Several studies have concluded that the relative rapid rise in health care costs can be attributed to new expensive high technology imagining systems coupled with over utilization of those procedures and prescription medication. But with the announcement that Sutter Hospital will pay $46 million to settle a lawsuit that alleged they were double billing for anesthesia services during surgeries, you have to wonder how much hospitals, in an attempt to recoup the expenses of unpaid Emergency Room care, are gaming the complexity of the billing code system to pad their bottom line.
Sutter Health rationalizes double billing
The fact that Sutter tries to rationalize their billing by parenthetically saying, “Well, everyone else does it too.” is a horrible signal that the whole hospital billing system is corrupt.
“Sutter Health spokesman Bill Gleeson said its anesthesia billing methods follow industry standards and are used by some 90 percent of California hospitals, in accordance with federal and state rules.
“It’s a very common method by which most of California hospitals deliver and bill anesthesia,” Gleeson said. “But the insurance commissioner believes that the new method we embrace will be clearer and more predictable to payers and consumers – and we agree.” – Sacramento Bee, Sutter Health agrees to $46 million settlement for billing practices.
Excellent care…excellent invoices
Sutter hospitals are known for excellent care and, on the part of insurance companies, expensive care as well. Several insurance companies either won’t allow Sutter Hospital and Physicians in their networks or limit the physician network to restrain exposure to the expensive Sutter system. How much of the health care costs that an insurance company has had to pay on behalf of members was the result of inflated or duplicate billing procedures on the part of Sutter is hard to estimate.
Sutter starts their own health plan
Sutter is launching their own health plan in January 2014 primarily to get a piece of the CalPERS state employee health plan pie. Carriers that did have contracts with CalPERS had dropped Sutter because of the expensive health care costs. (Sutter excluded from Blue Shield CalPERS network) The only way for Sutter to insure state workers had access to their facility and providers was to start their own HMO health plan. Even the administrators of the new Sutter Health Plus plan were probably privately applauding the settlement because it will ultimately reduce what the new health plan pays to the hospital for services.
Double billing may have helped plump up the bottom line at Sutter Health
Total income for 2012 was $735 million, compared to $634 million in 2011. The system’s total 2012 operating revenues were $9.6 billion, compared to $9.1 billion in 2011. – Sutter Health 2012 Financial Performance
Many legs to the health care chair
We have to remember that our health care system is made up of four somewhat independent legs.
First are the doctors that are either independent or belong to a physicians group. It is against the law in California for hospitals to employee doctors, but they can be a share holder in the physicians group they contract which brings patients to their healthcare facilities.
Hospital bare burden of uninsured
The second leg is the hospitals who are the primary providers of in-patient care. Hospitals are also under the regulation that they can’t refuse medical care to those brought into their Emergency Room. This saddles them with enormous unpaid bills. They also have to compete with lower cost private out-patient facilities that charge substantially less than they can for the same procedure like arthroscopic surgery or colonoscopies.
The payors or insurance companies
Health insurance plans comprise the third leg of the health care chair. They negotiate rates with physicians, hospitals and other providers that their members and they will pay for the various services from office visits to surgery and anesthesia. Because health insurance companies see all the billings from all the hospitals for all the procedures, they are in a unique position to help control costs. This includes the big gorilla on the block of Medicare.
The fact that Sutter was able to bury the duplicate charges and no insurance system picked up on the additional billing until a detailed audit was performed shines a spot light on the complexity of the medical billing code system.
The forgotten patient
Finally, we have the consumers or patients as the last leg of the chair. We are the reason the first three legs exist. But patients are long forgotten in the business world of health care management. Because the consumer pays so little of the actual invoice for health care services the other three legs are left to fight among themselves, set pricing, rates and sometimes find loop holes in the system for a little extra revenue.
Consumer directed health care is a hoax
Filed under “This is why consumer directed health won’t work”, Sutter Health has agreed to pay $46 million to settle a medical billing code sleight of hand inquiry. Until someone blew the whistle, Sutter Hospital and Marin General Hospitals were double billing for the service of anesthesia during patient surgeries. Consumers don’t have a chance of determining the actual cost of any procedure for comparative purposes while hospitals and doctors play games with the billing. The new rates Sutter will have to post on their website as a result of the settlement agreement will do little to help consumers make an informed or different decision.
Tangled web woven
Frankly, I’m a little surprise that the insurance companies or Medicare, who pay a portion or all of the hospital and doctor charges on behalf of a member, didn’t pick up the anomaly through an auditing procedure. The sneaky double billing on the part of Sutter is a testament to how complicated medical billing is to untangle and make any sense of the numbers.
Complete news release from Insurance Commissioner’s office
NEWS RELEASE, November 4, 2013
Sutter Health hospitals agree to pay record payment
in Department of Insurance lawsuit involving anesthesia billing
SACRAMENTO, Calif.– Insurance Commissioner Dave Jones today announced that Sutter Health, which operates one of the largest hospital chains in California, agreed to pay $46 million and implement historic changes in its billing and disclosure of anesthesia charges and services to its patients, insurers and other payers.
Sutter has over 20 hospitals in northern California, including California Pacific Medical Center in San Francisco, Sutter General Hospital in Sacramento, and Memorial Medical Center in Modesto. The settlement brings to a close a 2011 whistleblower lawsuit brought against Sutter by billing auditor, Rockville Recovery Associates. The commissioner joined the whistleblower in that lawsuit.
“This settlement represents a groundbreaking step in opening up hospital billing to public scrutiny,” said Commissioner Jones. “The settlement requires Sutter to disclose on its Website every component of its anesthesia billing and what those services cost Sutter. Patients, insurers and the public will now be able to compare Sutter’s costs to what it charges for anesthesia. They will see any mark-ups. I commend Sutter for agreeing to these reforms and this settlement. This new transparency should lead to lower prices and point the way to similar billing reforms for all types of hospital services.”
The whistleblower lawsuit alleged that Sutter included a false and misleading charge in its surgery bills. Sutter patients or their insurers received three separate charges relating to anesthesia, including a charge by an outside anesthesiologist, a charge for the operating room and a charge under an obscure Code 37x Anesthesia. Sutter often charged thousands of dollars for Code 37x Anesthesia for each operation. Yet the services covered by that code were allegedly already captured in the operating room charge, itself a charge in the thousands of dollars. Sutter charged for anesthesia on a time-based or chronometric basis even when no Sutter employee, only the outside anesthesiologist, was present and overseeing anesthesia. Some hospitals also charged separately for anesthesia gasses using code 25x. Sutter’s contracts with insurers also included a clause alleged to unduly restrict insurers from contesting the bills.
The settlement requires that Sutter:
- Pay $46 million
- Stop billing for anesthesia in the operating room on a chronometric basis and instead charge on a fully disclosed flat-fee basis
- Describe every component of its anesthesia billing
- Post on its Website and provide to insurers and the commissioner the cost to each Sutter hospital of its anesthesia services, updated annually
- Clarify the relationship between its master schedule of charges (known as chargemasters in the health care industry) and the bills that consumers and insurers receive. This change will lead to an increase of transparency and accountability in hospital billing
- More readily permit insurers and other payers to contest Sutter’s bills.
Another defendant, Marin General Hospital, has agreed to implement the same changes to its procedures for billing anesthesia services. Marin General Hospital was a member of Sutter Health during the period of the misconduct alleged by the complaint. In 2010, Marin General Hospital became an independent hospital.
Today’s settlement also includes defendants MultiPlan, Inc. (“Multiplan”) and Private Healthcare Systems, Inc. (“PHCS”), whose provider contracts with Sutter included Sutter’s audit policy that allegedly unduly restricted payers’ ability to challenge Sutter’s charges. In addition to paying $925,000, MultiPlan and PHCS agreed to continue to provide notifications to payers about their audit rights.
In March of this year, Time Magazine devoted a special issue to the problem of lack of transparency in hospital billing practices. “Bitter Pill: Why Medical Bills Are Killing Us” exposed hospital bills that sometimes include markups as high as 10,000%.
As required by the state’s insurance whistleblower law, Sutter’s settlement payment will be divided between the whistleblower, Rockville Recovery Associates, and the State of California. The state will receive $20 million, to be used to enhance the investigation and prevention of insurance fraud. Sutter and MultiPlan/PHCS do not admit to wrongdoing in the settlement agreement.
Summary of double billing lawsuit
provided by Riskmanagers.us
The California Insurance Commissioner (“CIC”) has filed a Motion on behalf of the State, under the California Insurance Frauds Prevention Act, to intervene and join in a whistleblower suit against MultiPlan and PHCS (the “PPO Networks”) and a large number of hospitals in their PPO Networks, including many Sutter hospitals (collectively, “Hospitals”), to recover damages, civil penalties and injunctive relief for violations of California’s Penal and Insurance Codes.
The following is a brief summary of the more significant assertions made in the case pleadings:
To increase revenues and profits, the Hospitals engaged in fraudulent billing of anesthesia services through the misuse of billing codes to bill for services not provided or already compensated.
- The Hospitals systematically and fraudulently misuse CPT codes and charge an extra $3,000 to $5,000 for “anesthesia services” every time one of their operating rooms are used, even when no anesthesia or only local/regional injection is used. This is in addition to charges billed for anesthesiologist and nurse anesthetist services, which are coded and billed separately.
- The Hospitals are double billing for costs captured in other bills and revenue codes, or simply billing for services not provided. The valid charges and the invalid charges appear on separate and distinct bills, but “insurance company claim examiners do not compare the data in the forms side by side for inconsistency.”
- The overcharges result in Hospital claims submitted to payors “which are in fact not discounted, or which are discounted far less than required,” which serves to “render illusory any negotiated discounts owed to insurers or other payors.” As a result, all payors who access Hospitals through MultiPlan or PHCS and enter an operating room are defrauded.
• The PPO Networks aided and abetted the Hospitals’ billing fraud by overseeing contracts effectively precluding insurer challenges to the reasonableness of any charges and enabling Hospitals to dramatically overcharge “under cover of the agreed discount” which was really a fiction. The PPO Networks also engaged in direct fraud by selling illusory discounts to payor clients.
- The Networks knew that the Hospitals were overcharging
- The Networks’ contracts with the Hospitals precluded meaningful review of or challenges to the reasonableness of charges, by specifically prohibiting line item review of bills and any auditing with regard to ‘medical necessity,’ ‘reasonableness of charges,’ and ‘the propriety of a provider’s usual and customary practices,’ and “otherwise discourage meaningful review of such charges.”
- The Networks were selling Hospital access and discounts, but the inflated bills “rendered illusory any discounts payors’ were entitled to under their contracts with MultiPlan and PHCS.”
The Networks have done this to gain access to the Hospitals’ facilities, which is what attracts insurers to do business with them and increases their market share and profits. (The Networks get paid a percentage of the purported discount they provide for insurers.)
- The Networks continue to engage in this practice throughout California and the United States, and have engaged in this practice over the past decade, during which time hundreds of thousands of claims containing fraudulent charges were submitted pursuant to the Networks’ contracts.
- The Networks engaged in these practices and aided and abetted the Hospitals’ misconduct, by (i) accepting bills despite their knowledge or reckless disregard of fraudulent charges; (ii) overseeing of contracts limiting payors’ audit rights and precluding any meaningful review of improper charges, including fraudulent charges; (iii) refusing to challenge the false billings submitted by the Hospitals; and (iv) otherwise discouraging meaningful review of invalid charges.
“The contracts between MultiplanJPHCS and the Sutter hospitals contains provisions which both Sutter and MultiplanJPHCS contend prevent any health insurer from refusing to pay any particular line item charged, even if the charge is fraudulent. Multiplan/PHCS uses that provision to discourage payors from examining the legitimacy of the bills the Sutter hospitals submit. Multiplan/PHCS and the Sutter hospitals use the contractual provision to discourage insurers from examining bills. Because Defendants use the contractual provision to prevent insurers from refusing to pay for fraudulent billing entries, the provision encourages and abets fraudulent activity and is against the public policy of the State of California.”
“The inflated bills are submitted to the numerous insurers, HMOs, PPOs and other health plans, including, without limitation, Aetna, American Insurance Consultants, Anthem Blue Cross of California, Blue Shield of California, California Foundation for Medical Care, Cigna, Coventry First Health, Great West Healthcare, Healthnet, Healthcare Fund of Superior California, IPM Health & Welfare Trust, Integrated Healthcare Administration, Interplan Health Group, Managed Care Incorporated, National Medical Audit, PHCS, Paracelus Healthcare Corporation, Physicians Mutual Insurance Company, Solano Partnership Healthplan, Tricare, Union Pacific Railroad Company PPO, United Healthcare, Viant and Wilson & Paschall, Inc.”
Finally, in a request for equitable relief, the State of California maintains that the Hospitals, MultiPlan and PHCS “use contractual provisions to prevent challenges to fraudulent billings” and that that such “provisions are contrary to the Insurance Code and public policy, and should therefore be declared unenforceable…”