October 26, 2009
To Whom It May Concern:
Ozarks Community Hospital is a small health system with facilities in southwest Missouri and northwest Arkansas. We are a for-profit organization providing care to a high percentage of patients covered by government programs in a region dominated by large charitable health systems that vie to control the commercial insurance market. Approximately 80% of our patients are on Medicare, Medicaid or Tricare or are uninsured.
We have never sued a patient to collect a bill. We provide an across-the-board 40% discount for the uninsured based on our belief that those without coverage should never have to pay more than Medicare pays. We allow uninsured patients to pay what they can without having to beg for charity or fill out complicated forms “proving” they deserve charity.
According to a twenty-year study by the Dartmouth Institute for Health Policy, as reported in U.S. News & World Report, our health system has the lowest out-of-pocket cost for Medicare beneficiaries of any hospital in the nation.
As an under-capitalized start-up destined to be a safety-net provider of low cost care with nothing better than governmental reimbursement, our healthcare system should have languished in a dormant state according to conventional wisdom; yet, we have grown in our ten years of existence, from a single hospital with 50 employees and $7 million in annual gross revenue, to a system of two hospitals, more than a dozen clinics, 850 employees and over $120 million in annual gross revenue. During this decade of growth, we have invested in people and services but not in bricks and mortar—and we have made virtually no profit. What we have done every year is provide more and more low-cost care to patients who would otherwise find it difficult to access care.
The point is: we know something about how healthcare works in this country. Congress is about to pass comprehensive legislation to reform healthcare. It is a complicated issue made more complicated by the vast amount of misinformation and propaganda out there. We are like many people and organizations—we were hoping reform would help but now we are worried it will hurt. It would appear the big insurance and pharmaceutical companies have won the battle. If the bill passed by the Senate Finance Committee becomes law in its current form, it is quite possible it will put our health system out of business. We have very little access to private insurance contracts and no leverage to negotiate decent terms. A public option would at lease give us a competitive opportunity to take care of patients.
The reform bill recently passed by the Senate Finance Committee, the bill with the best chance of becoming law, does not include a public option. There has been a great deal of discussion about this so-called public option. Unfortunately, most of the discussion has been based on very little information and virtually no understanding of the historical context.
Blue Cross Blue Shield of Missouri is one of the few commercial insurance companies with which we do much business—about 5% of our total patient volume. The Blue Cross Blue Shield organization in southwest Missouri is part of Wellpoint, the Blue Cross licensee in California and a Blue Cross Blue Shield licensee in 13 other states: Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New Hampshire, New York, Ohio, Virginia, and Wisconsin. Wellpoint provides health insurance to 34 million customers, making it the nation’s largest health insurer. It is the ultimate for-profit commercial insurance company. It made $3.3 billion in profits in 2007 and $2.5 billion in 2008. Its CEO makes $10 million a year.
Ironically, Wellpoint, the megabucks, for-profit insurance company, began life as the equivalent of a public option.
The original nonprofit, “public option” health insurance originated in 1929 as an experiment at Baylor University to provide prepaid hospital coverage to members of the community. It morphed into Blue Cross and Blue Shield as independent BCBS plans spread across the country. For more than forty years, BCBS plans were organized under federal law as tax-exempt 501(c)(4) organizations: “engaged in promoting the common good and general welfare of the people of the community.” BCBS premiums were based on a community rating instead of rates based on an individual’s health status. Throughout the country, these charitable corporations offered the same rates to all subscriber groups regardless of age, sex, occupation, or other characteristics that might affect the frequency with which members of the group would require hospitalization.
In 1994, the Blue Cross Blue Shield Association voted to allow its nonprofit members to become for-profit corporations. As the nonprofit plans were replaced by for-profit insurers, they dropped community ratings in favor of the more profitable individual experience ratings. A merger and acquisition feeding frenzy ensued among these BCBS for-profit plans and Wellpoint emerged as the proverbial 800 pound gorilla.
What has this gorilla been up to in our neck of the woods? For one thing, we cannot get it to pay claims. In that regard Wellpoint does not treat us differently than any other hospital. A Wellpoint executive recently testified to congress that it pays 97% of claims in less than 30 days. It would be comical if it did not hurt so much. It is the one constant in the universe. For our patient finance employees, getting a claim paid by Wellpoint in the normal course of business is the emotional equivalent of winning the lottery. It takes four to five employees to collect the 80% of our revenue that comes from governmental payers. It takes 25 employees to collect the 20% that comes from Wellpoint, other commercial insurances and patients. We get paid by Medicare and Medicaid, on average, in less than 30 days. It takes us twice as long to get paid by Wellpoint.
To make matters worse—and this is the really cruel part—Wellpoint pays us less than any other payer: less than Medicare, less than Medicaid. That is bad news for us but why should anyone else care? Like other insurance companies, Wellpoint objects to the public option based on the “cost shifting” myth. Wellpoint claims it pays more to providers because Medicare underpays. Assuming the public option plan would pay at Medicare rates, the private insurance companies paying a higher rate would also be “subsidizing” the public option. Those who favor the public option claim the argument is flawed for a number of reasons, but we have not heard anyone claim that the underlying assumption is wrong—that it is simply not true Wellpoint pays providers more than Medicare. In order to prove the underlying assumption false, we would have to publish the actual payments our hospital receives from Wellpoint. If we did so, we would breach the contract we have with Wellpoint: its contract prohibits us from disclosing what Wellpoint pays for the care we provide.
Everyone talks about transparency in healthcare, but few are willing to provide real information. What do healthcare experts mean when they talk about price transparency? Many hospitals disclose what they call prices. In fact, all they are really doing is disclosing their charges taken from their chargemaster list price. Some might refer to the chargemaster price as the retail price, but that is not a precise definition. For decades, the only payers who paid the hospital’s retail price were uninsured patients, and these days, with all the class action litigation brought against hospitals for making self-pay patients pay more than insurances and governmental payers, there are few hospitals not providing some sort of “discount” for uninsured patients. If no one ever pays the retail price, it is not accurate to call it a price. A hospital’s chargemaster price would be more accurately defined as a reference point used in hospitals’ contracting with payers. If a hospital were truly providing price transparency it would disclose the actual expected payment under its contract with a specific payer. Anyone with access to a computer can find the Medicare expected payment, but expected payments from insurance companies to hospitals are shrouded in mystery.
Some time ago, the Blues announced a plan to phase in price transparency for consumers. However, their insurance contracts continue to prohibit the provider from publicly disclosing negotiated prices, even to patients. In order to provide true transparency, negotiated payment rates would have to be disclosed to the public. Any publication of data compiled from comparative hospital charges merely creates the appearance of price transparency. It would make some sense if expected payments were based on a percentage of charges, but that is increasingly not the case. Our hospital has meaningful contracts with only a half dozen insurance companies (there are a hundred other insurances but none cover more than a small handful of patients). None of those insurance contracts base expected payment on a percentage of our charges. Wellpoint and the other insurance companies primarily rely on a fee schedule to establish expected payment and the fee schedules bear no relation to our charges (or our costs).
We have no idea what the Blues are paying other hospitals. We only know what our contract with the Blues allows us to collect—the total from both insurance and patient co-pay. The allowable Medicare payment is provided for comparison. Our average cost per procedure as calculated on the cost report filed with Medicare is likewise provided for comparison. The data table below represents a selection of outpatient procedures such as laparoscopic, arthroscopic, bronchoscopy and colonoscopy. We are not providing information describing the specific procedure priced in the table because doing so would violate the terms of our contract with the Blues.
These numbers are accurate. Blue Cross and Blue Shield of Missouri, a subsidiary of Wellpoint, the nation’s largest health insurance company, earning billions in profit each year, pays our little hospital substantially less than Medicare. Our hospital and physicians have no ability to negotiate for a better payment. It is take it or leave it. We cannot afford to take it. If we decide to leave it, thousands of patients currently being treated by our doctors will have to find new doctors. If that happens, there will not be enough doctors left in the network: bad news for patients but good news for Wellpoint. If patients have trouble getting in to a doctor, there will be fewer claims to pay and Wellpoint profits will grow.
Perhaps the public now better understands why we favor a public option. Without a public option, healthcare reform will consist primarily of a mandate requiring people to buy insurance from companies like Wellpoint. Those insurance companies will continue to tell patients that premiums are being driven higher because they are subsidizing the lower reimbursement paid by Medicare all the while gorging themselves on profit from millions of new premium paying customers. A handful of huge for-profit insurance companies and large, monopolistic health systems will continue to maintain proprietary, exclusive networks thwarting legitimate competition and true innovation.
The public has been told the public option is a scary, new government takeover of healthcare. It would be just as true to say that Wellpoint and other mega-buck private insurance companies like it run healthcare. Frankly, if we had to choose, we would much prefer government-run healthcare to Wellpoint-run healthcare. At least there would be more of a level playing field for hospitals and doctors who do not have “favored nation” contracts and relationships with the monopolistic megabuck insurance companies and health systems. The public has been told we need to get the government out of the way between patient and doctor. Medicare gives the patient the right to choose a doctor and a hospital. The big health systems and insurance companies often conspire to restrict that choice. The public option should function like Medicare and give patients the right to choose their doctor and hospital.
The bottom line is the public option would simply be another third-party insurance payer like Wellpoint or Medicare (or like the original Blue Cross and Blue Shield plans). Perhaps we would not need a new public option if the original public option had not been co-opted by corporate greed.
Paul Taylor, CEO
Ozarks Community Hospital
2828 N. National
Springfield, MO 65803