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Hospital fees

Outpatient sticker shock: $538 for a 3-minute treatment

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Cardinal Glennon Children's Medical Center

The exterior of Cardinal Glennon Children's Medical Center in St. Louis on March 14, 2011. Photo by Erik M. Lunsford,

A few weeks after Allison Zaromb took her 4-year-old son Meir to see a dermatologist in an outpatient office at the SSM Cardinal Glennon Children's Medical Center campus, she received separate bills from the doctor and the hospital.

The cost for a 3-minute procedure to treat Meir's warts totaled $538, which included a $220 bill for physician services - and a separate bill for a $318 hospital "facility fee."

Zaromb, a periodontist who lives in University City, is now suing SSM Health Care Corp. and Cardinal Glennon Children's Medical Center in a proposed class action lawsuit on behalf of other patients.

The lawsuit, filed in September in the state Circuit Court of the city of St. Louis, accuses the non-profit hospital system of deceptive business practices - in particular, violating a Missouri consumer practices statute - in failing to fully disclose the costs. A judge still must decide whether to certify the lawsuit as a class action.

"No one told me that I would have to pay more than my co-pay before I took my son to that doctor," Allison Zaromb said in an interview. "Had I known they were going to charge a fee beyond my co-pay for the physician, I would not have taken him there."

With the proliferation of hospital-owned outpatient centers and hospital-owned physician practices, hospital "facility fees" have become increasingly common. Such hospital facility fees often involve greater dollar amounts than the fees charged by physicians. And as patients bear a greater portion of their health costs, they are voicing outrage over some of the bills they receive.

"The hospitals should be far more transparent in giving the consumers the information they need to make intelligent decisions," said John Phillips, one of Zaromb's lawyers on the case. "All the lawsuit is attacking is the failure to give patients decent information so they can walk with their feet and go to the low-cost provider."

Zaromb said that she had not been charged hospital facility fees in the past when taking her children to appointments at other outpatient centers in the St. Louis area. In this case, Zaromb's health insurer paid nearly half of the $538 total, but she was left to personally pay $206 toward the facility fee in addition to a $40 co-pay for the physician's charges.

Her lawsuit is the latest in a string of proposed class action lawsuits challenging St. Louis area hospitals' billing practices - a thorny subject that many hospital officials are reluctant to discuss.

SSM Health Care officials declined to comment on Zaromb's pending lawsuit, but described their billing practices at Cardinal Glennon and other SSM outpatient clinics.

"We do recognize that all these kinds of arrangements get complex ... We talk with patients one on one," said Karen Rewerts, a vice president and chief financial officer of SSM operations in the St. Louis area. "We're following all of the regulatory requirements. ... We thought it was clear, but I agree that there are always ways to make that patient experience better."

She said the parents of children who visit Cardinal Glennon's outpatient clinic receive two invoices: a bill for physician services that are provided by medical faculty members of St. Louis University; and a bill that charges a facility fee "to cover the nursing care, the technology, the equipment and supplies, and space."

Rewerts said the hospital's outpatient clinic, which has 60 examination rooms, is an efficient way for the hospital to provide specialized care. Signs inform children's parents of the hospital's billing practices, she said, along with a form that must be signed upon registration.

Robert Zirkelbach, a spokesman for the America's Health Insurance Plans in Washington, D.C., said that billing outpatients for hospital facility fees is "not something we have a general policy on." But, he added, the insurance industry stresses "the importance of transparency so that patients don't get stuck with a fee they were not expecting."

Mark Reifsteck, president and chief executive of the southern Illinois division of Hospital Sisters Health System, which operates St. Elizabeth's Hospital in Belleville, Ill., said that hospitals have traditionally charged facility fees to cover the costs of their services.

But, he added, patients have increasingly complained about such fees with the proliferation of outpatient facilities, especially ambulatory surgery centers and imaging centers. Outpatient clinics have lower overhead costs than a hospital because they do not operate emergency rooms, so there is more pressure on hospitals to make up their high costs through such outpatient clinics.

"Hospital charging is very arcane and bizarre, and the biggest problem with the billing is that major payers such as Medicare and insurance don't pay the full cost," Reifsteck said. "So hospitals that take in large amounts of Medicare and Medicaid patients need cost-shifting to make up the difference - and sometimes outpatient procedures is the place to do that. When patients see (the bill), they'll get sticker shock."

Patients who visit an outpatient clinic owned by St. Elizabeth Hospital typically receive two bills: one for a physician's services, and the other for technical services, which may include laboratory work, a pathologist's report, and a hospital facility fee.

BJC HealthCare - which operates Barnes-Jewish Hospital, Missouri Baptist Medical Center, Christian Hospital, and several other hospitals and outpatient centers in the greater St. Louis metropolitan area - did not respond to repeated requests for comment about its billing practices.

Officials at Mercy Health, which operates Mercy Hospital St. Louis in Creve Coeur, declined to discuss their billing practices, but issued this written statement: "How hospital services are billed is governed by the Centers for Medicare and Medicaid Services (CMS) and by individual insurance companies. Mercy follows both CMS and insurance company requirements in our billing practices for hospital services."

Under federal regulations, health systems are permitted to charge a hospital facility fee for an outpatient service if it's done in a clinic that is "hospital-based" - meaning that the clinic is owned and operated as part of a hospital or health system, regardless of whether the clinic is physically located on the hospital grounds.

St. Anthony's Medical Center and St. Luke's Hospital declined to discuss their billing practices, but St. Luke's said in a written statement that anytime a patient receives care at one of its hospital-owned outpatient facilities the patient is billed for physician fees as well as for "a facility fee that includes costs for things such as staff services, supplies and equipment that the hospital provides."

Saint Louis University Hospital, which is owned by Dallas-based Tenet Healthcare Corp., has a contract with university-operated SLUCare physicians group. The hospital runs two outpatient centers: a gastrointestinal clinic at a doctors' office building across the street from the hospital; and an orthopedic clinic with outpatient surgery and imaging equipment at the Anheuser Busch Institute. SLUCare physicians, who are paid by the university, treat patients at both clinics. The hospital staffs the two clinics with nurses, technicians, schedulers, and lab technicians. It also pays rent on the GI clinic, and owns the building where the orthopedic clinic is located.

"We have signs in our clinic, and new patients get a letter when they sign up, saying they will receive two bills," said Laura Keller, a spokeswoman for SLU Hospital. "We are very transparent and up front with that. We're not in the surprise business."

But not all patients are satisfied with SLU Hospital's billing practices. John Thomas of Ballwin said that Tenet Healthcare misled patients about the rising cost of medical bills associated with the hospital's gastrointestinal outpatient clinic.

He said the hospital issued a letter in January 2010 saying that, although its outpatient clinic would be under new hospital management, total health care charges for outpatients would remain the same. Instead, because of the addition of facility fees, he said, Medicare is being billed about 63 percent more for his wife Pat's outpatient visits than it was charged in 2009.

"It's not fraud. But just because something is allowable, does not make it right," Thomas said. "I consider this to be a blatant abuse of Medicare."

Phillips, a Seattle lawyer, has brought two successful lawsuits against Seattle hospitals that were based on similar grounds. Those cases resulted in refunds to consumers and agreements by hospitals to provide more billing information to patients on their web sites.

He said that several years ago consultants began advising hospitals that if they acquired physician practices and called those practices "hospital-based," the hospitals could charge not only for physician fees but also for hospital fees.

"From a consumer's perspective, when you go see your doctor, you go see your doctor - whether it's in an office inside a larger hospital complex or right across the street," Phillips said. "The doctor's practice remains the same. ... They're making the doctor's office a ‘hospital-based' clinic for one reason: to make money by charging a facility fee, not to improve consumer service."



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