HFMA focus financial billing policies for the uninsured: what can hospitals expect from recent legal developments? Learn more in this discussion featuring Richard Scruggs, Joanne Judge, and Richard Clarke

Healthcare Financial Management, April, 2005 by Sarah Norland

In lawsuits across the country, hospitals are being accused of setting prices for the uninsured that are unfair and unreasonable and engaging in abusive collection tactics. Over the past year, 68 federal lawsuits of this nature have been filed by a group led by Richard Scruggs, Esq., an attorney who is best known for successfully suing the tobacco industry in the 1990s.

At many hospitals, the suits have presented an opportunity to revisit billing practices relating to the uninsured and underinsured and energize efforts to improve communications of policies that provide financial assistance to these patients. Those opposed to the litigation contend it does nothing to address the true source of the problem and only exacerbates burdens on an already strained public safety net.

In this issue of hfm, Scruggs; Joanne Judge, Esq., CPA, a partner with the Pennsylvania law firm of Stevens and Lee, P.C., who frequently represents hospital interests; and Richard Clarke, HFMA's president and CEO, discuss the importance of the lawsuits, what the future is likely to hold, and what hospital leaders should be doing in regard to their own organization's billing and collection practices.

The media has focused a great deal of attention on hospital billing practices related to the uninsured and underinsured. Why do you think interest in this issue has been so strong?

Scruggs: This is an issue that has the potential to impact each of us. Few people who can afford health insurance choose to forgo it. Those of us fortunate enough to have health insurance coverage are at risk of losing it through job loss, unaffordable cost, or development of a condition that is uninsurable or deemed preexisting.

Expecting the uninsured to pay the full rate, while offering large discounts to those with coverage, is just fundamentally unfair. Most of us know someone who has been hit by a hospital bill that he or she cannot possibly pay. It happens every day in every community, and the public can empathize with those affected. The hardest hit are the working poor, which makes it even worse.

At press time, the cases have made their way to 23 states. So it's safe to say it has also become a hot topic for even those hospitals that haven't been involved directly. What are providers' general perceptions of the litigation?

Judge: The varied bases for the suits and outcomes to date have created an enormous uncertainty for hospitals and health systems. Hospitals are already struggling to cope with fewer resources and increasing demands, and this issue diverts time and resources in an already stressed industry. In addition, both not-for-profit and for-profit hospitals have worked to comply with existing laws and regulations that govern how hospital charges are established. These institutions have at the very core of their missions a commitment to serve those who cannot afford to pay for care.

Yet some hospitals have beer perceived as doing a good job at establishing financial policies for uninsured and indigent patients, while others have not.

Scruggs: Most Americans expect charitable hospitals to hold themselves to a higher ethical standard, to have a strong sense of mission, and to act with benevolence. Hospitals that are doing a good job are reaching out to the uninsured. They have programs with reasonable requirements and make the uninsured aware of these programs. They reach out early in the encounter, rather than after collection efforts have been attempted.

Those that aren't doing a good job tend to subject the uninsured to strong-arm collection tactics and grant "charity care" only after collection attempts have failed. Their mission is to grow and amass wealth at the expense of the public they serve. These organizations are often bottom-line focused, have highly compensated executives, and have amassed large reserves of cash and investments. These organizations operate in a tax-exempt environment that is, or should be, contingent upon their operating in a charitable and benevolent manner.

Retailers like Sears have the ability to qualify customers for instant financing at the point of sale, with virtually no paperwork required. Some hospitals, on the other hand, have created complicated charity care programs that require an application process akin to obtaining a mortgage. We believe that these institutions not only are trying to avoid granting discounts to the uninsured, but also are trying to discourage this population from returning.

Many hospitals are seeking guidance on ways to better serve uninsured and underinsured patients and communicating billing practices.

Clarke: I think hospitals can work both internally on their processes and procedures, and externally with community groups to develop local workable solutions. Internally, hospitals must first develop written policies, probably endorsed by the governing board, on how to best serve these patients. The work we did with PATIENT FRIENDLY BILLING[R] can provide an excellent framework for these policies. Additionally, hospitals must provide effective and ongoing training to staff on how these policies work and for whom they apply. Finally, hospitals must effectively communicate these policies to patients. In all cases, hospital management must balance the medical and social needs of the patient with the effective financial management of the organization.