Limiting 'gross charges' on hospital bills

Robert D'Amicodatri had two strokes, complicated by seizures, and rang up $374,741 in charges at Crozer-Chester Medical Center early in 2009.

Three years later, in February, the Delaware County hospital sued him for $241,321, the balance after an insurance policy paid $20,998 and the hospital reduced his bill by $112,422 for a reason it has declined to explain.

Crozer acknowledged that D'Amicodatri, who lives in Upper Chichester, can't pay. D'Amicodatri, 67, was earning about $800 a week as a courier before the strokes. Now he makes $890 a month from Social Security, he said.

The hospital sued anyway, arguing that D'Amicodatri's wife can pay — even though she died in October, at Crozer.

The amount demanded by Crozer is "crazy," D'Amicodatri's lawyer, Scott Waterman, said. "They might as well bill $200 million," said Waterman, a consumer bankruptcy specialist in Media.

Crozer-Keystone Health System spokeswoman, Kathy Scullin, said she could not discuss D'Amicodatri's case because of privacy laws. The health system has a policy that allows "patients with limited means to receive care at no cost or at highly discounted rates," she said, but takes legal action if patients do not cooperate.

D'Amicodatri's hospital bills mounted before the Affordable Care Act took effect began taking effect in 2010, but the landmark law has a provision now in effect designed to eliminate, for some uninsured or underinsured patients at least, jaw-dropping bills like D'Amicodatri's that are based on astronomical "gross charges." Instead, hospitals are supposed to charge the uninsured no more than they would receive from Medicare or commercial insurers.

The health reform law, which the Supreme Court is expected to rule on this month, also imposed new requirements on nonprofit hospitals' financial assistance policies and placed restrictions on billing and collections to protect consumers who are overwhelmed by medical expenses.

Such measures were inserted into the Affordable Care Act to ensure that hospitals provide adequate amounts of charity care to balance the huge financial benefits of their tax exemptions. If upheld, the Affordable Care Act will likely reduce demand for charity care, though the Congressional Budget Office predicted that 20 million people would remain without insurance.

"What it's basically saying to charitable hospitals is you have to take care of those who can't afford to pay," said Julius Green, the leader for ParenteBeard's exempt organization tax practice. Every hospital "will probably say they have a charity care policy, but the extent to which they follow the policy and make sure people know about it varies greatly," said Green, based in the Philadelphia headquarters of the accounting and consulting firm.

To explore variations in the policies themselves, The Inquirer asked 25 Philadelphia-area hospitals and health systems for copies of their financial assistance policies. Twenty one of the hospitals and systems either provided copies or had the policies posted on their websites.

Two, Deborah Heart & Lung Center and Holy Redeemer Health System, refused to provide copies of their policies. Fox Chase Cancer Center did not respond to repeated requests. North Philadelphia Health System said it was in the middle of revisions.

The policies are difficult to compare because they are not uniform in structure or in level of detail provided.

Most hospitals make clear that an uninsured person whose annual family income is less than twice the federal poverty level and does not qualify for government aid is eligible for free care.

That is the minimum recommended by Pennsylvania regulations and required by New Jersey's Hospital Care Assistance Program. For a family of four the income limit is $46,100 this year, before local adjustments are applied.

Two of the responding hospitals go beyond that benchmark. At St. Mary Medical Center in Langhorne, an individual in a family of four with income up to $55,875 is eligible for free care. At Abington Memorial Hospital the same person could have a family income of up to $69,108, or three times the poverty level, and still qualify for free care.

Individuals who don't qualify for free care often get varying discounts depending on family income levels, but a crucial and often elusive detail in how much a hospital will hold a patient responsible for is the base from which a discounted bill is derived. Some use Medicare rates.

Jefferson Health System's policy said patients who are not eligible for free care should receive a discount of at least 70 percent off hospital charges, unless that amount violates the Affordable Care Act. Abington Memorial cuts its gross charges by half and then discounts from there for qualified patients. Einstein Healthcare Network offers no discounts to uninsured patients who don't qualify for free care, instead charging them fixed rates.

Historically, hospitals have billed uninsured patients "gross charges," which are far higher than costs and the rates they get from commercial insurers and receive from Medicare and Medicaid.

Virtua Health's 2011 financial statements illustrate the gap. Virtua said it provided $237.4 million in charity care based on gross charges. Based on Virtua's estimated costs, however, the amount of charity care was $45.1 million, or 19 percent of gross charges, Virtua reported.

New Jersey limits hospital bills for the uninsured who pass an income and asset test to 115 percent of the corresponding rate paid by Medicare. Pennsylvania had no such limit on gross charges before the ACA.

The ACA prohibited the billing of gross charges nationwide, though there is disagreement about whether the prohibition applies to anyone who is uninsured or just to those who qualify for aid. The act itself is ambiguous.

Green, at ParenteBeard, said it's only for those who qualify for aid. Corey Davis, staff attorney for the National Health Law Program in Carrboro, N.C., believes that the law prohibits gross charges for all uninsured patients.

Richard Weisshaupt, an attorney with Community Legal Services of Philadelphia who specializes in public benefits and health law was subdued in his praise of the gross charges measure. "It's a biggish deal," he said. "For a lot of people it's still so high that it's almost unattainable."

That is probably the case for D'Amicodatri.

Crozer-Keystone's gross chargers in the year ended June 30, 2011, were $6.6 billion, but it reduced those charges under contracts with government payers and commercial insurers by $5.6 billion, or 85 percent.

Applying that reduction to D'Amicodatri's gross charges of $374,741 would result in a bill for $56,211. Subtract the amount paid by insurance and D'Amicodatri would be left with a $35,215 bill.

That's a huge amount for someone with his income, but not big enough to consume all the value of his house — assessed at $131,490 last year — if Crozer wins a lien through its pending lawsuit.

As a man who said he had always worked "long and hard hours" to achieve a modest lifestyle, D'Amicodatri is dumbfounded by the amount of money demanded by Crozer: "How can anybody possibly have that kind of money taken away because nobody can ever accumulate that kind of money," he said.