American Hospitals – Healthcare Villains?

Virtually all Americans know that our healthcare system is broken and that it’s working against us. But who is the villain in this story? Who is responsible for maintaining this healthcare system, and using it to profit off of patients? If we had to round up the usual suspects in a lineup, we’d probably end up with health insurance companies and big pharma. But what about hospitals? Many people like the nurses and doctors who care for them, and associate hospitals with those care-givers. But are hospitals equally responsible for the crazy costs of health care, for our poor access to care, and for the medical debt that is like a ball & chain on our personal finances? A new documentary sets out to answer this question. It’s called “American Hospitals: Healing a Broken System,” and our guest today is Wendell Potter, who is associate producer on the film.

Today’s guest Wendell Potter is the former Vice President of Corporate Communications for the health insurance company Cigna. In 2008, he resigned, hung up his pitchfork for good, and became one of the industry’s most prominent whistleblowers, testifying against corrupt practices in HMOs before the U.S. Senate. Since then, he has become a prominent advocate for Medicare for All and universal health care.

Gillian starts by noting that we usually ID health insurers and Big Pharma as the worst actors in our healthcare system, the “villains” behind our dysfunctional system. She asks Wendell, should we add hospitals to the list?

Wendell says YES, hospitals are part of the rogue’s gallery specifically because of price gouging – charging far more than they should, and more than hospitals in countries with Medicare for All are allowed to. Hospital prices bear no relationship to the cost or quality of the medical services they’re providing, and many hospitals charge as much as they can get away with. They get away with it because they face much less scrutiny from employers, from Congress, the states, and even from advocates.

How do they get away with this? Unlike insurers and pharma, hospitals are part of our communities, they develop one-on-one relationships with their legislators and non-profits in their area.

Ben asks Wendell to tell us more about the principle crime hospitals are guilty of – price gouging – and how specifically does hospital pricing work? Hospitals charge whatever they can get away with, so even in the same zip code you’ll find hospitals charging wildly different prices for the same service, like an MRI. Insurance companies have not been able to negotiate these prices down because some of these hospitals are so big they can’t be left out of insurance plans, and in rural areas there might be only one hospital with absolute bargaining power. Moreover, insurance companies don’t care that much about hospital costs – they’re more than happy to pass those on to the rest of us in the form of higher premiums.

If you have insurance, when you get a hospital bill you’ll probably see an enormous $ number that represents the alleged “price” of the service you receive, then you’ll see a very marked down price that your insurance actually paid, creating the impression that your insurer has negotiated a massive discount on your behalf, sometimes 60% lower or even more. If you DON’T have insurance you might get that massive bill without a discount. Wendell explains that these huge hospital list prices are completely fake. Hospitals know that these prices will be negotiated down, and almost no one will actually pay the list price, so the game is to set that number as high as they possibly can to let insurers look like they’ve won something. If you’re uninsured you are in the worst position because you have very little bargaining power with a hospital, but even then most hospitals will reduce or even eliminate that price for uninsured people – particularly non-profits, who have an obligation to provide charity care. But not everyone knows this! As Gillian mentions, most people don’t think of hospitals as a place to haggle over prices!

One major trend in the last 20-30 years has ben the growth of for-profit hospital chains, which in many cases are buying out non-profit hospitals. Wendell notes that in many cases non-profits operate exactly the same as for-profits, with greedy pricing as well as aggressively pursuing collections of patients’ medical debt – including Catholic hospitals! Wendell notes that Catholic hospitals actually provide LESS charity care than other non-profit hospitals.

Ben asks Wendell about the TV show “New Amsterdam,” which is about a hospital CEO who refuses to operate his hospital based on profit motives, and implements radical and creative reforms to support patients and fight the healthcare bureaucracy. Could such a hospital actually survive in the hospital marketplace these days, or are they forced to pursue aggressive pricing, pursuing aggressive collections, etc? Wendell says there are some hospitals that are better and actually help improve the population health of the communities they serve. He points specifically to Maryland, the only state with an “All-Payer” rate-setting system for hospital payments, and more recently global budgeting, which has limited hospital closures, led to lower prices, and allowed hospitals to be at least slightly better actors.

When we win a Medicare for All system, which changes the financing system and essentially leaves existing hospitals and providers in place, how would that impact hospitals and the way they behave? All hospitals would have global budgets, so they wouldn’t have control over their own prices to practice price-gouging, they wouldn’t be in the business of collecting payments from patients at all, and of course everyone would have comprehensive coverage! Overnight, many of the incentives hospitals have to extort payers and ruin patients’ finances would disappear.

Moreover, much of hospitals’ high prices are not just their price-gouging, it’s also the incredibly high administrative expenses they incur navigating insurance companies’ plans, negotiating insurance company denials, and doing extensive documentation exclusively to justify claims, not to support their patients’ health. This layer of administrative waste would also disappear under Medicare for All, leading to even more extensive savings.

Finally, a very important note: the Medicare for All bills have just been introduced this week in the U.S. House and Senate! Please call your Rep and Senators and ask them to co-sponsor the Medicare for All bills if they haven’t done so already – you can see our 2023 Co-Sponsor Drive Toolkit here, and our information page on both bills here.

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