Hospitals to lower disputed charges

3 groups agree to cut costs for uninsured patients

By GUY BOULTON
gboulton@journalsentinel.com

Posted: Dec. 29, 2006

Three health care systems, including ProHealth Care Inc. in Waukesha, have reached agreements with the state Justice Department to end one of the most controversial practices of hospitals: charging uninsured patients often twice as much as what health plans pay for the same care.

By The Numbers

5% Patients without insurance will receive this discount added to the best discount given to a health plan, under the state's agreement with ProHealth Care

The agreements are to result in uninsured patients being charged rates more in line with what health plans pay.

Attorney General Peg Lautenschlager said she hoped the agreements, reached this week, become models for other hospitals.

Lautenschlager began focusing on the issue last year, when she filed complaints against what is now Wheaton Franciscan-St. Joseph and Wisconsin Heart Hospital for charging uninsured patients much higher prices than they charge insurance companies.

Her office later sent letters to health care systems in the state, asking about their billing practices.

In the past, most hospitals have billed uninsured patients at rates based on "charges" - the health care equivalent of list price. In contrast, health plans negotiate discounts with hospitals, and Medicare and Medicaid essentially dictate what they will pay.

The result has been that the uninsured - provided they don't qualify for charitable care - were the only ones who paid list price.

More generous policy

The widely criticized practice has drawn national attention in recent years. Congress, for instance, held hearings on the practice in 2003. It also led to lawsuits throughout the country, including several in the Milwaukee area, that alleged price-gouging of the uninsured by hospitals.

Under the agreement with ProHealth Care, which operates Waukesha Memorial Hospital and Oconomowoc Memorial Hospital, uninsured patients are to pay 5% less than the best discount given to a health plan.

ProHealth Care also agreed to provide at least some charitable care to uninsured patients with incomes up to 400% of the federal poverty level - about $66,400 for a family of three.

In a statement, ProHealth said the agreement entailed modest changes to two policies.

"These policies demonstrate our longstanding commitment to providing quality care to those without the resources to pay," spokeswoman Sandra Peterson said in the statement.

But the policy under the agreement with the department is considerably more generous than the one ProHealth put in place at the start of 2005.

Under that policy, ProHealth Care gave anyone without insurance a 15% discount. Patients qualifying for charitable care would receive larger discounts. On the other hand, those discounts were based on rates much higher than those paid by health plans.

This week, the attorney general's office also announced similar agreements with Janesville-based Mercy Health System Corp., which has medical centers in Beloit, Janesville, Lake Geneva and Whitewater; and with Mayo Health System, which has facilities in western Wisconsin.

Quiet moves to change

This year, Wheaton Franciscan Healthcare, the parent of St. Joseph hospital and Wisconsin Heart Hospital, reached an agreement with the attorney general's office in which the health care system agreed to charge uninsured patients rates similar to those paid by health plans. The attorney general in turn dropped the two complaints filed in 2005.

Other hospitals and health care systems have quietly moved on their own to change how they bill uninsured patients. They also have put in place policies to make it easier for people to qualify for charitable care.

In September, Froedtert & Community Health began giving automatic discounts of 20% to uninsured patients and an additional 20% if they prepay an estimated amount of the bill.

More than two years ago, Columbia St. Mary's adopted a similar policy, giving 20% discounts to uninsured patients and an additional 20% if the person pays the bill within 30 days.

The discounts for both health care systems apply to people who don't qualify for charitable care. Those policies can be complicated and vary from hospital to hospital.

In April 2004, the Wisconsin Hospital Association put out guidelines and recommended that its members look at their billing and collection practices.

George Quinn, senior vice president of the association, said most hospitals have changed their policies on how they bill the uninsured.

Quinn did not know whether most hospitals now bill uninsured patients at rates closer to what health plans pay. And he said some hospitals have asked the association for a more specific policy on how to bill the uninsured.

"In some cases, our members are ahead of us on this issue," Quinn said. "In other cases, our members are waiting for guidance from us."