Romney aide targets debt at hospitals
Aggressive collecting from patients urged
A top aide to Governor Mitt Romney wants Massachusetts hospitals to be more aggressive in collecting from patients who do not pay their bills, and he said the problem may be addressed by legislation the administration is drafting to expand coverage of the uninsured.
Tim Murphy, Romney's policy director, made his comments as politicians and patient advocates nationally are pressing hospitals to restrain their collection efforts.
Murphy is designing the governor's plan to cover the uninsured, which includes insurance policies that keep premiums low by charging high deductibles and copayments for hospital care. Those policies could flop if hospitals can't collect deductibles and copayments from patients, he said, because hospitals would pressure insurers to make up the difference, leading to higher premiums.
In addition, he said he is concerned that the growth of bad debt, debt that hospitals consider uncollectible, helps drive up the cost of private health insurance premiums, as well as government payments through the Medicaid and Medicare programs. These costs are paid by consumers, employers, and taxpayers.
''Hospitals . . . are on the passive side" in terms of collection, Murphy said in an interview with the Globe. He said hospitals need to demand more payment upfront and use all legal options to collect from ''recalcitrants."
In October, the state commissioner of healthcare finance and policy, Paul Cote, expressed concern about the number of liens Baystate Medical Center in Springfield put on people's homes and told Baystate to stop charging interest. Lawsuits in many states, including Massachusetts, are challenging hospital billing and collection methods, and Congress held hearings last year to question whether hospitals were being too aggressive.
''I hope we're not turning into the kind of state that uses aggressive bad debt collection to discourage people from seeking care," said Nancy Kane, a professor at the Harvard School of Public Health who studies hospital finances. Medical debt, she said, often forces people into bankruptcy and causes them to forgo follow-up care.
Murphy said half of hospitals' bad debt results from their failure to collect copayments and deductibles from patients with insurance, a figure he said was provided to him by a hospital executive he declined to name. But other hospital officials dispute that number, pointing to a 1999 study that indicated that most unpaid hospital bills are owed by people who cannot afford to pay.
That study of Massachusetts hospitals, commissioned by a legislative commission, found that 64 percent of bills for nonemergency care written off as bad debt were from patients below the federal poverty level, $8,240 for an individual at that time. And 94 percent were from patients earning less than $32,960, which would have qualified them for the state's free care program, which partially reimburses hospitals to care for lower-income patients. The study, published in the journal Health Affairs, concluded that ''Massachusetts hospitals adequately collect debts from patients who are able to pay."
Last year, Massachusetts hospitals provided about $263 million in care that they were not able to collect for, according to the Massachusetts Hospital Association. Hospitals were able to recover $81 million in bad debt for emergency room care from the free care pool, which is funded by hospitals, insurers, and a small amount of state funds.
''Hospitals are as aggressive as it is right for them to be," said Joe Kirkpatrick, vice president of healthcare finance for the Massachusetts Hospital Association. ''While it is important that they try to collect every dollar they can for services they provide, they certainly do not want to be a barrier to care for the people who need it."
Murphy, choosing his words carefully, declined to spell out what aggressive steps the hospitals should take, nor would he specify the legislative remedies under consideration. He said, however, that hospitals should report all patients who do not pay their bills to collection agencies and should get those agencies to ramp up their efforts. The Romney administration has previously stated that even low-income patients, including those on Medicaid, can pay something toward their healthcare.
''Hospitals use a softer approach with the credit agencies" than other industries, Murphy said. ''We would expect them to be more aggressive."
Placing liens against patients' assets is legal in Massachusetts, but most hospitals do not go after patients' homes or cars, according to the hospital association. Murphy would not say whether he advocated putting liens on homes and cars or garnisheeing wages.
Murphy said hospitals should more quickly offer discounts to patients facing large bills and should have standard payment plans to spread the cost.
Murphy said bad debt leads hospitals to shift costs to patients who do pay their bills and to insurers, including the government. That can drive up the cost of insurance and force more businesses to drop coverage, he added.
If hospitals do not collect deductibles and copayments for the proposed lower-cost insurance plans, Murphy said, they will end up having to write off a large share of the costs of patient care and will probably push for bigger payments from insurers. That, in turn, could force insurers to raise premiums, making the plans less attractive to the working uninsured who the Romney administration hopes will buy the plans.
The administration has suggested that insurers could provide stripped-down insurance for about $200 a month, with deductibles ranging from $250 to $1,000 and copayments on office visits of $20 to $40. Emergency room copayments could be more.
Murphy's first comments on bad debt were made during a program for healthcare journalists earlier this month.
Recognizing the sensitivity of the topic after it was broached, Romney's communications director, Eric Fehrnstrom, subsequently said the comments were off the record. But he later conceded they were not and made Murphy available for a follow-up interview this week. ''We don't want to be viewed as throwing bricks at the hospitals" while we're working with them to cover the uninsured, Fehrnstrom said.
Dr. James Mongan, president of Partners Healthcare, heard Murphy's comments at the Health Coverage Fellowship. ''Hospitals are being pounded on both sides of the ledger," Mongan said. ''We're sued for charging too much and blamed for not collecting bad debt."
His vice president of finance, Peter Markell, said hospitals could do better at collecting copayments and deductibles, but suggested a better strategy would be to pass a law making insurance companies responsible for collecting that money, since they are already collecting premiums from patients and reviewing hospital requests for payment.
He said Partners already sends all patients who do not pay their bills to collection, but does not take them to court, except in extremely rare cases when it is clear they have substantial assets. Partners wrote off about $54 million in bad debt costs last year for its eight hospitals and approximately 1,000 primary care doctors, he said, about 1.5 percent of patient revenues.
Alice Dembner can be reached at Dembner@globe.com.