When Emergency Room Charges = Hospital Overcharges

February 18, 2012, 8:00AM. By Gordon Gibb

Providence, RIThe issue of emergency room charges may appear to be a symptom of all that is wrong with the current status quo in the American health care system. However, the observation does little to defray the frustration over emergency room costs, when determining the actual cost of a service is next to impossible.

Various reports have targeted the inequities between fees for service charged to Medicare and Medicaid—the health care insurer for those who lack their own resources—and those charged to more robust HMOs that represent the middle class and other private citizens.

Emergency room fees charged to patients who do not carry insurance of any kind, either due to lack of affordability, lack of qualification or lack of need (read, "independently wealthy") is another thing again.

It has been observed that hospitals taking a loss on a service according to a lower negotiated fee for one insurer (such as Medicare and Medicaid) will attempt to make up for the shortfall by charging higher fees to blue-chip insurers and private citizens.

Warren S. Hersch, writing in the January 31 issue of the National Underwriter, makes the point that a hospital is in many ways a business with profits in its sights. "As 85-plus million patients covered by Medicaid and Medicare receive care at below-market prices because of the huge negotiating power they wield with providers, doctors and hospitals have to make up for the losses elsewhere if they're to cover their costs," writes Hersch. "Result: They overcharge privately insured people like me for the same care. The more tests and procedures they administer, the more opportunities they have to overcharge."

Hersch recently found himself in a hospital emergency room for a suspected heart condition. Following four days of extensive testing, monitoring and re-testing, Hersch's arteries were found to be free of any blockages. The patient writes that he was at first stunned, then angry and with many questions: "What is my condition? And was it really necessary to put me through four days of tests, drug cocktails and high-tech procedures when perhaps simpler and less expensive means were available to ascertain the cause of the heart palpitation?"

Hersch goes on to say that in his view his four-day ordeal was driven by a combination of well-meaning doctors who apply their expertise for medical reasons, "but whose decisions are guided—however subtly—by larger market forces weighing on the profession."

Alleged hospital overcharging was also the driving force behind a record $5.3 million penalty required on the part of Rhode Island Hospital (RIH). According to the Providence Journal (2/14/12), the facility agreed to reimburse the feds $2.6 million in overcharges and $2.7 million in damages and penalties.

At issue is a procedure utilizing the Gamma Knife, which treats deep and usually inoperable tumors of the brain or malformations of the blood vessel through the use of high-intensity radiation. Federal regulators consider the treatment an outpatient procedure. However, the hospital routinely allowed patients to stay overnight, dramatically increasing costs to Medicaid and Medicare.

RIH, in its defense, indicated it was simply providing Medicare and Medicaid patients with the same level of care as that allowed and funded by private health insurers—although it was reported the latter stopped funding overnight accommodation in 2010. A spokesperson for the hospital also asserted that Medicare and Medicaid did, indeed, pay for overnight accommodation at one time—and that all overnight accommodations were facilitated at the behest of the patient's physician.

The doctor who headed the Gamma Knife program at RIH during the period under review is no longer at the hospital.

The hospital overcharging issue was investigated over a two-year period by the US Attorney's Office, the Office of Inspector General of the US Department of Health and Human Services, and the Federal Bureau of Investigation. The result of an investigation involving 260 Gamma Knife patients admitted overnight between January 1, 2004, and December 31, 2009, concluded that RIH had falsely claimed the accommodation was medically necessary.

In an era where "Dispute Medical Bill" is a common headline, the RIH payout is considered the largest civil-fraud settlement related to health care in Rhode Island. The hospital admits to no wrongdoing in the hospital charges dispute.