The Dallas Morning News
DALLAS - Uninsured and diagnosed with liver cirrhosis, Elaine Sawyer entered the Mayo Clinic in Jacksonville, Fla.
A month later, doctors determined a transplant wouldn't help. She and her husband, Dempsey Sawyer, returned home to McKinney, Texas, in June with a terminal diagnosis and a hospital bill for $225,000.
Had Mrs. Sawyer, 63, had health coverage, her family might have been responsible for a modest co-payment and an insurance company would have paid a discounted price - perhaps tens of thousands of dollars.
"I've talked to some medical people and they said some of those charges are ridiculous," said Mr. Sawyer, 69, a retired high-tech worker, who borrowed money to pay $190,000 of the bill.
Now, he has begun to explore ways to get some of the money back.
As the number of uninsured Americans continues to rise, a lot of people are questioning the fairness of prices charged to those who lack health coverage.
Hospitals typically bill uninsured patients at "sticker price," while charging insurers lower negotiated prices. Officials say they collect very little from the uninsured, and that they run financial-assistance programs.
Noted trial lawyer Richard Scruggs is suing 40 nonprofit hospital systems nationwide on behalf of uninsured plaintiffs, alleging they violated their favorable tax status by charging higher rates to the uninsured.
Scruggs and other consumer advocates say the uninsured should be given discounts similar to those offered to people covered under managed care or a government program such as Medicare or Medicaid.
Some hope the lawsuits could engender sweeping changes to hospitals' pricing models, affecting their profitability.
"Hospitals maintain their bottom line on the back of the uninsured," said K.B. Forbes, executive director Consejo de Latinos Unidos, a consumer group that has taken on for-profit hospitals' pricing policy.
About 43 million Americans have no health insurance, and 25 percent of Texas residents are uninsured, the highest rate in the nation.
Scruggs has sued two Texas hospital systems, Dallas-based Baylor Health Care System and East Texas Medical Center in Tyler.
Baylor has filed for a motion to dismiss. General counsel John Thomas defended the hospital system's pricing policy in an interview.
He denied Baylor engaged in practices that would violate its nonprofit status. In Texas, a hospital retains its nonprofit status by offering "charity care," whose cost is worth at least 4 percent of its net annual revenue.
Baylor provided about $190 million of charity care in fiscal 2003, including free care, discounts to uninsured patients, prevention work and medical education, Thomas said. Baylor had about $1.4 billion in revenue in 2003.
"Baylor has a very fair and reasonable policy with respect to charity care," Thomas said. "There's no basis for this lawsuit."
Focusing on standard charges, hospitals say, is pointless since they ultimately only collect such a miniscule percentage of them. Hospitals write off uncollected charges after a period of time.
"It comes down to what can patients afford to pay," said Mike Malone, a health care attorney for Vinson & Elkins, which is working with East Texas Medical Center in Tyler, Texas, in battling Scruggs' lawsuit. "(Hospitals) start with the number that they think is the fair market value, and to the extent that they don't get paid, they don't get paid."
Officials for the Mayo Clinic in Jacksonville weren't available for comment.
Hospitals typically have three sets of prices for their services - for Medicare/Medicaid members, managed care plan members and self-paying patients.
The government sets Medicare and Medicaid prices and they typically are lowest. The American Hospital Association says in 2002, Medicare paid 98 percent of total costs. The U.S. Center for Medicare and Medicaid Services says payments are adequate.
Forbes estimates Medicare pays about 1 percent above cost. That means Medicare pays $10,100 for a procedure that costs a hospital $10,000 to provide.
Those enrolled in private health plans benefit from discounts insurers negotiate locally from hospitals.
Forbes said managed care plans pay on average about 13 percent above cost, a figure backed up by a federal government report.
Meanwhile, hospitals' standard charges can often be about three to four times the cost. In other words, an uninsured patient would be sent a bill of about $30,000 to $40,000 for the same $10,000 procedure.
"Even if one out of ten uninsured patients decides to pay the full price, the hospital would be making more profit from him than it would from 10 Medicare patients," Forbes said.
Lisa McGiffert, a health analyst at Consumers Union, cautioned that using averages is "dangerous" because managed care rates change constantly. But she added: "It's clear that cost shifting has been going on."
Hospital officials say their pricing system, though complex, is viable. It helps ensure that hospitals can treat Medicare and Medicaid patients and still offer other expensive services, such as emergency rooms.
Standard charges are merely market prices that are initially offered to all payers, hospitals say, from which managed-care plans and the government "negotiate down."
"It's important to understand that a hospital charges patients the same amount regardless of the type of insurance," said Carmela Coyle, policy analyst with American Hospital Association.
Hospitals in Texas say they can't lower charges for the uninsured because state law prohibits them from knowingly charging more for services to individuals who have insurance.
The Texas Department of Insurance says this law doesn't apply to Medicare and Medicaid patients or the "medically indigent."
Many hospitals also say their so-called charity care programs are comprehensive.
Baylor's program calls for free care to those considered "financially indigent," or anyone below 200 percent of the federal poverty level. The federal poverty level for a family of four is $18,850 in 2003.
Patients who earn between 200 percent and 500 percent of the poverty level are eligible for discounts on a sliding scale if they are considered "medically indigent," Thomas said.
At admission, uninsured Baylor patients are asked to sign a form reminding them of their financial responsibility. They also must provide documents that prove their income, such as tax filings or W-2 forms.
Baylor says it doesn't place liens on its patients' homes or sue them to collect, as Scruggs asserts in his lawsuits.
Meanwhile, Mr. Sawyer spends his days caring for his wife. Laid off from his job as an engineer at Hitachi a year and a half ago, he might look for a part-time job to help repay loans taken out to pay the hospital bill.
He now regrets not extending his health coverage from Hitachi, which would have cost him $700 a month in premiums.
"Even the doctors (at Mayo) were reminding me of my financial responsibility," he said. "I guarantee you, I'm not sending any more money."
Mrs. Sawyer, now in hospice care at home, has shown signs of improvement since her return from Florida, he said.
(c) 2004, The Dallas Morning News. Distributed by Knight Ridder/Tribune News Service.