Anthem Blue Cross Drops Cedars-Sinai, UCLA From Health Plan
Bob Herman
Becker Hospital Review
September 24, 2012
Anthem Blue Cross in California is shutting out two of the largest healthcare providers in the Los Angeles area — Cedars-Sinai Medical Center and UCLA Health System — from one of its health plans because the health systems are "too expensive," according to a Los Angeles Times report.
All physicians affiliated with Cedars-Sinai and UCLA will be eliminated from Anthem's Select health plan, effective Jan. 1, which is offered to roughly 60,000 employees and dependents in Los Angeles. The city said Anthem's plan would save $7.6 million in annual premiums. It is expected that roughly 2,200 city employees and family members will lose in-network access to their physicians, according to the report.
In response to the move, the health systems said their high costs are associated with their medical research and innovative treatments that "benefit the entire community," according to the report. Cedars-Sinai and UCLA also said Anthem's maneuver will only shift costs onto those who still receive care at the facilities.
Showing posts with label costs. Show all posts
Showing posts with label costs. Show all posts
Monday, November 19, 2012
Sunday, August 12, 2012
Inquiry into the spectacularly profitable HCA Hospital Chain cites unnecessary cardiac work
Hospital Chain Inquiry Cited Unnecessary Cardiac Work
By REED ABELSON and JULIE CRESWELL
New York Times
August 6, 2012
GRAPHIC: HCA’s Growing Profit
In the summer of 2010, a troubling letter reached the chief ethics officer of the hospital giant HCA, written by a former nurse at one of the company’s hospitals in Florida.
In a follow-up interview, the nurse said a doctor at the Lawnwood Regional Medical Center, in the small coastal city of Fort Pierce, had been performing heart procedures on patients who did not need them, putting their lives at risk.
“It bothered me,” the nurse, C. T. Tomlinson, said in a telephone interview. “I’m a registered nurse. I care about my patients.”
In less than two months, an internal investigation by HCA concluded the nurse was right.
“The allegations related to unnecessary procedures being performed in the cath lab are substantiated,” according to a confidential memo written by a company ethics officer, Stephen Johnson, and reviewed by The New York Times.
Mr. Tomlinson’s contract was not renewed, a move that Mr. Johnson said in the memo was in retaliation for his complaints.
But the nurse’s complaint was far from the only evidence that unnecessary — even dangerous — procedures were taking place at some HCA hospitals, driving up costs and increasing profits.
HCA, the largest for-profit hospital chain in the United States with 163 facilities, had uncovered evidence as far back as 2002 and as recently as late 2010 showing that some cardiologists at several of its hospitals in Florida were unable to justify many of the procedures they were performing. Those hospitals included the Cedars Medical Center in Miami, which the company no longer owns, and the Regional Medical Center Bayonet Point. In some cases, the doctors made misleading statements in medical records that made it appear the procedures were necessary, according to internal reports.
Questions about the necessity of medical procedures — especially in the realm of cardiology — are not uncommon. None of the internal documents reviewed calculate just how many such procedures there were or how many patients might have died or been injured as a result. But the documents suggest that the problems at HCA went beyond a rogue doctor or two.
At Lawnwood, where an invasive diagnostic test known as a cardiac catheterization is performed, about half the procedures, or 1,200, were determined to have been done on patients without significant heart disease, according to a confidential 2010 review. HCA countered recently with a different analysis, saying the percentage of patients without disease was much lower and in keeping with national averages.
At Bayonet Point, a 44-year-old man who arrived at the emergency room complaining of chest pain suffered a punctured blood vessel and a near-fatal irregular heartbeat after a doctor performed a procedure that an outside expert later suggested might have been unnecessary, documents show. The man had to be revived. “They shocked him twice and got him back,” according to the testimony of Dr. Aaron Kugelmass in a medical hearing on the case.
In another incident, an outside expert described how a woman with no significant heart disease went into cardiac arrest after a vessel was cut when a Bayonet Point cardiologist inserted a stent, a meshlike device that opens coronary arteries. She remained hospitalized for several days, according to a person who has reviewed internal reports...
In a recent statement, HCA declined to provide evidence that it had alerted Medicare, state Medicaid or private insurers of its findings, or reimbursed them for any of the procedures that the company later deemed unnecessary, as required by law...
Some doctors accused in the reviews of performing unnecessary procedures are still practicing at HCA hospitals...
A Giant Hospital Chain Is Blazing a Profit Trail
By JULIE CRESWELL and REED ABELSON
August 14, 2012
During the Great Recession, when many hospitals across the country were nearly brought to their knees by growing numbers of uninsured patients, one hospital system not only survived — it thrived.
In fact, profits at the health care industry giant HCA, which controls 163 hospitals from New Hampshire to California, have soared, far outpacing those of most of its competitors.
The big winners have been three private equity firms — including Bain Capital, co-founded by Mitt Romney, the Republican presidential candidate — that bought HCA in late 2006.
HCA’s robust profit growth has raised the value of the firms’ holdings to nearly three and a half times their initial investment in the $33 billion deal.
The financial performance has been so impressive that HCA has become a model for the industry. Its success inspired 35 buyouts of hospitals or chains of facilities in the last two and a half years by private equity firms eager to repeat that windfall.
HCA’s emergence as a powerful leader in the hospital industry is all the more remarkable because only a decade ago the company was badly shaken by a wide-ranging Medicare fraud investigation that it eventually settled for more than $1.7 billion.
Among the secrets to HCA’s success: It figured out how to get more revenue from private insurance companies, patients and Medicare by billing much more aggressively for its services than ever before; it found ways to reduce emergency room overcrowding and expenses; and it experimented with new ways to reduce the cost of its medical staff, a move that sometimes led to conflicts with doctors and nurses over concerns about patient care.
In late 2008, for instance, HCA changed the billing codes it assigned to sick and injured patients who came into the emergency rooms. Almost overnight, the numbers of patients who HCA said needed more care, which would be paid for at significantly higher levels by Medicare, surged.
HCA, which had lagged the industry for those high-paying categories, jumped ahead of its competitors and was reimbursed accordingly. The change, which HCA’s executives said better reflected the service being provided, increased operating earnings by nearly $100 million in the first quarter of 2009.
To some, HCA successfully pushed the envelope in its interpretation of existing Medicare rules. “If HCA can do it, why can’t we?” asked a hospital consulting firm, the Advisory Board Company, in a presentation to its clients.
In one instance, HCA executives said a private insurer, which it declined to name, questioned the new billing system, forcing it to return some of the money it had collected.
The hospital giant also adopted a policy meant to address an issue that bedevils hospitals nationwide — reducing costs and overcrowding in its emergency rooms. For years, the hospital emergency room has been used by the uninsured as a de facto doctor’s office — a place for even the most minor of ailments. But emergency care is expensive and has become increasingly burdensome to hospitals in the last decade because of the rising number of uninsured patients.
HCA decided not to treat patients who came in with nonurgent conditions, like a cold or the flu or even a sprained wrist, unless those patients paid in advance. In a recent statement, HCA said that of the six million patients treated in its emergency rooms last year, 80,000, or about 1.3 percent, “ chose to seek alternative care options.”
“Many E.R.’s in America, particularly in densely populated urban areas where most HCA-affiliated facilities are located, have adopted a variety of systems to determine whether a patient in fact needs emergency care,” the statement said. “About half our hospitals have done so. Typically, our affiliated hospitals have two caregivers — usually a triage nurse and a physician — make that determination. It should be noted that other non-HCA affiliated hospitals are using similar processes to address E.R. issues.”
As HCA’s profits and influence grew, strains arose with doctors and nurses over whether the chain’s pursuit of profit may have, at times, come at the expense of patient care.
HCA had put in place a flexible staffing system that allowed it to estimate the number of patients it would have each day in its hospitals and alter the number of nurses it needed accordingly.
Several nurses interviewed said they were concerned that the system sometimes had led to inadequate staffing in important areas like critical care. In one measure of adequate staffing — the prevalence of bedsores in patients bedridden for long periods of time — HCA clearly struggled. Some of its hospitals fended off lawsuits over the problem in recent years, and were admonished by regulators over staffing issues more than once.
‘Through the Roof’
Many doctors interviewed at various HCA facilities said they had felt increased pressure to focus on profits under the private equity ownership. “Their profits are going through the roof, but, unfortunately, it’s occurring at the expense of patients,” said Dr. Abraham Awwad, a kidney specialist in St. Petersburg, Fla., whose complaints over the safety of the dialysis programs at two HCA-owned hospitals prompted state investigations.
One facility was fined $8,000 in 2008 and $14,000 last year for delaying the start of dialysis in patients, not administering physician-prescribed drugs and not documenting whether ordered tests had been performed.
Claiming he provided poor care, the other hospital did not renew Dr. Awwad’s privileges. Dr. Awwad is suing to have them reinstated. HCA declined to comment. HCA says it stands by its procedures, billing practices and level of care...
By REED ABELSON and JULIE CRESWELL
New York Times
August 6, 2012
GRAPHIC: HCA’s Growing Profit
In the summer of 2010, a troubling letter reached the chief ethics officer of the hospital giant HCA, written by a former nurse at one of the company’s hospitals in Florida.
In a follow-up interview, the nurse said a doctor at the Lawnwood Regional Medical Center, in the small coastal city of Fort Pierce, had been performing heart procedures on patients who did not need them, putting their lives at risk.
“It bothered me,” the nurse, C. T. Tomlinson, said in a telephone interview. “I’m a registered nurse. I care about my patients.”
In less than two months, an internal investigation by HCA concluded the nurse was right.
“The allegations related to unnecessary procedures being performed in the cath lab are substantiated,” according to a confidential memo written by a company ethics officer, Stephen Johnson, and reviewed by The New York Times.
Mr. Tomlinson’s contract was not renewed, a move that Mr. Johnson said in the memo was in retaliation for his complaints.
But the nurse’s complaint was far from the only evidence that unnecessary — even dangerous — procedures were taking place at some HCA hospitals, driving up costs and increasing profits.
HCA, the largest for-profit hospital chain in the United States with 163 facilities, had uncovered evidence as far back as 2002 and as recently as late 2010 showing that some cardiologists at several of its hospitals in Florida were unable to justify many of the procedures they were performing. Those hospitals included the Cedars Medical Center in Miami, which the company no longer owns, and the Regional Medical Center Bayonet Point. In some cases, the doctors made misleading statements in medical records that made it appear the procedures were necessary, according to internal reports.
Questions about the necessity of medical procedures — especially in the realm of cardiology — are not uncommon. None of the internal documents reviewed calculate just how many such procedures there were or how many patients might have died or been injured as a result. But the documents suggest that the problems at HCA went beyond a rogue doctor or two.
At Lawnwood, where an invasive diagnostic test known as a cardiac catheterization is performed, about half the procedures, or 1,200, were determined to have been done on patients without significant heart disease, according to a confidential 2010 review. HCA countered recently with a different analysis, saying the percentage of patients without disease was much lower and in keeping with national averages.
At Bayonet Point, a 44-year-old man who arrived at the emergency room complaining of chest pain suffered a punctured blood vessel and a near-fatal irregular heartbeat after a doctor performed a procedure that an outside expert later suggested might have been unnecessary, documents show. The man had to be revived. “They shocked him twice and got him back,” according to the testimony of Dr. Aaron Kugelmass in a medical hearing on the case.
In another incident, an outside expert described how a woman with no significant heart disease went into cardiac arrest after a vessel was cut when a Bayonet Point cardiologist inserted a stent, a meshlike device that opens coronary arteries. She remained hospitalized for several days, according to a person who has reviewed internal reports...
In a recent statement, HCA declined to provide evidence that it had alerted Medicare, state Medicaid or private insurers of its findings, or reimbursed them for any of the procedures that the company later deemed unnecessary, as required by law...
Some doctors accused in the reviews of performing unnecessary procedures are still practicing at HCA hospitals...
A Giant Hospital Chain Is Blazing a Profit Trail
By JULIE CRESWELL and REED ABELSON
August 14, 2012
During the Great Recession, when many hospitals across the country were nearly brought to their knees by growing numbers of uninsured patients, one hospital system not only survived — it thrived.
In fact, profits at the health care industry giant HCA, which controls 163 hospitals from New Hampshire to California, have soared, far outpacing those of most of its competitors.
The big winners have been three private equity firms — including Bain Capital, co-founded by Mitt Romney, the Republican presidential candidate — that bought HCA in late 2006.
HCA’s robust profit growth has raised the value of the firms’ holdings to nearly three and a half times their initial investment in the $33 billion deal.
The financial performance has been so impressive that HCA has become a model for the industry. Its success inspired 35 buyouts of hospitals or chains of facilities in the last two and a half years by private equity firms eager to repeat that windfall.
HCA’s emergence as a powerful leader in the hospital industry is all the more remarkable because only a decade ago the company was badly shaken by a wide-ranging Medicare fraud investigation that it eventually settled for more than $1.7 billion.
Among the secrets to HCA’s success: It figured out how to get more revenue from private insurance companies, patients and Medicare by billing much more aggressively for its services than ever before; it found ways to reduce emergency room overcrowding and expenses; and it experimented with new ways to reduce the cost of its medical staff, a move that sometimes led to conflicts with doctors and nurses over concerns about patient care.
In late 2008, for instance, HCA changed the billing codes it assigned to sick and injured patients who came into the emergency rooms. Almost overnight, the numbers of patients who HCA said needed more care, which would be paid for at significantly higher levels by Medicare, surged.
HCA, which had lagged the industry for those high-paying categories, jumped ahead of its competitors and was reimbursed accordingly. The change, which HCA’s executives said better reflected the service being provided, increased operating earnings by nearly $100 million in the first quarter of 2009.
To some, HCA successfully pushed the envelope in its interpretation of existing Medicare rules. “If HCA can do it, why can’t we?” asked a hospital consulting firm, the Advisory Board Company, in a presentation to its clients.
In one instance, HCA executives said a private insurer, which it declined to name, questioned the new billing system, forcing it to return some of the money it had collected.
The hospital giant also adopted a policy meant to address an issue that bedevils hospitals nationwide — reducing costs and overcrowding in its emergency rooms. For years, the hospital emergency room has been used by the uninsured as a de facto doctor’s office — a place for even the most minor of ailments. But emergency care is expensive and has become increasingly burdensome to hospitals in the last decade because of the rising number of uninsured patients.
HCA decided not to treat patients who came in with nonurgent conditions, like a cold or the flu or even a sprained wrist, unless those patients paid in advance. In a recent statement, HCA said that of the six million patients treated in its emergency rooms last year, 80,000, or about 1.3 percent, “ chose to seek alternative care options.”
“Many E.R.’s in America, particularly in densely populated urban areas where most HCA-affiliated facilities are located, have adopted a variety of systems to determine whether a patient in fact needs emergency care,” the statement said. “About half our hospitals have done so. Typically, our affiliated hospitals have two caregivers — usually a triage nurse and a physician — make that determination. It should be noted that other non-HCA affiliated hospitals are using similar processes to address E.R. issues.”
As HCA’s profits and influence grew, strains arose with doctors and nurses over whether the chain’s pursuit of profit may have, at times, come at the expense of patient care.
HCA had put in place a flexible staffing system that allowed it to estimate the number of patients it would have each day in its hospitals and alter the number of nurses it needed accordingly.
Several nurses interviewed said they were concerned that the system sometimes had led to inadequate staffing in important areas like critical care. In one measure of adequate staffing — the prevalence of bedsores in patients bedridden for long periods of time — HCA clearly struggled. Some of its hospitals fended off lawsuits over the problem in recent years, and were admonished by regulators over staffing issues more than once.
‘Through the Roof’
Many doctors interviewed at various HCA facilities said they had felt increased pressure to focus on profits under the private equity ownership. “Their profits are going through the roof, but, unfortunately, it’s occurring at the expense of patients,” said Dr. Abraham Awwad, a kidney specialist in St. Petersburg, Fla., whose complaints over the safety of the dialysis programs at two HCA-owned hospitals prompted state investigations.
One facility was fined $8,000 in 2008 and $14,000 last year for delaying the start of dialysis in patients, not administering physician-prescribed drugs and not documenting whether ordered tests had been performed.
Claiming he provided poor care, the other hospital did not renew Dr. Awwad’s privileges. Dr. Awwad is suing to have them reinstated. HCA declined to comment. HCA says it stands by its procedures, billing practices and level of care...
Sunday, April 29, 2012
In Hopeful Sign, Health Spending Is Flattening Out
By ANNIE LOWREY
The New York Times
April 28, 2012
The growth of health spending has slowed substantially in the last few years, surprising experts and offering some fuel for optimism about the federal government’s long-term fiscal performance.
Much of the slowdown is because of the recession, and thus not unexpected, health experts say. But some of it seems to be attributable to changing behavior by consumers and providers of health care — meaning that the lower rates of growth might persist even as the economy picks up.
Because Medicare and Medicaid are two of the largest contributors to the country’s long-term debts, slower growth in health costs could reduce the pressure for enormous spending cuts or tax increases.
In 2009 and 2010, total nationwide health care spending grew less than 4 percent per year, the slowest annual pace in more than five decades, according to the latest numbers from the Centers for Medicaid and Medicare Services. After years of taking up a growing share of economic activity, health spending held steady in 2010, at 17.9 percent of the gross domestic product.
The growth rate mostly slowed as millions of Americans lost insurance coverage along with their jobs. Worried about job security, others may have feared taking time off work for doctor’s visits or surgical procedures, or skipped nonurgent care when money was tight.
Still, the slowdown was sharper than health economists expected, and a broad, bipartisan range of academics, hospital administrators and policy experts has started to wonder if what had seemed impossible might be happening — if doctors and patients have begun to change their behavior in ways that bend the so-called cost curve.
If so, it was happening just as the new health care law was coming into force, and before the Supreme Court could weigh in on it or the voters could pronounce their own verdict at the polls.
“The tectonic plates might be beginning to shift,” said Karen Davis, the president of the Commonwealth Fund, a nonprofit research group in New York. “It’s hard to believe everything that’s been tried over the last decade to slow spending wouldn’t be making a difference.”
Experts were surprised, for instance, at a drop in spending on some hospitalized seniors — people enrolled in Medicare, whose coverage the recession should not affect. They also noted that some of the states where health care spending slowed most rapidly were states that were not hit particularly badly by the recession, suggesting that other factors were at play.
“The recession just doesn’t account for the numbers we’re seeing,” said David Cutler, a Harvard health economist and former adviser to President Obama. “I think there’s much more going on.”
The implications of a bend in the cost curve would be enormous. Policy makers on both sides of the aisle see rising health care costs as the central threat to household budgets and the country’s fiscal health. If the growth in Medicare were to come down to a rate of only 1 percentage point a year faster than the economy’s growth, the projected long-term deficit would fall by more than one-third.
The growth of health costs slowed in the 1990s as health maintenance organizations became more popular. That played a role in both gains in household income — less money on employer-provided health benefits means more money for raises — and in budget surpluses, economists argue.
Some experts caution that there remains too little data to determine whether the current slowdown will become permanent, or whether it is merely a blip caused by the economy’s weakness.
“If there’s something else going on, we don’t know what it is yet,” said Gail Wilensky, a health economist who headed Medicare and Medicaid during the administration of President George Bush. “The most honest thing to say is that, one, the reduction in use is greater than the recession predicts; two, we don’t understand why yet; and, three, you’d be foolhardy to say that we can understand it.”
She argued that the unusual decline in not just income but also wealth during the recession might be one factor cutting down on use of the health care system.
But many other health experts say that there is just enough data to start detecting trends — even if the numbers remain murky, and the vast complexity of the national health care market puts definitive answers out of reach.
Many experts — and the Medicare and Medicaid center itself — point to the explosion of high-deductible plans, in which consumers have lower premiums but pay more out of pocket, as one main factor. The share of employees enrolled in high-deductible plans surged to 13 percent in 2011 from 3 percent in 2006, according to Mercer Consulting.
That means thousands of consumers with an incentive to think twice about heading to the doctor. One study by the RAND Corporation found that health spending among people who shifted into a high-deductible plan dropped 14 percent — though the study also found that enrollees cut back on some care that tended to save money in the long run, like vaccinations.
A second factor is a dearth of expensive, novel drugs coming onto the market, experts said, as well as growing pressure to use generics. “There just aren’t as many blockbusters,” said Professor Cutler, the Harvard economist.
Finally, and most important, health economists point to a shift toward accountable care, in which providers are paid for the quality of care, not the quantity.
There are about 164 “accountable organizations” in the United States, according to research by Leavitt Partners. Hundreds of other insurers and health systems have enacted some of the features of accountable care, like assigning specially trained nurse practitioners to patients with multiple chronic conditions to make sure they take their medications and to prevent hospitalizations...
Tuesday, April 5, 2011
Hospitals and insurers may be illegally blocking competitors.
Health-care sector facing increased antitrust scrutiny
By Julie Appleby
Washington Post
April 4, 2011
Amid growing concern about rising health-care costs, the Justice Department is stepping up efforts against hospitals and insurers that it suspects are illegally blocking competitors.
Department officials are not talking, but a recent settlement the government reached with a Texas hospital system has antitrust experts buzzing.
In the first case of its kind since 1999, the department sued United Regional Health System in Wichita Falls for allegedly giving health insurers strong incentives not to do business with rival hospitals. That practice allowed United Regional to keep its monopoly, according to the lawsuit, while also becoming one of the most expensive hospitals in the state.
The hospital disputes some of the findings of the case but agreed late last month to a settlement requiring it to change how it contracts with private insurers.
Antitrust lawyer Matthew Cantor of the New York law firm Constantine Cannon, who was not connected with the case, said the court challenge shows that the Justice Department is “looking at ways in which dominant hospitals or conglomerations of medical practices are conspiring to increase medical costs.”
In the past two years, the department also has settled with a group of Idaho orthopedists over allegations that they conspired to drive up prices and stopped the two biggest Lansing, Mich., insurers from merging, citing “a likelihood of unilateral price increases.”
The Texas settlement comes on the heels of a department lawsuit filed in October against Blue Cross Blue Shield of Michigan over contracts that require hospitals to guarantee the lowest prices to the Blues plan. The department contends that the contracts improperly raise costs for other insurers and their customers. Blues plan administrators say the lawsuit is without merit and are fighting it.
The Wall Street Journal reported that the department has expanded its investigation of such contracts to other insurers, including CareFirst BlueCross BlueShield, which does business in Northern Virginia, Maryland and the District.
Even as they increase enforcement efforts, federal antitrust authorities are planning a more flexible response to select groups of doctors and hospitals that form accountable-care organizations, or ACOs, an experimental model of payment and care authorized by last year’s health law. But, at least initially, ACOs will compose only a tiny fraction of the health-care market; the type of actions that got the Texas hospital in trouble, for example, would remain illegal for ACOs.
Robert Leibenluft, former assistant director for health care in the Federal Trade Commission’s Bureau of Competition under President George W. Bush, sees a pattern in the lawsuits filed in Texas and Michigan: “Increased scrutiny by the DOJ of both health plans and providers who have market power.” He specializes in antitrust law at the D.C. firm Hogan Lovells.
The department’s actions coincide with increasing concern by policy experts over the impact of a decade of consolidation among hospitals, insurers and doctor groups. Some mergers have led to sharp increases in health-care costs, the FTC has found in a number of studies, although not all do.
Justice officials would not comment on the Texas case or others they are working on.
At a conference last May in Arlington, Justice antitrust chief Christine Varney promised an aggressive approach to challenging health-sector mergers and contracts used to keep out new rivals.
The success of the health-care overhaul law approved by Congress, she said, partly depends on “healthy competitive markets free from undue concentration and anti-competitive behavior.”
While watching for those problems, Varney told lawyers at that conference that the department will try not to impede more health-sector partnerships to improve quality and contain costs. Some policy experts say the new emphasis on coordination — encouraged by the health law — could also spur more market consolidation among medical providers in some markets.
“The key,” she said, “is whether we can gain those benefits without sacrificing meaningful competition.”
The Texas case revolved around contracts United Regional offered to insurers starting in 1998, according to the complaint and settlement agreement filed in U.S. District Court on Feb. 25 by the Justice Department and Texas attorney general’s office. The contracts offered insurers steep discounts, but only if they agreed not to contract with other hospitals or outpatient facilities in the area.
At the time, 369-bed United Regional was the only hospital in Wichita Falls, population 100,000. But a group of doctors was working to build a far smaller rival facility, said surgeon Jerry Myers, who led the effort and is now chief executive of the 41-bed Kell West Regional Hospital.
If insurers signed with a rival medical center, the discounts would be dropped and they would have to pay close to full charges.
Such pricing practices aren’t “just about charging higher prices generally, it’s strategically charging prices in a way specifically designed to keep out competition,” said Tim L. Greaney, an antitrust expert and director of the Center for Health Law Studies at St. Louis University.
Within three months of Kell’s opening, United Regional had signed the now-disputed contracts with five health insurers and by 2010 had eight insurers, according to the federal lawsuit. The only insurer in the region that didn’t sign was the largest, Blue Cross Blue Shield of Texas.
Even with the discounts offered to insurers, United Regional became expensive, the complaint alleges. An analysis by a major insurer cited in court documents concluded that payments from insurers for hospital care at United Regional were at least 50 percent higher than average amounts paid in seven other comparable Texas cities. For services offered at both United and Kell, the big hospital’s average per-day rate for care was 70 percent higher.
The hospital disagrees with the way the Justice Department applied the law. “We believe then and now that these contracts were appropriate and legal,” United Regional chief executive Phyllis Cowling said.
Cowling also disputes the department’s cost findings. “We are paid a little bit more by insurers, but I know it’s not 70 percent,” she said. “It’s probably some 10 percent or 15 percent more, based on our numbers.”
The hospital is under orders to remove the exclusionary contract provisions. It will continue to honor the deeper discounts offered to its insurers, even if they sign deals with Kell, Cowling said.
Kaiser Health News (www.kaiserhealthnews.org) is an editorially independent news service of the Kaiser Family Foundation, a nonpartisan health-care policy organization that is not affiliated with Kaiser Permanente.
By Julie Appleby
Washington Post
April 4, 2011
Amid growing concern about rising health-care costs, the Justice Department is stepping up efforts against hospitals and insurers that it suspects are illegally blocking competitors.
Department officials are not talking, but a recent settlement the government reached with a Texas hospital system has antitrust experts buzzing.
In the first case of its kind since 1999, the department sued United Regional Health System in Wichita Falls for allegedly giving health insurers strong incentives not to do business with rival hospitals. That practice allowed United Regional to keep its monopoly, according to the lawsuit, while also becoming one of the most expensive hospitals in the state.
The hospital disputes some of the findings of the case but agreed late last month to a settlement requiring it to change how it contracts with private insurers.
Antitrust lawyer Matthew Cantor of the New York law firm Constantine Cannon, who was not connected with the case, said the court challenge shows that the Justice Department is “looking at ways in which dominant hospitals or conglomerations of medical practices are conspiring to increase medical costs.”
In the past two years, the department also has settled with a group of Idaho orthopedists over allegations that they conspired to drive up prices and stopped the two biggest Lansing, Mich., insurers from merging, citing “a likelihood of unilateral price increases.”
The Texas settlement comes on the heels of a department lawsuit filed in October against Blue Cross Blue Shield of Michigan over contracts that require hospitals to guarantee the lowest prices to the Blues plan. The department contends that the contracts improperly raise costs for other insurers and their customers. Blues plan administrators say the lawsuit is without merit and are fighting it.
The Wall Street Journal reported that the department has expanded its investigation of such contracts to other insurers, including CareFirst BlueCross BlueShield, which does business in Northern Virginia, Maryland and the District.
Even as they increase enforcement efforts, federal antitrust authorities are planning a more flexible response to select groups of doctors and hospitals that form accountable-care organizations, or ACOs, an experimental model of payment and care authorized by last year’s health law. But, at least initially, ACOs will compose only a tiny fraction of the health-care market; the type of actions that got the Texas hospital in trouble, for example, would remain illegal for ACOs.
Robert Leibenluft, former assistant director for health care in the Federal Trade Commission’s Bureau of Competition under President George W. Bush, sees a pattern in the lawsuits filed in Texas and Michigan: “Increased scrutiny by the DOJ of both health plans and providers who have market power.” He specializes in antitrust law at the D.C. firm Hogan Lovells.
The department’s actions coincide with increasing concern by policy experts over the impact of a decade of consolidation among hospitals, insurers and doctor groups. Some mergers have led to sharp increases in health-care costs, the FTC has found in a number of studies, although not all do.
Justice officials would not comment on the Texas case or others they are working on.
At a conference last May in Arlington, Justice antitrust chief Christine Varney promised an aggressive approach to challenging health-sector mergers and contracts used to keep out new rivals.
The success of the health-care overhaul law approved by Congress, she said, partly depends on “healthy competitive markets free from undue concentration and anti-competitive behavior.”
While watching for those problems, Varney told lawyers at that conference that the department will try not to impede more health-sector partnerships to improve quality and contain costs. Some policy experts say the new emphasis on coordination — encouraged by the health law — could also spur more market consolidation among medical providers in some markets.
“The key,” she said, “is whether we can gain those benefits without sacrificing meaningful competition.”
The Texas case revolved around contracts United Regional offered to insurers starting in 1998, according to the complaint and settlement agreement filed in U.S. District Court on Feb. 25 by the Justice Department and Texas attorney general’s office. The contracts offered insurers steep discounts, but only if they agreed not to contract with other hospitals or outpatient facilities in the area.
At the time, 369-bed United Regional was the only hospital in Wichita Falls, population 100,000. But a group of doctors was working to build a far smaller rival facility, said surgeon Jerry Myers, who led the effort and is now chief executive of the 41-bed Kell West Regional Hospital.
If insurers signed with a rival medical center, the discounts would be dropped and they would have to pay close to full charges.
Such pricing practices aren’t “just about charging higher prices generally, it’s strategically charging prices in a way specifically designed to keep out competition,” said Tim L. Greaney, an antitrust expert and director of the Center for Health Law Studies at St. Louis University.
Within three months of Kell’s opening, United Regional had signed the now-disputed contracts with five health insurers and by 2010 had eight insurers, according to the federal lawsuit. The only insurer in the region that didn’t sign was the largest, Blue Cross Blue Shield of Texas.
Even with the discounts offered to insurers, United Regional became expensive, the complaint alleges. An analysis by a major insurer cited in court documents concluded that payments from insurers for hospital care at United Regional were at least 50 percent higher than average amounts paid in seven other comparable Texas cities. For services offered at both United and Kell, the big hospital’s average per-day rate for care was 70 percent higher.
The hospital disagrees with the way the Justice Department applied the law. “We believe then and now that these contracts were appropriate and legal,” United Regional chief executive Phyllis Cowling said.
Cowling also disputes the department’s cost findings. “We are paid a little bit more by insurers, but I know it’s not 70 percent,” she said. “It’s probably some 10 percent or 15 percent more, based on our numbers.”
The hospital is under orders to remove the exclusionary contract provisions. It will continue to honor the deeper discounts offered to its insurers, even if they sign deals with Kell, Cowling said.
Kaiser Health News (www.kaiserhealthnews.org) is an editorially independent news service of the Kaiser Family Foundation, a nonpartisan health-care policy organization that is not affiliated with Kaiser Permanente.
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