A story from Arkansas about hospitals billing uninsured patients at higher "rack rates" than they bill insured patients contains some important insights about this increasingly recognized problem.
Lawyers for St. Mary's Hospital, one of the hospitals under fire for its billing practices, defended its actions thusly, "Just as a company that buys 100 widgets from a seller will get a better price than a company that buys just one widget from the seller, a managed care plan that 'buys' St. Mary's services for hundreds of patients can legitmately expect to pay less for St. Mary's services than patients such as plaintiffs who buy St. Mary's services only for themselves."
The analogy is not a good one because one can produce a lot of widgets at a cheaper unit cost than one can produce one widget. But health care must be customized for each patient, so how would knowing that a group of patients are insured by a particular company lower the costs of caring for them enough to justify a volume discount?
Furthermore, the communications director for Mercy Health System, of which St. Mary's is a part, said the system agrees with "the American Hospital Association's stance on the issue of uninsured billing." That stance is apparently that the federal government should keep its hands off the issue. On the other hand, former Secretary of Health and Human Services Tommy Thompson wrote to the AHA that "hospitals charging the uninsured the highest rates is a serious issue that demands all of our attention." He called the AHA's position "not correct and [it] certainly does not reflect [Health and Human Services] policy.... I strongly encourage you to work with the AHA member hospitals to take action to [end the situation] where ... uninsured Americans and others of limited means are often billed and required to pay higher charges."
But the real issue here is not the pricing of widgets, or even whether the federal government or the states should have roles regulating the prices hospitals charge uninsured patients.
Mercy Health System's mission statement says that it "is committed to the ministry of health and healing for all God's people, with particular concern for the economically poor." By charging the uninsured the full rack rate, and then vigorously defending this pricing scheme as documented above, the hospital and system leadership appears to be in fundamental conflict with their own stated worthy mission.
This is another striking example of a fundamental problem in the US health care system (and perhaps in other countries as well.) Health care organizations' actions are more and more in conflict with their stated values.
So what mercy will the uninsured patients of Mercy Health Systems get?
(Thanks to the Health Business Blog for the reference to this article.)
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