Hospitals to Underinsured: Pay Upfront

Includes: THC, UNH
by: Michael Steinberg

The Wall Street Journal's “Cash Before Chemo: Hospitals Get Tough” reports hospitals are demanding large upfront payments from the uninsured and underinsured if they have any income, assets; or if they can beg, borrow, or steal the money. Both the nonprofit M.D. Anderson Cancer Center in Houston and for-profit Tenet (NYSE:THC) and HCA hospitals chains were cited. Not only are these hospitals demanding large payments before even starting a course of treatment, but they are also sustainably inflating their rates.

The Journal example is a 52 year old early retiree who purchased a United Healthcare (NYSE:UNH) policy through AARP. The policy has a maximum benefit of $37,000, less than 30% of the cancer patient’s estimated cost of treatment. The M.D. Anderson hospital demanded $45,000 just for a diagnosis, and then an additional $60,000 before any treatment would start. Because Anderson did not accept the United policy, it would not let the patient pay United’s negotiated rates. M.D. Anderson hospital charged her full retail.

Hospitals are required by law to provide emergency care in life threatening situations. They differentiate between a life threatening heart attack and long-term care for cancer. The cancer patient in the example was not at risk of dying on the exact day she appeared for treatment.

The hospitals have greatly improved their collections with the pay upfront policies, and the nonprofits are generating large profits for their executives. M.D. Anderson justifies discounting prices for insurers because insurers provide volume and are less risky than individuals.

United reimbursed its policy holder $38,478.36. But United did not explain why she was not entitled to its negotiated hospital rates, at least for the first $37,000 in charges. If the M.D. Anderson hospital charged United directly (at negotiated rates) for the first $37,000, she would have gotten much more value from her insurance coverage.

Apparently, the “free marketeers” mantra that no one goes without care in the US is flawed. The talk about the open door emergency room is of limited value. People with any assets can lose everything, even with health insurance. I wrote in "United Healthcare: Beyond the Numbers" that United is seeing its Medicare policy holders have delayed treatments prior to becoming 65. United Healthcare cited the economics of deferred care in its conference call.

The Wall Street Journal presents an interesting sense of balance in healthcare coverage. The Journal provides the best coverage of the difficulties faced by the self-employed, early retirees, and others without benefits in acquiring adequate health insurance. I have not seen any other newspaper publish as many warnings to the potential self-employed and early retirees about medical underwriting.

At the same time, almost every editorial touts the dangers of healthcare reform. Typical topics include how guaranteed issue will raise everybody else’s premiums and how the Canadian system has long wait times for elective surgery. By definition elective means non-emergency. No reports of patients dying at the hospital doorstep have been published. Keep in mind that most US insurers do not cover elective surgery anyway!

Note: The Wall Street Journal print edition titles the same article “Hospitals Demand Cash Upfront From Patients.” The article is on page one, below the fold.