EXPENSIVE PLACE TO GET SICK: Hospital stays cost most here

Several bills proposed by Assembly to help consumers

Published May 15, 2005
By Paul Harasim Review-Journal, Las Vegas, NV

Tim Vigil’s patients include Dells, IBMs and Compaqs. Inside his operating room off Flamingo Road, they sit quietly, waiting for him to perform the transplants necessary to bring Microsoft Windows back to life on their screens.

At his LaptopDoctor.com computer repair shop, Vigil wonders why the health care industry can’t treat its patients with the same care he gives his.

“I’m not out to gouge you,” he said.

The 43-year-old married father of two teens, who did not have health insurance, declared bankruptcy in 1998 after a collection agency wouldn’t let him work out a payment plan for $25,000 in medical bills for treatment of a broken ankle.

“I kept telling them I’d work out a plan, and they said they needed a lot of money right now,” he said. “I couldn’t believe it cost me so much anyway for a broken ankle. I finally filed for bankruptcy just to get them off my back. But by doing that, I really screwed myself. I haven’t been able to get credit to really expand my small business or buy a home. It’s been a nightmare.”

Nevada is no stranger to the debate over hospital costs. In 1987, then-Gov. Richard Bryan, working with Republican Sen. Ray Rawson, authored a cost-containment bill because Nevada’s for-profit hospitals had the highest rates in the nation.

The legislation bumped Nevada off its perch as the costliest state for hospitalization, but it was allowed to expire because legislators thought costs were stabilizing.

An attempt by Democrats to resurrect the 1987 cost-containment bill in recent years failed.

Now, several bills proposed by the Assembly to help consumers with Nevada’s high health care costs are under scrutiny in the Senate.

Whether the proposed legislation can help — or, as a lobbyist for the hospitals suggests, it will increase administrative costs and end up doing more harm than good — is open to debate. What is clear is that studies show even though financial reports reveal hospitals are not reaping large profits, Nevadans again pay the highest rates in the nation for hospital care.

For example, data compiled by Select Quality Care from Medicare and state health care agencies reveal that the Cleveland Clinic, recognized as the top heart care center in the world, carries a list price of $88,273 for open heart surgery involving a heart valve replacement. In Las Vegas, Valley Hospital Medical Center charges $233,259 for the same procedure; St. Rose Dominican-Siena, $199,179; Sunrise Hospital, $196,908; Desert Springs Hospital, $186,622; and University Medical Center, $156,953.

The same operation in nearby Phoenix costs $79,601 at the renowned Mayo Clinic.

The bills up for debate include:

• Assembly Bill 353, which would require hospitals to submit a yearly report that itemizes how patients are charged. It also would raise the discounts on hospital charges offered to the uninsured to 50 percent, from 30 percent. Assemblywoman Sheila Leslie, D-Reno, notes that is still 20 percentage points less than the 70 percent typically negotiated by insurance companies on behalf of customers. Hospital charges are similar to the list price on a car. Few pay the full amount because insurers negotiate discounts. Hospitals would have to make public their policies on discounts and debt collections.

• Assembly Bill 342, which would require hospitals with more than 100 beds to inform the state where profits are sent. Some lawmakers are concerned that out-of-state hospital corporations are profiting at the state’s expense. Hospitals also would have to file a capital improvement budget for the upcoming fiscal year as well as a plan specifying how their services and resources address community needs.

• Assembly Bill 322, which would require hospitals to reinvest 4 percent of their gross revenues into the community. That investment could include free care, public education programs, health or disease screening programs, and free or below-cost prescription drugs.

• Assembly Bill 296, which would ensure that insured patients taken to a hospital on an emergency basis aren’t penalized if the hospital does not normally accept their insurance coverage. In other words, patients would not have to pay high “out-of-network” charges during an emergency health crisis.

• Assembly Bill 195, which sets up an Internet framework for Nevadans to purchase lower priced prescription drugs from Canada.

• Assembly Bill 66, which would require drug manufacturers to report to the state gifts, fees, payments or subsidies of more than $25 that are given to doctors, hospitals, nursing homes, pharmacists and health care administrators.

The legislation, largely favored by Democrats and opposed by Republicans, has irritated hospital executives.

“We feel like we’re being demonized,” said Bill Welch, head of the Nevada Hospital Association. “Profits are going down — our average is now only between 1.8 percent and 2.2 percent — and people are accusing us of raking all this money in. Hospital costs are high because the state has a high number of uninsured patients, a nursing shortage that drives up salaries, a mental health crisis that sees many people with emotional problems going to expensive emergency rooms for treatment, and a large percentage of patients who go to expensive emergency rooms for primary care. And we have to reinvest and build facilities faster than you’re seeing in other parts of the country because we’re such a fast growing state.”

Nursing salaries, a huge part of a hospital’s budget, continue to rise in Nevada as the state’s burgeoning hospital industry recruits nurses. According to federal statistics, Nevada’s $57,700 median wage for nurses ranks seventh in the country. California ranks first at $64,100.

Hospital care accounts for about one-third of the $1.6 trillion national spending on health care. The rapid rise nationwide of hospital spending in the past five years has contributed to the swiftest ascent of health insurance premiums in a decade.

And immigration, both legal and illegal, has contributed to skyrocketing costs. Under federal law, hospitals cannot refuse emergency care. According to Mark Krikorian, executive director of the Center for Immigration Studies, a think tank based in Washington, D.C., studies show the total number of uninsured in the country is one-third larger than it would be otherwise because of immigrants.

As part of a four year, $1 billion program, the federal government recently set aside $2.4 million a year to help reimburse Nevada hospitals for emergency treatment of illegal immigrants. Nevada hospital officials said it comes “nowhere close” to the actual costs of providing between $6 million and $10 million of such care per year.

But Leslie argues that major health care chains in Nevada — which include HCA, Universal Healthcare Services Inc. and Catholic Healthcare West — wouldn’t continue to build hospitals in Nevada if they weren’t making considerable profits. Twelve hospitals have been built in the past decade, and more are planned.

“We just can’t sit back and do nothing for our citizens as our hospitals continue to raise their prices and apparently send their profits to out-of-state headquarters,” said Leslie, chair of the Assembly Committee on Health and Human Services. “And we don’t want them to just expand for their profit and not take in the needs of the community.”

In 2004, Valley Hospital shut down its profitable 12-bed geropsychiatric center because, chief executive Greg Boyer said, more profit could be made by delivering more babies at the hospital. It left the Las Vegas Valley, which has the fastest growing senior population in the United States, with only 18 beds devoted to such care. In March, however, an expansion at North Vista Hospital raised the number of beds for geropsychiatric care to 40.

“It’s such a cold and callous bottom-line way of thinking,” said a nurse who worked in the unit. “How much profit is enough when you are also supposed to have a social responsibility?”

Leslie and Assembly Speaker Richard Perkins, D-Henderson, want the hospital industry to report more financial and strategic information to state officials so lawmakers can make informed policy decisions.

“We have the fourth highest rate of adults without health insurance in the nation, nearly 350,000 people,” Leslie said. “The truth is we are headed into a perfect storm of a health care crisis in our state, and we need to be proactive in developing solutions.”

But Republican Assemblymen Garn Mabey and Joe Hardy, both Southern Nevada physicians, and state Sen. Sandra Tiffany, R-Henderson, argue hospitals are being singled out.

“Are we going to make the casinos and every other business report what they’re doing with their profits and making them reinvest a certain amount in the community?” Tiffany said. “Come on.”

Leslie responds that Tiffany’s argument doesn’t apply to an essential public service.

“Nevadans are paying the most for hospital care and we really don’t know why,” said Leslie. “Every state has many of the same problems but most aren’t charging as much.”

A study by University of Southern California professor Glenn Melnick, who testified before Congress last year on health care pricing, shows Nevada has the highest hospital charges in the country — 300 percent higher than costs. California and Florida, according to his research, are next with a 290 percent markup. Nearby Arizona and Utah have markups of 214 percent and 187 percent respectively.

Welch said some out-of-state institutions might charge less for procedures because they receive either foundation or tax support.

There is no single formula for calculating charges, Melnick said. Hospitals factor in the number of uninsured they treat, labor costs, and whether the hospital contracts with a large number of low-paying insurers.

“Reimbursement rates are very complicated and margins are not high,” Welch said.

With most hospitals relying on government health payments for around 50 percent of revenue, and private insurers that negotiate discounts responsible for most of the rest, raising charges is a common way to bring in additional money from those not covered by discounts, Melnick said.

Raising list charges, which often bear little relationship to the actual cost of services, Melnick said, is a way hospitals also increase the amount they get from insurers, which often use the charges as a starting point in negotiating discounted contracts for their policyholders.

There is a precedent for offering uninsured patients large discounts for hospital care, even larger than the 50 percent figure proposed in Nevada. Earlier this month, four hospital systems in Minnesota said uninsured patients with household incomes below $125,000 would pay no more than the amount paid by larger insurers for policyholders.

Minnesota’s attorney general, who calls having the uninsured pay more for the same treatment consumer fraud, negotiated the settlement after threatening to sue hospitals he thought were overcharging the uninsured. The hospitals also must scale back aggressive debt-collection tactics.

Mabey said the best way for the uninsured to deal with high health care costs is “to learn a skill so you can work for a company that offers health insurance.”

As for high list charges, Melnick said that isn’t unusual for states with a high tourism trade. Tourists who are sick or injured have to pay “sticker price,” which can “amount to millions of dollars a year” for a hospital. State Sen. Maurice Washington, R-Sparks, chairman of the Human Resources and Education Committee, said that makes sense.

Under the concept of supply and demand, Washington noted, for-profit hospitals can raise charges to any amount the market will bear. Prices, he said, will level out once the state’s rapid growth stabilizes. He said hospital chains are making a huge investment in building hospitals in Nevada.

A study commissioned by the Nevada Hospital Association found that capital spending for new, renovated and expanded hospitals increased 70 percent to $378 million in fiscal year 2004, from $223 million in fiscal year 2000.

Hospital reports on file with Nevada’s Division of Health Care Financing and Policy do not reveal huge profits by the state’s hospitals, where 85 percent of the beds are in for-profit institutions.

In 2004, for instance, St. Rose Dominican Hospital-Siena Campus had the highest profit margin at 11 percent. MountainView Hospital reported a 6.4 percent profit; Summerlin Hospital, 6.3 percent; and Valley Hospital, 6 percent. Sunrise Hospital, which Welch said had to write off bad debt, reported a 0.1 percent loss. North Vista Hospital, St. Rose Dominican-de Lima Campus and University Medical Center also reported small losses. Two new hospitals, Southern Hills and Spring Valley, reported large losses of 81 percent and 17 percent respectively, largely because of startup costs with few patients.

USC’s Melnick also said that a hospital’s corporate parent — anxious to make it appear it is not making large profits in a community — will make its hospitals pay high prices for services that are systemwide. “For example,” he said, “if the corporate parent owns all the hospitals in the chain, it will often charge its hospitals high rent. It will do the same thing with the supplies that it buys for the entire chain. They negotiate a group discount but when they sell them to their operating units they don’t pass on the discounts. The same goes for legal fees. Any and all that they can, they do. It’s called transfer pricing and it happens all the time. Unless you have an expert looking at the books, it’s hard to tell the true performance.”

Welch noted that Nevada hospitals must follow general accounting practices or run afoul of the law. Both he and Jim Wadhams, a lobbyist for the hospitals, said there is no need for further paperwork to be done by hospitals. “We just have to get it in a format everyone can understand,” Wadhams said.

“When you have your car repaired, you have a right to receive itemized pricing before you agree to the service,” said Andy Brignone, an attorney for the Healthcare Coalition, during a recent meeting of Nevada’s Assembly Committee on Health and Human Services. “If it’s important enough to require advance disclosure of pricing when you have your car body repaired, then it should be important enough to require hospitals to disclose pricing when you go to a hospital to have your human body repaired.”

Leslie said she hopes the current bills are precursors to requiring hospitals to furnish a price list for procedures, which is something the state of California does.

Washington said AB296 probably will garner support from both sides of the aisle. If an individual is taken to an emergency room for, say, a heart attack, he said they shouldn’t be penalized because insurance doesn’t cover them there.

Mabey said he doesn’t believe AB66, which would require drug company representatives to report gifts to health care professionals, is necessary. The drug industry and the medical profession, he said, have established codes of conduct that clarify what is unethical. “They don’t give us anything other than samples now,” he said.

But Leslie said evidence abounds that lavish gifts still are given, which encourages physicians and other health care professionals to offer the highest priced prescription drugs to patients and hospitals. If passed, Leslie said, the legislation eventually could cause drug companies to spend less on marketing, lowering the price of drugs. Nearly a dozen other states either have passed bills or have them pending.

Having the state involved in buying drugs from Canada is problematic, legislator-physician Hardy said. A law against importation has largely been ignored, and Customs agents haven’t bothered private citizens going to Canada. But the Food and Drug Administration has sent warnings to states with drug import programs and has seized some drug orders. The FDA warns that drugs from foreign pharmacies can be unsafe because they can originate anywhere.

Assembly Majority Leader Barbara Buckley said such a program can be run successfully and gives consumers another option in the fight against costs.

But professor Melnick said that should the programs — which have been slow to catch on in states — ever cut into the profits of pharmaceutical companies, one outcome is certain: “The pharmaceutical companies will simply stop supplying so many drugs to Canada.”

Hospital costs should not be thought of in a vacuum, said Dr. Jerry Reeves, a member of the state Board of Health and president of Las Vegas Operations for the Culinary Health Fund. “You want to get the best value for the dollars spent on health care,” he said.

It makes no sense, he said, for Valley Hospital in Las Vegas to charge $233,259 for a heart valve operation that the Cleveland Clinic lists at $88,273, not when when the Cleveland institution has a mortality rate of 3.67 percent for the procedure while Valley’s is 6.78 percent. That means Nevadans pay more than 2 1/2 times more for an 85 percent greater chance of dying from the surgery.

Washington called such a scenario bizarre.

“I think I better go to Cleveland,” he said.

facebooktwittergoogle_pluspinterestlinkedinmailby feather