need to grant some rate discounts, a Banner official suggested “we needed to find ways to keep the conversations strategic,” Mr. Day says.

On the other side, Chuck Lehn, vice president of managed care for Banner Health, says Mr. Day earned his trust by sharing closely held information, including certain details of how the insurer sets premiums. Aetna also agreed it wouldn’t build a guaranteed profit margin into providing administrative services for the new product, he says, though both sides will share its earnings.

An insurer forges partnerships with health providers that can blur their traditional roles.
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“We shared a lot more information than we normally would” with an insurer, including detailed cost and utilization data, Mr. Lehn says. “I remember thinking, ‘I’m putting my total trust and faith that they’re not going to use this’” against Banner to winch down rates.

The two sides zeroed in on areas where they could potentially shave costs and improve care, such as relatively high use of imaging scans by some Banner doctors, Mr. Lehn says.

During a different effort to strike a deal with a provider, Mr. Day’s talks broke down for months because a separate contract-rate negotiation between the hospital system and local Aetna executives got so contentious that details leaked to the local media. In another case, a mistrustful hospital executive demanded written pledges that his company’s patient information wouldn’t be used in setting the patients’ insurance rates.

Like other insurers, Aetna is making moves into the business of providing services to providers partly to prepare for another change tied to the federal overhaul law. It requires health plans to spend a set share of premium dollars on health-care expenses, which can crimp insurance profits.

An Employer Gets Into Health Care

A few years ago, Robert Jacobs, a human-resources executive at MasterBrand Cabinets, felt he was running out of options to blunt annual double-digit health-coverage price increases. Employees had already shouldered as much as they could bear, he felt. He had hit the limit of discounts from health providers. Wellness programs like free health-club memberships had shown little impact.

MasterBrand Cabinets ties its employee insurance contributions to their health risks. Pictured here, Robert Jacobs.
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Then Mr. Jacobs read a research report that said about three-quarters of health costs are linked to lifestyle-related conditions. That persuaded him to try a radical new tack: Last year, MasterBrand, which has some 7,000 U.S. employees, started tying their insurance-premium contributions to their health-risk factors. Those who score poorly on measures such as cholesterol, blood pressure, body-mass index and tobacco use pay more each week.

“We had to do something more,” Mr. Jacobs says. After wood and salaries, health care is the company’s third-biggest expense, and “I can’t pass that along to my customers in prices on kitchen cabinets.”

The program at MasterBrand, a unit of Fortune Brands Home & Security Inc., is an example of companies’ growing willingness to push workers toward better health, a role once left to health-care providers. MasterBrand, like others, offers the health tests right at the offices and factories where its employees work.

A survey this year by consulting firm Towers Watson and the National Business Group on Health found that 13% of U.S. employers are tying financial incentives to health outcomes like cholesterol-test results, and another 33% plan to do so. Forty-three percent of the biggest employers are taking an even more direct path into health care by offering onsite clinics, according to a survey by Mercer.

Some of these efforts are controversial. In a letter to federal regulators in March, groups including the American Heart Association, the American Diabetes Association and the American Cancer Society’s advocacy arm said such programs were backed by little evidence and risked discrimination against people based on their health.

Mr. Jacobs, a blunt-spoken 60-year-old who himself is managing elevated blood pressure, says he is giving employees accountability. “It’s almost like going to a risk-based insurance like automotive,” he says. “If you have a health risk you’re not managing, you’ll pay a little more.”

An employer provides health tests and gives workers incentives to do well on them.
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So far, MasterBrand hasn’t set very stringent standards, he says. Also, the most a worker has to pay extra based on test results is $10.50 a week, while a person with the best health indicators gets a $2-a-week discount.

The program is administered by Bravo Wellness LLC, a vendor that oversees an appeals process that is supposed to let workers opt out without penalty or aim for alternative goals if they have a medical condition that makes it impossible to achieve the targets. Those who choose not to participate without a medical excuse pay an extra $37.50 a week in premiums.

Around a half-dozen workers got urgent calls after they took the health tests, warning they were in imminent danger of heart attacks, Mr. Jacobs says, and a couple had heart-related surgery.

He also points to employees like Sandra Kaufman, 47, who works in shipping at a MasterBrand facility in Goshen, Ind. She says she initially thought the program was “an invasion of my privacy.” But she couldn’t afford the penalty for refusing to participate, so before it launched two summers ago, she went to a doctor for the first time in years. When she learned she had high blood pressure, elevated cholesterol and diabetes, Ms. Kaufman started dieting and exercising, and she says she has lost about 50 pounds.

Mr. Jacobs says he fielded complaints when the program was started. One man asked him angrily, “Why are you doing this to us?” The worker didn’t think the company should be imposing health standards. “That’s personal,” he said, according to Mr. Jacobs, who says he responded that MasterBrand had a stake as well, since it was paying around 80% of the cost of workers’ health coverage.

The worker is now a “willing participant” in the program, Mr. Jacobs says.

A Patient Gets Care From His Insurer

On a recent day, Louis E. Kauder Jr., an 86-year-old suffering from advanced diabetes, arrived at a storefront clinic in La Mirada, Calif., for his weekly checkup.

Nurse Eugenia Chang looked at his blood-sugar result and started quizzing him. What had he eaten? Mr. Kauder confessed to a dinner the night before of macaroni and cheese and chocolate chips. “Your sugar is a lot higher than normal,” she chided, urging him to avoid desserts and eat more protein.

Louis E. Kauder Jr., who has advanced diabetes, gets weekly checkups at a clinic run by Caremore Health Group, which takes an activist approach.
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Then she zeroed in on his toe, which had a small sore. Was he wearing the protective shoes the clinic provided? She painted the toe with a disinfectant and wrapped it in gauze.

Finally, she examined a gaping six-inch-long wound on Mr. Kauder’s left calf. That was improving, she said, and she would continue the daily home visits from a nurse to dress it.

Hospitals and doctors are increasingly promoting this type of health care – close, constant monitoring, with strong efforts to push preventive measures – as the best way to treat chronically sick patients.

But Mr. Kauder’s clinic is different: It’s owned by a health-insurance company, CareMore Health Group, that offers Medicare Advantage plans. CareMore says it can improve patients’ health and save money in the long run by taking an active hand in their care.

.It’s a bet that more insurers are making, hoping to trim costs and lock in some doctors in case the influx of newly insured consumers leads to a shortage. CareMore was bought in August for slightly less than $800 million by WellPoint Inc. The big insurer said it plans to more than double the number of “care centers” that CareMore operates and spread it across the country.

Last December, Humana Inc. spent $790 million for Concentra, an operator of urgent- and occupational-care clinics. And Humana late last month announced it would buy SeniorBridge, which focuses on care for complex chronic conditions.

UnitedHealth Group Inc.’s Optum health-services arm recently purchased the operations of Monarch HealthCare, an Irvine, Calif., association that includes some 2,300 doctors, the latest of several doctor groups in which the company has taken ownership stakes. Cigna Corp. announced in October that it would spend $3.8 billion to buy HealthSpring Inc., a Medicare Advantage carrier that works closely with doctors and owns some of its own clinics.

CareMore says the heavy upfront investment it makes in preventive care for patients like Mr. Kauder pays off because its members end up spending less time in the hospital than most traditional Medicare beneficiaries. They have fewer readmissions and lower rates of events like heart attacks, says the company’s chief medical officer, Ken Kim.

A hospital stay can run $3,000 or more a day, Dr. Kim says. Amputation of a limb for a patient with advanced diabetes like Mr. Kauder can cost about $16,000, he says, and CareMore’s amputation rate is about 60% lower than the average for traditional Medicare.

“We get to them at the front end” and keep medical conditions from worsening to catastrophic levels, he says. As a result, CareMore is more profitable than many rival Medicare plans, he adds.

Mr. Kauder started with CareMore last October. “They really take care of me,” he says. He doesn’t pay a premium for the CareMore Medicare Advantage plan, and he doesn’t have out-of-pocket fees to see CareMore staff, though he does pay charges for some other things, like certain medications.

His case illustrates many of the challenges of managing chronically ill patients. After repeated medication tweaks and sessions with a nutritionist, Mr. Kauder’s blood sugar level has improved, but it’s still not at CareMore’s target. The retired auto mechanic also has heart problems, and he had a bypass operation a few years ago.

A CareMore staffer asked a visiting wound-care nurse whether his home, where he lives alone, showed signs of neglect such as rotting food. On another occasion, when a visiting nurse spotted Mr. Kauder trying to clamber over a wall in his backyard, she informed clinic personnel. A case manager phoned Mr. Kauder to make sure he wasn’t showing signs of dementia and booked him for an immediate checkup.

Still, Mr. Kauder’s major leg lesion has lingered since February, a common circumstance for someone with advanced diabetes. It became infected, and his home-visit nurse started administering an intravenous antibiotic. In June, he ended up in the emergency room after he tripped and opened up the wound, which bled heavily. Doctors at the hospital urged him to consider amputating the limb below the knee.

“I said, no way,” says Mr. Kauder, whose mother lost a leg to diabetes. After a night in the hospital, where CareMore doctors visited him, he returned home. Since then, he hasn’t been in the hospital, and the wound has improved. He’s off the IV antibiotic. The clinic tracks the wound’s progress with weekly digital pictures.

Dr. Kim, the CareMore chief medical officer, who wasn’t personally involved in Mr. Kauder’s case, says the care almost certainly saved his leg.

Write to Anna Wilde Mathews at anna.mathews@wsj.com

Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved

By Alicia Gallegos,

American Medical News

Aetna Inc. has accused nine New Jersey doctors of charging excessive fees for out-of-network services. Four are countersuing, alleging that the insurer is guilty of fraudulent billing practices.

The lawsuits are the latest development in a debate among insurers and health care professionals over “usual, customary and reasonable” rates for out-of-network doctors.

Aetna sued the physicians between July and November 2010, claiming that they had charged “unconscionable” fees for services and threatened to balance-bill patients if not paid.

Cardiologist Benjamin Hannallah, MD, of Watchung, N.J., charged up to $48,980 for an inpatient consultation in 2009, an increase of more than $47,000 from his 2007 rate, according to one of the lawsuits. The average Medicare charge for an inpatient consultation is $358.12, according to 2010 data from the Centers for Medicare & Medicaid Services.

Cardiologist Karan Nejad, MD, of Hackensack, N.J., raised his fee for seeing critically ill hospital patients from $2,040 in 2007 to $15,000 in 2008, another lawsuit claims. The average charge for the first hour of a critical care visit is $520.76, according to CMS data.

Gynecologist-obstetrician Waleed Abdelghani, MD, of Hackensack, who assisted in two cesarean sections, allegedly charged $30,000 for each surgery, while in-network surgeons were paid about $2,000 for the same procedure, Aetna said. Standard pay for a surgeon assisting a C-section is $1,400, Aetna spokeswoman Cynthia Michener said.

“These were just outrageous bills,” she said. “We are hoping to develop some case law here that there is such a thing as an outrageous fee.”

The sued physicians treated patients at hospitals in Aetna’s network. The patients had no knowledge they were being treated by out-of-network doctors, Michener said.

Attorneys for the doctors denied Aetna’s allegations and maintained the fee rates were reasonable. Aetna has taken the charges out of context and made much of simple clerical errors, said Robert J. Conroy, attorney for Drs. Hannallah and Nejad.

“Their case is built on half-truths, innuendo and omissions of material facts,” he said.

Aetna is attempting to establish regulations on out-of-network fees through the courts because of its failure to do so legislatively, said George Frino, attorney for interventional cardiologist Deepak Srinivasan, MD, of Hackensack, one of the defendants.

“[Dr. Srinivasan] was shocked and appalled that an insurance carrier would claim fraudulent billing activities when, for years, his invoices were processed in due course, and no complaint was ever made by Aetna,” Frino said. “In our mind, this is a gross misuse and abuse of the judicial system.”

Between November 2010 and March, four physicians, including Dr. Srinivasan, countersued Aetna. They allege deceptive billing practices and racketeering, among other claims. Aetna denies the allegations and has asked a judge to dismiss the suits.

Most out-of-network physicians practice fair billing, Michener said. Only a handful take financial advantage of hospital patients, she said.

Aetna plans to review similar billing patterns in other states to identify doctors who are potentially billing excessively.

“Some doctors who used to be in-network realized they could go out-of-network and raise fees because they had a captive patient base in the hospital,” she said.

Billing system at odds

Insurers and physicians have fought in court elsewhere over acceptable UCR rates.

In 2000, the Litigation Center of the American Medical Association and State Medical Societies sued Aetna, UnitedHealth Group and several others over a database used to determine fees for out-of-network care. The Litigation Center said the system for years had been using flawed data to set the rates.

The suits triggered an investigation by Andrew Cuomo, then New York attorney general. In 2009, UnitedHealth Group reached a $350 million settlement.

As part of a separate settlement with Cuomo’s office, large health insurers operating in New York agreed to stop using the data. None of the companies that settled admitted wrongdoing. Cases against Aetna, Cigna and WellPoint are pending.

Ingenix, a subsidiary of UnitedHealth Group, which sold the database at the center of the Cuomo agreements, is now known as OptumInsight.

A database created by FAIR Health, an independent nonprofit, was launched in January. Database officials expect to send payments based on the new figures to physicians by the summer.

American Medical Association President Cecil B. Wilson, MD, said the AMA supports more transparency in the out-of-network billing system.

“The AMA does not condone excessive fees for medical care and encourages physicians and patients to discuss costs before medical services are provided,” he said.

Also named in Aetna’s lawsuits are: internist Magdy Wahba, MD, of Paterson, N.J.; neurological surgeons, David Estin, MD, Jonathan Lustgarten, MD, and Ty James Olson, MD, all of Ridgewood, N.J.; and obstetrician-gynecologist Azer Alizade, MD, of Hackensack, N.J. Aetna also listed several “John Does” in the suits to allow for more defendants if their involvement later becomes clear.

THE ASSOCIATED PRESS

TRENTON  — Health insurance carriers who serve individuals and small businesses in New Jersey may soon have to gain state approval before implementing rate increases.

These firms currently can set and increase rates just by filing the information with the state. But a measure planned by three state lawmakers would require that the firms gain approval for such actions from the state Department of Banking and Insurance.

It also would expand the jurisdiction of the state’s Division of Rate Counsel, which now has no say over health insurance rates, to create a watchdog for residents and small businesses.

“Residents deserve a watchdog, someone with the knowledge to advocate on their behalf when it comes to the complicated issue of rising health care premiums,” said Assemblyman Dan Benson, D-Hamilton Township (Mercer County), who said he will sponsor the measure with fellow Democrat Valerie Vainieri Huttle of Englewood.

Democratic Senate Majority Leader Barbara Buono plans to sponsor identical legislation, with both measures likely to be introduced by year’s end.

“This legislation will provide far greater transparency,” Benson said.

Ed Rogan, spokesman for the banking and insurance department, declined to comment on the proposal. As a matter of policy, the department does not discuss proposed or pending legislation.

Besides requiring the banking and insurance department commissioner to approve any rate increase, the proposed bill also would give the commissioner authority to reject proposed rate changes deemed discriminatory or excessive.

The commissioner and rate counsel would also have to jointly hold public hearings on any proposed premium increases for insurance contracts or policies in the Individual Health Coverage Program or New Jersey Small Employers Health Benefits Program market.

Information about premium increases, including an explanation of how carriers report and calculate health insurance premiums, also would have to be posted on the department’s website.

Currently, insurers in these plans are required to spend no more than 20 percent of the premiums paid on administrative expenses.

Consumer Reports: How to Haggle With Your Doctor or Hospital

YONKERS, NY — When we visit our doctors, we don’t typically think of ourselves as “consumers” or buyers of health care, but in these tough times, that is precisely the role a patient needs to play to avoid drowning in a sea of medical bills. What are the best strategies for haggling with your doctor or hospital? A new report in the October issue of Consumer Reports and online at www.ConsumerReportsHealth.org features advice from Consumer Reports’ medical expert and M.D., John Santa.

According to the latest Consumer Reports Index, which gauges the health of the economy from the consumer perspective, 16.3 percent of Americans are unable to afford medical bills.

“Americans are overwhelmed by health costs and many people simply can’t pay their bills, can’t afford their medications,” says John Santa, M.D., M.P.H., director of the Consumer Reports Health Ratings Center. “The last thing most patients want to do is haggle with their doctors, but a little bit of negotiating can go a long way. It’s also important to know that there are tremendous variations in health care costs—knowing this can help a consumer get a hand up and politely insist on the fairest possible price.”

Here’s Consumer Reports’ advice for three possible scenarios:

You’re healthy.The optimal time for patients to talk with their healthcare providers about costs is before any have been incurred. While doctors have a professional obligation to take a patient’s financial resources into account, patients should raise the issue with their doctors to let them know that costs are important to them. “For a variety of reasons, doctors are likely to suggest the most expensive options first. But you might be surprised by your doctor’s willingness to change course, for example prescribing fewer expensive brand name drugs or choosing watchful waiting over a costly diagnostic test,” says Santa.

The unexpected occurs. A patient lands in the hospital without the benefit of any planning and gets slammed with a huge bill, say $15,000 for a coronary angiogram, and insurance ends up covering only a fraction of the bill. Consumer Reports recommends these approaches to get the greatest reduction to their bill:

• Sit down with the doctor who ordered or performed the hospital services to find out how the hospital costs ran so high. Were all the services needed and reasonably priced? Consumers can judge for themselves by checking www.healthcarebluebook.com which lists the going rates for many medical services for free. Closely examine each bill to identify errors, which are common.
• Consumers should not assume the price on their bill is set in stone. Providers often discount rates substantially to insurers and others, so why shouldn’t a consumer ask for the same rate reduction? Consumers should dispute any charges they think their insurance company ought to cover.
• Patients should not pay their bill until they have exhausted all of their options, but they should make clear to the hospital’s billing department that reaching a resolution is important to them. They might consider making a discounted offer they think would be manageable within a set time period. Consumers can consult one of the reputable groups that, for a fee, can help reduce the size of medical bills, such as Medical Cost Advocate (www.medicalcostadvocate.com).

You’re having an elective surgery. This situation allows for more planning and research into the best procedure, doctor, hospital, drug or other option. “Use your time wisely to do the research because variations in health-care costs can be significant, and providers will gladly let you overpay for a service that you could get for less,” says Santa. Keep in mind the following advice:

• Consumers should shop around, talk to different providers, and bargain for what they think is a fair price.
• Consumers shouldn’t hesitate to ask for the price upfront and get it in writing. Request an itemized list of all potential charges.
• As with any purchase, consumers should beware of any offer that sounds too good to be true. If a provider suggests a shortcut, be wary and ask a lot of questions, and check out providers that are unfamiliar.