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Health-Care Tug of War Puts Patients In the Middle
Battle in New Jersey Illustrates Problems

By Amy Goldstein
Washington Post Staff Writer
Friday, October 9, 2009

BAYONNE, N.J. -- One February morning, a courier arrived at the front desk of Bayonne Medical Center, trying to get to a patient's bedside. His mission: to deliver a letter from New Jersey's dominant health insurer warning that the patient would face a huge hospital bill if he did not leave right away.

Hospital security guards stopped the courier -- and 13 others who came soon after -- before they reached patients' rooms. But then came the faxes and, after that, the letters mailed to patients' doctors and homes. Told that her health plan would not pay for her to stay in the hospital, a 35-year-old social worker named Lisa with a severe lung infection was so unnerved that, tethered to an IV pole dripping antibiotics into her arm, she began to pack her gym bag before a staff member coaxed her back into bed.

The hardball tactics being used to pry patients from their sickbeds illustrate the colliding financial interests that pervade U.S. health care. It is a tug of war over where patients are treated, who decides how much care they receive and -- fundamentally -- which parts of the health-care industry gain or lose when people become ill.

The battle playing out in Bayonne has particular relevance as Congress tries to rewrite the rules that govern health care nationwide -- with hospitals, insurers, doctors and other stakeholders descending on Capitol Hill to angle for advantage. The bills before the House and the Senate would shift the system's balance of power that has evolved over decades -- a balance at the core of the dispute here.

Yet the fight over hospital patients in this working-class enclave also hints at the limits of what federal health-care changes would accomplish; none of the bills would legislate away the specific business practices that have escalated into a full-scale brawl between the city's only hospital and New Jersey's largest health insurer, Horizon Blue Cross Blue Shield. Lawsuits are flying in both directions, each side accusing the other of fraud, greed and underhanded behavior that harms consumers and increases medical costs. Bayonne accuses Horizon of harassing patients and not paying its bills. Horizon accuses Bayonne of price-gouging and interfering with its health plans.

Such a sharp clash of self-interests is evidence that President Obama may have been naive in suggesting early on that health care's stakeholders are now willing to set aside rivalries that have thwarted previous attempts at reform, said Uwe E. Reinhardt, a health economist at Princeton University who led a state commission on New Jersey's shaky hospital finances. "It's no different from Iraq with all the different tribes. . . . 'How does it affect the money flow to my interest group?' " he said. "They are all sitting in the woods with their machine guns, waiting to shoot."

In such a tense climate, Bayonne has become virtually the only hospital in the country that has withdrawn in protest from the "provider networks" of every major insurer, abandoning a tradeoff that has become a staple of the health-care system: Hospitals agree to be paid lower rates in exchange for knowing that insurers will steer patients to their beds. Bayonne is not, however, the only hospital at odds with Horizon. Four others have pulled out Horizon's network or are close to leaving.

When Daniel A. Kane arrived as Bayonne Medical Center's chief executive the winter of 2007, it was losing $1.5 million or more monthly and teetering on the edge of collapse. For more than a century, it had been a fixture in this blue-collar community at the tip of a peninsula in Newark Bay.

There was no choice, Kane concluded, but to file for bankruptcy protection and find new owners. Kane and a crew of consultants scoured the country and enlisted investors who wanted to convert Bayonne into a for-profit hospital, one of two in the state.

"This place was messed up every way," said Brent Martin, a consultant brought in to help turn it around. To buy equipment and improve care, the new owners said, they needed to cut costs and bring in more money. In seceding from all of its insurance networks -- a move made possible by the bankruptcy -- the hospital's administrators reasoned they could then charge insurers higher rates. They gambled that people in this rooted community would keep coming.

Even so, Kane said, dropping out of Horizon, which covers nearly half the state residents who are insured, was "very tough."

Christy W. Bell, Horizon's senior vice president for health-care management, said, "Typically, we try to avoid these disputes. It catches patients in the middle." Kane portrayed it differently: "When you are not in [Horizon's] network . . . they are going to teach you a lesson."

Horizon mailed letters to 215,000 members and warned employers that, if people went to Bayonne, they risked big hospital bills and higher premiums.

It was Feb. 6, the first day Bayonne was out of Horizon's network, that Neil Carroll, in charge of the hospital's security, received a call that the courier for Horizon was at the front desk. Horizon officials said they sent letters to all of their 115 members admitted to Bayonne from February to July, urging them to leave. They told some patients that Horizon had determined "your medical condition is no longer acute" so it would not pay for part of their stay. They told some that, because the hospital was outside the network, the patient must shoulder up to 30 percent of the bill. They told others that Horizon would not pay anything, because the patient did not need to be hospitalized in the first place.

Lisa, the social worker, had arrived at Bayonne Medical Center by ambulance, wheezing, with a 103-degree fever. She was wheeled upstairs to a hospital bed. A few days later, an elderly woman in the next bed mentioned that Horizon had stopped paying for patients to be there. Still coughing and weak, Lisa said, she called Horizon and a customer service representative gave her a choice: move to a hospital in Jersey City, several miles away, that was in Horizon's network or pay for the rest of her care on her own.

"They sent me into a furious panic," said Lisa, who spoke on the condition that her last name not be disclosed, saying she fears retaliation by Horizon. A pulmonologist told her to stay. Still, she had her gym bag packed when she buzzed for a nurse, who called a case manager, who told Lisa that Bayonne had no intention of charging her beyond what Horizon was willing to pay.

Lisa climbed back into bed.

Horizon officials said they could not discuss Lisa's case without her permission, which she declined to give. But in general, they said, networks' discounted rates help the insurance industry control medical spending. They have, they said, a responsibility to encourage patients to avoid needless expenses at out-of-network institutions.

Bayonne administrators counter that Horizon is falsely telling patients they could be stuck with enormous bills; hospital officials have promised they will not ask patients to pay more than their health plans cover.

Horizon sued the hospital in May, accusing it of "slick and fraudulent tactics" to submit "phony, inflated bills." Horizon contends the hospital has more than doubled its charges to rates far higher than those of nearby hospitals. Bayonne denies doing so. Horizon also alleges it is illegal for Bayonne to drop patients' co-payments, although Bayonne says that having rescinded its contract with Horizon, it no longer needs to follow the rules between the insurer and its customers.

In July, Bayonne sued Horizon, accusing it of "illegal intimidation, harassment, threats and fraud" against patients and doctors, and of paying the hospital a fraction of what it owes. And it alleges that Horizon is trying to "illegitimately . . . enhance its Wall Street value" at a time when it has asked state regulators to let it convert to a for-profit company -- a claim that Bell calls "simply hogwash."

Amid the attacks and counterattacks, said Jon Glaudemans, senior vice president for consultants Avalere Health, who studied health care in New Jersey, is dysfunction in the medical marketplace that Congress's proposals would not fix.

"It's a game of chess that turned into a game of chicken," he said, "and the patients are in the middle."

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