Connecticut Insurers Share Facility Fee Concerns With Lawmakers

Dec. 19--HARTFORD -- Insurance executives told lawmakers Thursday that they have not seen efficiencies promised by hospital mergers and the purchase of physician offices lead to lower costs in an era when consumer payments now cover half of healthcare outlays nationally.

The Bipartisan Roundtable on Hospitals and Healthcare took testimony on facility fees and other cost drivers from the perspective of insurers, while state Comptroller Kevin Lembo told the representatives he worries about his ability to negotiate costs as the market continues to shrink to fewer, but larger hospital systems.

"This is going to be a tough spot for us," Lembo told the committee.

The state of Connecticut covers approximately 210,000 people between employees, their dependents and retirees, spending $1.4 billion in the process.

State Rep. Terri Wood, R-Darien, expressed shock when told by Martha Temple, president of the New England market for Aetna, that deductibles, co-pays and premiums for consumers equal 50 percent of healthcare costs.

"That's pretty staggering," Wood said.

Temple said the increases in cost have outpaced inflation by 7 percent to 10 percent over the last few years.

Bernadette Kelleher, vice president of provider solutions for Anthem Blue Cross and Blue Shield, said the promised cost savings have not been passed onto commercial carriers.

She said they are not always easy conversations to have with hospitals and physicians, but they are pushing for evidence of efficiencies and what they are yielding.

William Welsh, associate chief counsel at Cigna, said his company has seen significant cost increases attributed to hospital consolidations.

Welsh said they looked at the claims of a patient who was on a drug regime for cancer before his physician's practice was bought by a hospital and afterwards.

They found the average unit cost for the pharmaceutical was $6.90 before the purchase and $413 after it was bought, an estimated 6,000 percent increase to the hospital outpatient rate. He said this was common within the oncology area.

In another example, Welsh said a very simple procedure, such as wart removal in an dermatology practice, went from an estimated $200 total cost to the patient to anywhere from 25 percent to 40 percent more when the hospital added a facility fee after it purchased the practice.

Common gastrointestinal procedures, such as colonoscopies and endoscopies, jumped dramatically when practices were bought compared to independent offices not affiliated with a hospital. The average cost for those affiliated with a hospital were $3,300, while the independent group charged $1,400.

The Cigna official said nationally facility fees are viewed by others "as a real profit center."

Welsh said private equity firms are not only buying up ambulatory surgery centers, but nonprofit hospitals with the purpose of "terminating their in network contracts and billing strictly at the out-of-network rates solely to maximize profits."

He said given the desire for profits through facility fees, they have seen nationally, doctors with office suites, charging facility fees for such routine procedures, such as ear wax removal. Welsh said they have refused to pay fees in those instances.

Welsh said providers are also now waiving cost share obligations with for instance, Medicare, because you can't pass down the excessive cost of a facility fee.

The official said a routine colonoscopy would be reimbursed by Medicare at $350 or $450 He gave an example of an out of network ambulatory surgery center that charged a facility fee of $16,000 to $23,000, waiving any payment from Medicare.

Welsh said he has seen that type of behavior "anecdotally" in Connecticut within the last year.

He said Cigna represents many self-funded employer plans, the type of client who wants to offer robust plans to their employees.

"They feel they are being unfairly targeted because of their generosity. I think my message is, in the end for everybody, customer, client, provider, carrier, this is simply not beneficial or productive for anybody," Welsh said of facility fees.

Lembo told the committee the state may need more regulatory options to protect consumers.

He said consolidation of practices and hospitals may improve care coordination, but the state should ensure they result in better care and lower utilization, rather than higher prices because hospitals would have increased market power.

Lembo suggested the state may want to require each individually licensed hospital in a system to negotiate contracts independently, and require a 30-day mandatory mediation period after a contract expires.

He said now when contracts end, it amounts to "an exercise in brinkmanship" by the insurer and the hospital with patients and employers caught in the middle.

The comptroller also suggested requiring an extended period where hospitals must continue to accept patients at the previous rates after negotiations break down. This would give them additional time to find new providers.

Lembo also talked about charges for what he said was essentially an urgent care visit, but was billed at emergency room rates.

An audit being conducted for the state by Anthem and United Healthcare found claims were coded differently than expected, given the diagnosis, in more than half of the cases.

"... virtually all encounters at either free-standing or in-hospital ERs are billed at ER rates rather than lower urgent care rates, regardless of whether a patient saw an ER doctor for a real emergency ...," Lembo said.

State Sen. Len Fasano, R-North Haven, who will take over the minority leader position next month, expressed concern over pricing out independent doctors when insurers start going to bundled payments.

State Rep. Patricia Dillon, D-New Haven, worries urban hospitals will be punished for serving sicker patients on such measures as hospital readmissions. She also referenced mental health patients who doctors say have no place they can discharge them to.

James Dubreuil of United Healthcare said they work with hospitals on discharge plans to skilled nursing facilities or home care. He said these options are covered by their plans.

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