Killer Billing Errors

The negotiated discounts are good but they are diminishing as hospitals gain more leverage, said Paul B. Ginsburg, president of the research group Center for Studying Health System Change in Washington.

In the 1990s, consumers chafing under restrictive managed-care plans demanded more choice and got it, Ginsburg said. Suddenly, insurance carriers found themselves scrambling to lure more hospitals, especially prominent ones, into their networks, making it more difficult, he said, for the insurance companies to negotiate effectively.

Adding to the hospital industry's negotiating clout is a spree of hospital consolidations taking place in certain parts of the country, Ginsburg said.

"So the motivation for hospitals to agree to low prices is much less than before," Ginsburg added.

Meanwhile, as private insurers keep bargaining for discounts, hospitals keep raising their list prices. The idea is to make up for shortfalls created by those discounts as well as for delinquent bills and free care administered to the poor, said Nancy M. Kane, a management professor at the Harvard School of Public Health.

The price hikes especially hurt the most vulnerable: the uninsured, who now pay prices "wildly unrelated to cost," Kane said.

Congressional committees are investigating hospital billing practices involving the uninsured, and several federal lawsuits recently filed accuse not-for-profit hospitals of failing to fulfill their charitable obligations.

Hospitals say they're feeling squeezed. While insurance companies reap record profits, one in three hospitals in this country is losing money every day and another third are barely breaking even, said Carmela Coyle, senior vice president for policy at the American Hospital Association in Washington.

"We've got market areas like Philadelphia where there is only one insurer, and that insurer holds all the cards," Coyle said. "For those who suggest hospitals are in the driver's seat, one would think that would mean you would see better financial situations for hospitals."

Coyle also said the hospital industry is working hard to produce more clear, concise and correct bills. Her group is working with the Healthcare Financial Management Association on educating providers and hospitals about generating more patient-friendly bills.