Business Week, 8/28/08 (http://www.businessweek.com/magazine/content/08_36/b4098040915634.htm): As health-care costs continue to soar, millions of confused consumers are paying medical bills they don’t actually owe. Typically this occurs when an insurance plan covers less than what a doctor, hospital, or lab service wants to be paid. The health-care provider demands the balance from the patient. Uncertain and fearing the calls of a debt collector, the patient pays up.
Most consumers don’t realize it, but this common practice, known as balance billing, often is illegal. When doctors or hospitals think an insurer has reimbursed too little, state and federal laws generally bar the medical providers from pressuring patients to pay the difference. Instead, doctors and hospitals should be wrangling directly with insurers. Economists and patient advocates estimate that consumers pay $1 billion or more a year for which they’re not responsible.
Yolanda Fil, a 59-year-old McDonald’s cashier in Maple Shade, N.J., got tangled up with balance billing after gall bladder surgery in 2005. She and her husband, Leon, a retired state transportation worker, have coverage through Horizon Blue Cross Blue Shield of New Jersey. Horizon made payments on Fil’s behalf to the hospital, surgeon, and anesthesiologist. Then, in 2006, Vanguard Anesthesia Associates billed Fil for an unpaid balance of $518. Soon, a collection agency hired by Vanguard started calling Fil once a week, she says. Although she thought her co-payment and insurance should have covered the surgery, Fil eventually paid the $518, plus a $20 transaction fee. “I didn’t have any choice,” she says. “They threatened me with bad credit.”
CAUGHT IN THE MIDDLE
Luckily for Fil, her insurer decided to get tough with Vanguard. In December 2006, Horizon Blue Cross sued the medical practice for balance billing Fil and more than 8,000 other policyholders who received invoices for a total of $4.3 million for service from 2004 to 2006. A New Jersey judge last year ordered Vanguard to stop billing the patients and provide refunds to those who had paid. Fil is awaiting her $538 refund. Vanguard didn’t respond to requests for comment.
National statistics aren’t available, but there’s little doubt that many consumers unwittingly fall victim to balance billing. The California Association of Health Plans, a trade group in Sacramento, estimates that 1.76 million policyholders in that state received such bills in the past two years, totaling $528 million. The group found that 56% paid the bills. “Patients think they owe this money, and it causes tremendous stress and anxiety for people,” says Cindy Ehnes, director of the California Managed Health Care Dept. “It is inappropriate to put the patient in the middle of this.”
Balance billing most frequently occurs when medical providers participating in a managed-care network believe the plan’s insurer is imposing too deep a discount on medical bills or is taking too long to pay. California, New Jersey, and 45 other states ban in-network providers from billing insured patients beyond co-payments or co-insurance required by the plan. Similarly, federal law prohibits providers from billing Medicare patients for unpaid balances.
These laws require medical providers to seek payment only from the insurer for services covered by the plan. Many states also shield insured patients from balance billing by out-of-network hospitals and doctors in emergencies, since patients usually don’t control who treats them in those situations. (Bans on balance billing generally don’t apply when a patient gets an elective procedure, such as cosmetic surgery, or seeks out-of-network, non-emergency service without a referral.)
Some physicians, hospitals, and labs take advantage of consumer befuddlement, argues Jane Cooper, CEO of Patient Care, a Milwaukee firm that employers hire to help insured workers fight billing mistakes. “Medical providers count on the fact people will pay these bills because they don’t have time to figure it out,” Cooper says.
Quest Diagnostics, the country’s largest lab chain, with revenue last year of $6.7 billion, has faced investigations and lawsuits over allegations of balance billing. A private suit that seeks class-action status in federal court in Newark, N.J., alleges that Quest has balance-billed thousands of patients covered by private insurance and Medicare, turning over many accounts to debt collectors. Quest, based in Madison, N.J., denies any wrongdoing.
In a separate case in 2003, the New York Attorney General’s Office alleged that Quest encouraged consumers to overpay or billed them after Quest had already been paid by insurers. The company denied wrongdoing in the New York case and said only five people were due modest refunds. Quest agreed to pay New York $150,000 in legal costs and revise some practices, such as waiting longer to dun patients while a claim is pending with an insurer. A Quest spokeswoman says: “The vast majority of our transactions occur problem-free when correct information is provided by patients, physicians, and payers.”
As some authorities get tougher, physicians are trying to overturn prohibitions on balance billing. The American Medical Assn. is lobbying Congress to allow balance billing within the Medicare program, as was allowed until 1991. Two Republican congressmen, Tom Feeney of Florida and Tom Price of Georgia, have sponsored legislation that would accomplish that goal. The AMA cites declining reimbursements from Medicare and private insurers in support of its bid to bill patients directly. AMA member David McKalip, a neurosurgeon in St. Petersburg, Fla., says patients can trust doctors to behave ethically and not gouge the poor: “Doctors will know up front which patients are willing to pay” beyond what the government reimburses.
FIGHTING BACK
Consumers overwhelmed by medical bills might dispute that. Many lack the resources to fight balance billing on their own. With an eye on their legal fees, private attorneys hesitate to take on individual disputes over amounts that usually don’t exceed $1,000. Glenn Siglinger is one exception. He fought a lengthy battle against a surgeon all the way to the Connecticut Supreme Court. In 2006 that court upheld a trial verdict awarding the Siglinger family nearly $40,000 in punitive damages from a doctor.
The case began in December 1995, when Siglinger’s wife, Laura, and his daughter, Allison, then three, were injured in a car accident. Both were taken to the emergency room at Bridgeport Hospital, where Dr. Charles Gianetti, the plastic surgeon on call, stitched a cut on Allison’s face. The Siglingers’ insurer paid Gianetti $1,981 under a contract with the family’s health plan. Later in 1996, he claimed the Siglingers owed him an unpaid balance of $4,496. The Siglingers refused to pay, and Gianetti sued them. Ruling for the Siglingers, the trial judge ordered Gianetti to pay their legal fees, in addition to the punitive damages. The Siglingers say he hasn’t paid them anything.
“It was traumatic enough seeing my daughter go through a serious accident, but then to go through this,” says Siglinger, a real estate investor. He and his wife have since divorced; Allison is now 15. “I wonder how many people paid these bills without giving it a second thought,” he says. The Siglingers are among 150 patients Gianetti has sued for unpaid balances, according to state records. The Connecticut Attorney General’s Office is scheduled to go to trial next year against Gianetti, having accused him in a civil suit of improper billing.
Gianetti, 69, no longer practices medicine, but he continues to pursue former patients in court. He says the state of Connecticut has “nothing on me,” declining other comment.
Even routine office visits can lead to balance billing. In Illinois, federal prosecutors say Dr. Janet Despot and Rickey Weir, her husband and office manager at the Cardinal Respiratory medical practice in Springfield, overbilled Medicare, private insurers, and patients by more than $800,000 from 1997 through 2007. Despot, 50, pleaded guilty to a misdemeanor charge of balance-billing Medicare patients in February. She didn’t receive jail time, but has paid a $10,000 fine and forfeited $2.5 million that will be used for restitution and additional fines. Federal officials are considering barring her from the Medicare program; the Illinois medical board separately is seeking to discipline her. For now she remains in business.
William Gass, a 41-year-old recycling coordinator, successfully took Despot to small-claims court in 1999 to get $300 in improper bills erased from his credit report. “It’s unconscionable to me she can still practice medicine,” Gass says.
Despot says her husband, Weir, from whom she is getting divorced, handled all billing. She claims she wasn’t aware that patients were being hounded for money they didn’t owe. A Medicare ban “would end my career,” she says. “I didn’t understand medical billing.” Weir has pleaded not guilty to fraud charges and awaits trial in November. He declined to comment.
Regulators in most states have been slow to take action in billing disputes. But in July, California officials sued Prime Healthcare Services, seeking to force the 12-hospital chain based in Victorville, Calif., to stop balance billing. Last September, Thomas Lai was rushed to the emergency room at Prime’s Huntington Beach Hospital because of severe chest pain. The 51-year-old musician stayed for four days, but doctors didn’t find anything seriously wrong.
His wife, Tess, says she asked the hospital staff to transfer Thomas to a hospital covered by his Kaiser Permanente network—but to no avail. She had taken him to the hospital closest to home, which Kaiser advised her to do. Kaiser paid a discounted rate for the hospitalization, and the Lais thought that was the end of it.
They were shocked to receive a bill from Prime in May for more than $16,000. A collection firm threatened to report them to credit agencies. “I’m concerned about our credit report with this huge bill hanging over us,” Tess says. Kaiser instructed the Lais not to pay anything while the state case unfolds.
Asked about the state action, Prime said: “This frivolous suit is not about the actions of one provider but the failure of the [state] to do its job to regulate HMOs and provide assistance to providers who have the right to be reimbursed properly for emergency services rendered to HMO enrollees.” Prime didn’t comment on the Lais.
Cindy Ehnes, the director of California’s managed-care department, says her agency isn’t taking sides between providers and insurers. It holds insurers accountable for paying promptly, she says. Medical providers should use proper channels to press their claims, such as an independent dispute-resolution system crafted by the state, she adds. “Patients are having their credit destroyed at a time when they are already sick and vulnerable.”
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