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Hospital Bill
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You owe $55,243.00 for
appendectomy*
*But HMOs only pay $2,500.00
Wall Street Journal 3/17/03
March 2006
Introduction
This report draws on data from the New York State Department of Health to calculate the
amount that hospitals in New York overcharge uninsured patients and other patients who are
unable to pay their full hospital bills. “Overcharges,” as used in this report, are the amounts that
the hospital charges greater than the reasonable cost of providing care, according to the
hospitals’ own reporting to the New York State Health Department.
Hospitals in New York and around the country establish a charge rate, comparable to a
list price, for hospital services. However, very few of a hospital’s patients ever pay the charge
rate. As a spokesperson for the American Hospital Association explained on the CBS news show
60 Minutes on Sunday March 5th, 2006, “Actually, what hospitals charge for a service is the
same for everybody, whether they have insurance or not. What’s confusing for everybody is that
what a person ends up paying in this country can be very different.”
Medicaid, Medicare, and most private insurance plans actually pay rates that are
significant discounts off the charge rate. Insurance companies negotiate the discount with
hospitals. Medicare pays hospitals at rates established under federal law and Medicaid pays rates
established under New York State law.
The only patients who are expected to pay the charge rate are uninsured patients and the
few patients who are covered by insurance plans that have not negotiated a hospital discount.
These patients are generally known as “self-pay” patients.
Hospitals in New York are required to report the total amounts they charge for inpatient
and outpatient care to the New York State Department of Health (DOH). Hospitals are also
required to report the reasonable cost of providing care for purposes of calculating Medicaid
rates. Using this information, DOH calculates a conversion factor for each hospital, which is the
ratio of cost to charges.
The Department of Health applies the individual hospital conversion ratio to that
hospital’s total BD&CC charges to calculate the actual cost to that hospital for providing
BD&CC. A complicated formula is then used to distribute the $847 million – the formula and
amount are set by legislation – from the BD&CC pool fund to the individual hospitals; the fund
does not cover the full cost of BD&CC for most hospitals.
This report uses the DOH data on BD&CC charges and costs to calculate the aggregate
amount that hospitals charge in excess of the actual cost of providing care to patients who are
uninsured or can’t afford to pay their bills. We call these amounts, ‘overcharges.’
Findings
The Public Policy and Education fund of New York (PPEF) analyzed the data reported by
210 hospitals throughout to the New York State Department of Health for 2003, the most recent
year for which data were available. Based on these data, there are a number of findings about
overcharges to self-pay patients in New York.
! On average, New York State hospitals charge self-pay patients 2.3 times more than the
cost of providing inpatient care. The cost of providing care is only 43% of the amount
charged for inpatient care.
! The inpatient overcharge rate varies dramatically among hospitals.
o Parkway Hospital, one of only two for-profit general hospitals reporting to the
Department of Health, had the highest overcharge rate for inpatient care, charging
patients 7.3 times the cost of providing care.
o 9 hospitals charged more than 4 times the cost of providing inpatient care.
1
NYCRR Title 10, Section 86-1.11(g)(1)(i)(a &b)
! There are substantial differences in overcharge rates by types of hospitals, using a DOH
classification2 – see Table 2.
o Hospitals that overcharge at the highest rate – 2.6 times the cost of inpatient care –
are non-profit hospitals that do not care for a disproportionate number of low-income
2
There are 5 types of hospitals:
• Voluntary SLIPA (Supplementary Low Income Patient Adjustment) are non-profit hospitals that see a
disproportionate number of Medicaid and low-income uninsured patients.
• Voluntary non-SLIPA hospitals are non-profit hospitals that see more low-income patients.
• Distressed hospitals are considered to be in very bad financial condition, often because of the large number
of low-income patients they serve.
• Rural hospitals are a group of hospitals in rural areas.
• Major public hospitals are public entities controlled by the New York City Health and Hospitals
Corporation and state and county run hospitals.
! On average, New York hospitals charge self-pay patients 1.6 times more than the cost of
providing outpatient care. The cost of providing care is only 61% of the amount charged
for outpatient care.
! The outpatient overcharge rate varies dramatically among hospitals.
o 4 hospitals, including Parkway Hospital, one of only two for-profit general hospitals
in New York, charged 4 times the cost of providing outpatient care.
o 15 hospitals charged more than 3 times the cost of providing outpatient care.
o 66 hospitals charged more than 2 times the cost of providing outpatient care.
o 141 hospitals charged 1.5 or more times the cost of providing outpatient care.
o On the other extreme, 13 hospitals charged less (2% to 28%) than the cost of
providing care and an additional 6 hospitals’ charges closely matched, within 10%,
the cost of providing outpatient care.
! There are big regional differences in overcharge rates – See Table 3.
o Hospitals in the Northeast region of the State have the highest overcharge rates for
outpatient care, 2.4 times.
o Hospitals in New York City had the lowest over charge rate, largely – as data below
show – due to the large number of public hospitals.
! There are also substantial differences in overcharge rates by types of hospitals, using
the DOH classification – see Table 4.
o Voluntary non-SLIPA and rural hospitals overcharge the most, followed by voluntary
SLIPA and distressed hospitals.
o Public hospitals only charge slightly more than the cost of actually providing care,
with their costs at 94% of the charge rate.
AMOUNT OF OVERCHARGES
The 210 hospitals in New York State collectively overcharged self-pay patients by $1.1
billion in 2003. That is the patients who were self-pay – patients who are uninsured or did not
have an insurance plan that has negotiated a discount with the hospital – were charged $1.1
billion more than the reasonable cost to the hospital of providing services.
! Of those aggregate overcharges:
Fourteen hospitals ranked in the top 50 for both their overcharge rate and the total
amount of overcharges. The list includes several of New York’s largest teaching hospitals that
have relatively high overcharge rates and a large number of beds: St. Luke’s Roosevelt, Beth
Israel; Staten Island University, Maimonides and Lenox Hill. The list also includes three smaller,
Biggest Burglars:
Hospitals Among Top 50 in Inpatient Overcharge Rate and Total Overcharges
Inpatient
Overcharge Total
Hospital Overcharges
Rate
Discussion
More than 5.6 million New Yorkers, one-out-of three people under the age of 65, did not
have health coverage for all or part of 2002-2003, according to a June 2004 report released by
Families USA. Most of these New Yorkers, 65%, went without health insurance for six months
or longer. According to a report from the National Institutes of Health, 18,000 Americans die
prematurely each year due to the lack of health insurance.
High medical bills have severe impact on individual and family finances. Medical debt is
the second most frequent cause of personal bankruptcies. Hospital billing practices exacerbate
any financial crisis facing New Yorkers. As this report demonstrates, hospitals in New York
State charge uninsured patients more than twice the hospitals’ cost of providing health care.
Low and moderate-income uninsured patients usually do not get discounts similar to the rates
paid by Medicaid, Medicare, or private insurance companies. In New York State, these
overcharges statewide amount to about $1 billion annually.
Some hospitals also engage in aggressive debt collection activities, routinely sending
uninsured patients vastly inflated bills, using collection agencies to hound patients for payments,
and taking steps such as garnishing wages or attaching bank accounts to secure payment. It is
these hospital billing and collection practices that are largely responsible for the fact that medical
costs are the second leading cause of personal bankruptcy.
Until recently, hospital associations nationally and in New York long maintained that
Medicare required them to bill the uninsured at the “full-charge” rate and try to collect the debt.
On February 19, 2004, then U.S. Secretary of Health and Human Services Tommy G. Thompson
sent a letter to the president of the American Hospital Association disagreeing with the hospital
associations’ interpretation of Medicare regulations by writing: “Nothing in the Medicare
program rules or regulations prohibit such discounts [for low-income patients].”
In response to negative publicity and a Congressional investigation into hospital billing
and collection practices, the American Hospital Association (AHA) issued voluntary guidelines
to its member hospitals in December 2003. The Healthcare Association of New York State
While the hospital associations’ guidelines are an acknowledgement of the need for
hospitals to do better, they are no substitute for legislation. Both the AHA and HANYS
guidelines themselves are weak, providing little in actual patient protections. In addition, since
they are voluntary – lacking the force of law or an enforcement mechanism – they do not
establish accountability for the use of public dollars.
Hospitals individually and collectively often tout the amount of “charity care” they
provide. The Preamble to the HANYS guidelines claims that New York hospitals provide
“almost $2 billion a year in uncompensated care.”3 It fails to explain if the dollar calculation is
based on the full charge rate or the lower, actual cost of care. There is no mention of federal and
state governments’ provision of significant amounts of taxpayers’ dollars to hospitals every year
to offset some of these costs. The federal government provides $22 billion a year to hospitals
nationwide and New York State provides $847 million a year to cover the costs of bad debt and
charity care.
The hospitals also fail to mention the dollar value of the significant exemptions they
receive for property, school, and sales taxes. These exemptions are taxpayer funding for
hospitals to provide community benefits. Under New York State and Federal laws, hospitals
may and do include a wide array of activities under the headings “uncompensated care,” “charity
care,” and/or “community benefits.” The various activities do, in fact, benefit the community but
most hospitals fail to state clearly that care for those unable to pay is only a portion of the total
dollar amount they report to the public. At least one hospital was more forthcoming; it reported
that “care for the poor” in 2003 accounted for about a third, $8 million, of its “nearly $25 million
in community benefits.” The other two-thirds, $17 million, covered “under-reimbursement by
Medicare and Medicaid, free lectures and health screenings in the community, and the value of
volunteer labor.”4
The Nassau County Department of Health reports that total charges for charity care
provided by the 12 hospitals in the county in 2003 were $68.5 million dollars. In contrast, the
reported cost of that care was actually one-third lower, $45.3 million.5 There was significant
variation from hospital to hospital in the ratio of charges to cost: one hospital reported charges
3
Ibid.
4
St. Peter’s Hospital. 2004. “Celebrating 135 Years of Caring.” Supplement to the Times Union. Albany, New
York. November 1, 2004. p.21.
5
Nassau County Department of Health. 2004. Fiscal Year 2003 Nassau County Hospital Charity Care Report. Nassau
County, NY. October 2004. Table 2.
http://www.nassaucountyny.gov/official/resources/file/eb00094f5cd4681/CharityCareFY2003Report_10-25-04.pdf
Long before the voluntary guidelines or HHS letter, some states had enacted laws and
regulations that require hospitals to provide discounts to patients based on financial need. Two
of New York’s neighbors, Massachusetts and New Jersey, require hospitals to comply with
statewide eligibility criteria, screening and application process, reporting requirements, and a
payment mechanism for charity care. But New York State, which provides hospitals with $847
million a year to compensate hospitals for unpaid bills, has no such requirements.
In both March 2005 and March 2006, the NYS Assembly passed three bills by wide bi-
partisan votes (only 10 or 11 negative votes out of 150 Assembly members) – on legislative
proposals that would establish statewide standards for providing financial assistance to patients.
The package of three bills introduced by the chairs of the Assembly Insurance and Health
Committees, Alexander “Pete” Grannis (D-Manhattan) and Richard Gottfried (D- Manhattan)
would: (1) set statewide eligibility standards; (2) establish a statewide discounted rate for those
with incomes under 200% of the federal poverty level and require sliding scale discounts for
patients under 400% of poverty; (3) standardize the application process; (4) define covered
services; (5) forbid egregious billing and debt collection practices; (6) specify public disclosure
on how taxpayers’ funds were used; (7) require notices to the public about available financial
aid; (8) instruct hospitals to bill low to moderate-income uninsured patients at the discounted rate
paid by Medicare or other insurers; and (9) create an independent appeals process.
The Governor’s 2005 HCRA proposal included some new procedural requirements for
hospitals to qualify for funds from the BD&CC fund pools, procedures. The Governor included
similar proposals in his 2006-2007 budget. His Health Commissioner, Antonia Novello, also
pledged to advocate enactment of financial assistance protections after news stories reported the
death of a young man who was denied treatment due to the lack of health coverage. The NYS
Senate included the Governor’s proposal in its March 2006 budget resolution.
The Public Policy and Education Fund conducted surveys of 19 hospitals in four upstate
cities in 2005 - 2006 to see whether the hospitals are meeting the standards set forth in the
legislation passed by the Assembly. With regard to the specific issue addressed in this study,
whether hospitals provide discounts to self-pay patients, our surveys found seven hospitals
(37%) that meet the standards set forth in the Assembly legislation: providing free care (other
than small co-payments) to patients who earn up to 200% of the federal poverty level and sliding
The data presented in this report demonstrate that hospitals routinely charge uninsured
New Yorkers more than twice the cost of providing care. These findings underscore the urgency
for the Governor and State Senate to join the Assembly to enact strong consumer financial
assistance protections for uninsured New Yorkers and other New York hospital patients who are
unable to pay their hospital bills.
.
6
A family of four earns $39,900 at 200% of the FPL and $79,800 at 400% of FPL. An individual earns $20,100 at
200% of FPL and $40,200 at 400% of FPL.
7
The cities were Rochester; Utica; Syracuse and Buffalo. The hospitals that were in full compliance were Faxton-
St.Luke’s in Utica; St. Joseph’s in Syracuse; and five hospitals run by Kaleida in Buffalo. In addition: Highland in
Rochester, Community General in Syracuse and St. Elizabeth’s in Utica provided a full discount up to 200% of FPL;
Parkridge in Rochester and Crouse in Syracuse provided a sliding discount up to 400% of FPL.
© 2006 Public Policy and Education Fund of New York, 94 Central Avenue,
Albany, New York 12206; 518-465-4600. http://www.citizenactionny.org/.
Support for the Public Policy and Education Fund’s research on health
coverage issues comes from the Robert Sterling Clark Foundation.