The tension that exists between providing good care for patients and making a profit in the healthcare business is one of my signal preoccupations. In our current fee-for-service model, there exists a seemingly intractable conflict between prioritizing the needs of one’s patients and maximizing one’s profits. When this conflict can be mitigated, both healthcare providers and patients come out well. But when patients become just another kind of customer and healthcare just another kind of business, problems arise. It’s a subject I return to over and over.
This conflict rises right to the surface in this article about HCA, the largest for-profit hospital chain in the country. I should note that I’ve had my qualms with how the New York Times reports on hospitals, so I ought to be as skeptical about articles that confirm my suspicions as I am about those who biases I don’t share. It’s a long article, and it seems thorough and balanced to me, but I will also freely admit that I might be reading it approvingly because I am inclined to based upon my preexisting beliefs. For those of you who read the whole thing and find flaws in the reporting, I request that you share your opinions.
During the Great Recession, when many hospitals across the country were nearly brought to their knees by growing numbers of uninsured patients, one hospital system not only survived — it thrived.
[Aside: Can I just grouse briefly about an unrelated point? What an unfortunate failure of our creative minds that we couldn’t come up with a better name for our current economic woes than “the Great Recession.” It has all of the rhetorical oomph of Malt-O-Meal.]
Right off the bat I see one of the major barriers to true reform, which is the deeply enmeshed relationship between the executives in the for-profit hospital industry and powerful lawmakers. In addition to Bain, and thus Mitt Romney, the article goes on to discuss the various relationships between HCA and former Senate Majority Leader Bill Frist (for whom I have no respect for completely different reasons), Florida Governor Rick Scott and the acting head of Medicare Marilyn B. Tavenner. I realize the problematically entwined relationships between major industries and the people whose job it is to regulate them is nothing new, and that healthcare is hardly unique in this regard, and also (as that last link makes clear) it’s not just Republicans who do it. But it sure does make me uneasy to see how freely these executives can stroll through the corridors of power and find familiar faces.
Among the secrets to HCA’s success: It figured out how to get more revenue from private insurance companies, patients and Medicare by billing much more aggressively for its services than ever before; it found ways to reduce emergency room overcrowding and expenses; and it experimented with new ways to reduce the cost of its medical staff, a move that sometimes led to conflicts with doctors and nurses over concerns about patient care.
I’ve written about how medical billing works before, so I’m not going to go into much detail now. Suffice it to say that, for savvy providers, it is possible to manipulate the system by which patient encounters are coded to make straightforward, simple encounters seem more complex and thus more costly. Is that what HCA has encouraged its providers to do?
All hospitals use a system of codes to bill services to Medicare, Medicaid and private insurers. The codes, which require some subjective evaluation, are supposed to reflect how much care is being delivered. Hospitals can differ over which treatments require which codes. A patient who walks into the emergency room with a simple case of indigestionwould be classified by the hospital as using very little of its resources. The hospital would be reimbursed just $50 by Medicare for its evaluation.
A patient who might be suffering a heart attack might require oxygen, be placed on a cardiac monitor and transported for a CT scan. The hospital would classify those services at the highest level, earning it a $323 reimbursement from Medicare.
At HCA in 2006, slightly more than a quarter of the payments it received from Medicare were for patients classified in the two highest-paying categories, far behind the 58 percent reported at other hospitals, according to an analysis of Medicare payments by The Times, using data provided by the American Hospital Directory.
Nearly overnight, HCA’s patients appeared to be much, much sicker. By 2010, HCA had surpassed other hospitals, with 76 percent of its payments coming from the two most expensive classifications, versus 74 percent for other hospitals.
Medicare has not provided hospitals with clear guidance about what kind of coding system they should use, and Mr. Yuspeh said HCA had alerted the agency to its use of the new system. No one has accused HCA of up-coding, or billing for more expensive services that were not needed — one of the complaints made against it a decade ago.
Vicki Bryan at the research firm GimmeCredit began warning HCA’s bondholders who subscribe to her reports in the spring of 2009 that HCA’s model was bolstering short-term returns, but that the system could have potentially negative long-term consequences if Medicare balked and demanded reimbursements.
So far there is no indication Medicare has done so, and a spokeswoman declined to comment. The acting head of Medicare is Marilyn B. Tavenner, a former HCA executive who left there in 2005 to become the secretary of Health and Human Resources in Virginia.
I’m not in a position to audit HCA’s charts, so I’m left to guess. But that certainly seems like an eyebrow-raising jump in the illness and complexity of its patients in an awfully short period of time.
This post is already plenty long, and I’ve already lifted enough from the article as it is. It goes on to detail further profit-maximizing measures HCA hospitals took with regard to access and payment for emergency room care, and with regard to staffing. I’ve also already written about HCA coming under investigation in Florida (which is somewhat reassuring, actually, vis-à-vis Gov. Scott’s connection to the chain) for allegations that some of its providers had ordered unnecessary tests and procedures for certain patients in order to boost revenues. When viewed as a whole, these articles paint a none-too-pretty picture of what can happen when patients’ interests and shareholders’ collide.
All of this makes my lips curl into an unpleasantly grim smile when I consider the ramifications of the cuts to Medicare in the Affordable Care Act. While the lower reimbursement rates are meant to be balanced out in the long term by increased numbers of insured patients under the new law, it’s hard to know how any given hospital’s balance sheet is going to look after the rates go down. Call me cynical, but I can’t really picture executives at a for-profit hospital whose patient enrollment hasn’t kept up with the loss sustained by the lower reimbursements saying “Well, chums, we had a good run. I guess it’s time to pull the kids out of Choate and scout out the public schools!” The profits may well decrease, but does anyone really doubt that the hospitals won’t wring every bit of revenue out of their patient-care models on the way, by methods ethical and otherwise?
None of this is to say that cuts to Medicare aren’t necessary. They may well be, and this may be the best way to do it. I pretend to be no healthcare economist. But what real cuts to Medicare won’t be are painless. They won’t be limited to big rich ol’ hospitals and insurance companies. Real patients with real problems will feel them in some real way, be it their pocketbooks or because they’re not getting turned enough in bed when their nurses are short-staffed again. Claims that any meaningful cuts to Medicare won’t be perceptible to the people covered under it strain credulity. Anyone who says otherwise is selling something.