Hospitals Block ‘Surprise Billing’ Measure In California

Yves here. This article demonstrates the power of health care industry incumbents. “Surprise billing” is pure and simple price gouging, particularly since hospitals routinely game the system, such as by scheduling doctors who are not in a patient’s network on his operation, even when the patient has gone to considerable lengths to try to prevent that.

All these hospitals did was the equivalent of yelling “Boo” at the legislature, and the legislation to combat surprise billing was yanked, even though there has been a great deal of deservedly critical press coverage of this abuse.

By Ana B. Ibarra, a Sacramento-based for California Healthline, who previously covered at the Merced Sun-Star. Originally published at California Healthline

Citing fierce pushback from hospitals, California lawmakers sidelined a bill Wednesday that would have protected some patients from surprise medical bills by limiting how much hospitals could charge them for emergency care.

The legislation, which contributed to the intense national conversation about surprise medical billing, was scheduled to be debated Wednesday in the state Senate Health Committee.

Instead, the bill’s author pulled it from consideration, vowing to bring it back next year.

“We are going after a practice that has generated billions of dollars for hospitals, so this is high-level,” said Assemblyman David Chiu (D-San Francisco). “This certainly does not mean we’re done.”

Chiu said he and his team would keep working on amendments to the bill that address the concerns of hospitals while maintaining protections for patients.

Hospitals focused their opposition on a provision of the bill that would have limited what they can charge insurers for out-of-network emergency services, criticizing it as an unnecessary form of rate setting.

“Balance billing,” better known as surprise billing, occurs when a patient receives care from a doctor or hospital — or another provider — outside of her insurance plan’s network, and then the doctor or hospital bills the patient for the amount insurance didn’t cover. These bills can soar into the tens of thousands of dollars.

In the absence of federal laws, many states have tried to formulate solutions to balance billing, but health policy experts suggest this issue would be best addressed by the federal government.

Congress is discussing different approaches but not without facing fierce opposition and lobbying from two influential groups: health insurers and providers, including doctors and hospitals.

Last week, the Senate Health, Education, Labor and Pensions Committee passed the Lower Health Care Costs Act, which would require insurers to pay providers no more than the median in-network rate in a geographic region for emergency and nonemergency care. But the American Hospital Associationdeemed the payment arrangement unworkable.

Getting buy-in from hospitals and other providers will not be easy.

“The system exists in a way that allows a subset of providers to stay out-of-network and charge very high rates,” said Christen Linke Young, a fellow at the USC-Brookings Schaeffer Initiative for Health Policy. “They’re basically exploiting the system.”

Chiu’s bill would have prohibited out-of-network hospitals from sending surprise bills to privately insured emergency patients. Instead, hospitals would have to work directly with health plans on billing, leaving the patients responsible only for their in-network copayments, coinsurance and deductibles.

The bill also would have limited the amount hospitals could charge insurers for each service, and the amounts would have varied by region.

That’s the part hospitals opposed.

“We’ve said from the beginning that we are supportive of protecting patients. Unfortunately, the proponents of the bill inserted a completely unrelated provision regarding rate setting,” said Jan Emerson-Shea, a spokeswoman for the California Hospital Association.

Emerson-Shea said that if the state sets prices, health plans would have little incentive to negotiate contracts with hospitals. If this provision were removed, the hospital association would support Chiu’s bill, she said.

“That provision doesn’t need to be in the bill if the bill is really about protecting patients,” she said.

Chiu disagrees. Protecting patients from high costs and capping what insurers pay hospitals are “inextricably related,” Chiu said.

If this provision were removed, patients might still face high costs in the form of rising insurance premiums as insurers try to recoup their costs, Chiu said.

“It is useless to protect patients from receiving a bill on the front end if hospitals can turn around and price gouge consumers on the back end. It’s like closing your front door and leaving the back door wide open,” he said.

In California, a 2009 state Supreme Court ruling protects some patients against surprise billing for emergency care, and a state law that took effect in 2017 protects some who receive nonemergency care.

But millions remain vulnerable to surprise bills, largely because California’s protections don’t cover all insurance plans.

Chiu’s bill was designed to close some of the loopholes. “It is disappointing it couldn’t get done this year” because more Californians will get hit with exorbitant balance bills in the meantime, he said.

The measure was prompted by the peculiar billing practices at Zuckerberg San Francisco General Hospital, located in his district.

Unlike most large hospitals, San Francisco General does not contract with private insurers. An investigation by Vox found that the hospital considered patients with private insurance out-of-network for emergency care and was slapping many of them with whopping bills. The hospital has since announced it has stopped balance billing patients.

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  1. JBird4049

    I see I have some letter writing to do. Not that I expect it to do much as I have no money for bribes donations, but this is just wrong.

    1. Yves Smith Post author

      Thanks a ton. What is really appalling is that the hospitals didn’t even deign to offer a remotely credible reason. They baldy said, “How dare you tell us how to price”. And these are institutions who have licenses that can be revoked. Grotesque.

      1. inode_buddha

        I wonder if usury laws would apply here… Or a good sized class action suit. This is just disgusting, and I’m not even a Cali resident.

        1. Cal2

          How about contract law? Offer and acceptance.

          Example: You take car to a garage for repairs, they have to give driver a list of what’s to be done, an estimated price, or at least get a phone OK before work is done.
          Why is the human body less important than a car?

          Granted, people may be unconscious when arriving in ER, but most are not.

          When a patient signs that agreement to pay, now called in some cases, “Guarantor of payment”, how can one be responsible for paying a blind price?

          Look at the positive side of this; more Californians will be pissed off and will more likely vote for Bernie in the upcoming Democratic Primary, even with the defects in his M4A policy.

  2. Birdy Big

    The Democratic Party has supermajorities in both houses of the California legislature. Supermajorities. And it can’t even stop this kind of horrific price gouging.

    America will never have a decent healthcare system.

    1. Paul P

      Well, it is the Democratic Party. Expectations met.

      I often wondered how the hospitals get away with surprise billing in that normal contact law requires that a contract be made between
      parties. Surprise out of network doctors providing services after a patient is asked for her insurance and the hospital says they accept her insurance would seem to preclude the creation of a contract with the out of network doctor, unless agreed to.

      I assume the hospitals get around this by having patients sign a “if the insurance doesn’t cover the bill, you’re on the hook” form.

      I’ve been crossing out the form and writing the only recourse for the hospital is my insurance, only. I don’t think they look at what I sign, as they accept the form.

      I think writing you want services only from providers who accept your insurance would also be effective.

      If anyone knows the details of this contract issue or the results of any litigation, I’d be interested in hearing about it.

      1. ambrit

        Someone in comments recently (?) mentioned a “consent” form from a medical “provider” that had language forestalling any changes written on said document being enforceable.
        Perhaps a better work around here would be to have public elected officials be required to put all ‘wealth’ in escrow accounts for the duration of their tenure. Any gains above some reasonable amount, perhaps defined as a percentage of the original amounts, go to the government coffers. Remove the “ill gotten gains” effect of “Public Service.”
        The pernicious effects of money in politics have to be curbed somehow. Else, how do all ‘scape whipping?

        1. Inode_buddha

          There is such a thing as unconsciencable and unenforcable contracts, which means it doesn’t matter what they say in the fine print if its illegal.

      2. Lynne

        How do you manage that? When I go in for any medical stuff, they have no paper. You’re supposed to scroll through pages on a monitor and then there’s a signature pad you have to sign. They don’t even have printers. I keep thinking that has to be an ADA violation

      3. Ray Phenicie

        In response to Paul P:

        I often wondered how the hospitals get away with surprise billing in that normal contact law requires that a contract be made between parties.

        Look to the paperwork that you sign at some point when entering a hospital or doctor’s office. There’s always a clause covering the failure of an insurance claim to yield up a payment. “In the event that your insurance company does not pay, you agree to pay the usual charges”. Or something to that effect.
        You may refuse to sign that document but expect to be delayed in seeing the doctor. In the ER setting you will still be seen but a bill may still be sent for out of network charges.

      1. flora

        They get very upset if people are offended by “insensitive” WPA art; they’re just fine with equal opportunity economic exploitation.

  3. rc

    Yes, Democrats and Republicans are both corporatist parties leading effectively to a one party system. You will not get a response from them unless they see something like what happened in Hong Kong–millions of people on the street outside.

    Where is the DOJ? Why not enforce anti-trust law against the industry for restraint of trade and exercising monopoly power? Some believe we need only enforce existing laws to end these healthcare rackets, abuses that ultimately end in increased premature death, pain and suffering.

  4. divadab

    Kamala’s pals at work – and a good indication of what she’s all about.

    Another flipping attractive salesperson for the corporatist oligarchy.

    Systematic corruption. All the way up and down including the Supreme Court. Only the utterly compromised thrive in this environment.

    1. flora

      an aside: my first, perhaps too cynical thought on hearing Kamala wants a bunch of money to lend to low income black Americans so they can buy homes is: she’s trying to restock the pool with prey for the predators like One West and Wells. ok, too cynical.

      1. John Wright

        Maybe not cynical enough..

        “Under Harris’ proposal, homebuyers who rent or live in historically redlined communities can apply for a federal grant of up to $25,000 to assist with down payments or closing costs. Harris’ campaign estimates that this will help up to 4 million families.”

        If the new grant recipients are renters, converting them to owners may actually result in higher monthly costs and risks associated with home ownership (new roof, plumbing,wiring) and they will have a mortgage to service, perhaps also in an area with few jobs or public transit to available jobs.

        If they find a better paying job elsewhere, they will have a house to sell.

        This is a gift to the existing owners (slum lords?) of the properties.

        Having a new mortgage but no or a low paying job is a formula for failure.

        Beware of politicians exported from “liberal” CA, the state has provided to the nation Ronald Reagan, Richard Nixon, Dianne Feinstein and now Kamala Harris.

  5. Lee

    I have Original Medicare with a supplement. On a recent Medicare statement regarding a diagnostic procedure requiring a general anesthetic there was a substantial charge from the anesthetist for which Medicare and my supplemental insurance paid zip. No party claimed I owed anybody anything. Are Medicare patients treated differently than those covered by other insurers?

    1. Leftcoastindie

      With medicare Part B you would normally be on the hook for 20% and if you have a supplemental (like I and you do) that 20% is covered so you should not see a bill for any overage. As for no charges for the anesthetist that person might be an employee of the surgical center. If that person were an anesthesiologist – an MD, then there would be a charge I would think, but you wouldn’t be responsible for it.

      It’s kind of nice to have no copays and deductibles and not have to think about paying a bill for medical care.
      Hopefully everyone in America will be able to share that experience soon.

  6. David in Santa Cruz

    Health care should be treated as a public utility, as should consumer banking.

    Oh wait! In California, the public utilities murder people…

    1. David in Santa Cruz

      But, as everyone knows, for-profit, Wall Street-owned, private business is so much more efficient than government!

      Which begs the question: Efficient at what, exactly?


    FYI, Zuckerberg got the hospital named after him for donating a mere 7% of the costs of building a new acute care building. At least the robber barons of old would entirely fund a whole new university and/or hospital themselves to get their names on it.

  8. flaesq

    I’m completely flabbergasted that we fixed *most* of this in Florida, possibly the worst place in the US to be a consumer, human, or both, but California can’t fix it.

    Our fix prohibits balance billing for services rendered in hospitals so it’s fixed if one winds up in an in-network hospital. None of this suck up to they’re all out of network ER doctors. Unfortunately this protection will probably go away with whatever preemption manages to slither through the US Senate.

    1. David in Santa Cruz

      The difference in Florida is that the population is heavily weighted toward groups who turn out to vote. The legislature has to respond to issues that voters care about or they’ll be turfed-out in the next election.

      The California legislature is less concerned about the needs of actual voters, who don’t turn-up to vote much. Since we’re effectively a one-party state, the politicals are more focused on raising money from the donor-class. If they bring in the dough, the Party will allow them to jump to the next term-limited lily pad.

      This is how you get a “democracy” where institutions such as CalPERS, PG&E, and the hospitals allow Wall Street to call the shots, stripping assets and collecting rents instead of serving their customers/constituents.

      1. JBird4049

        If it was just allowing a rigged rentiers economy, it might not be that bad. Burning towns, mass homelessness, the housing crisis, the costs of higher education, the crisis of k-12 schools, corruption at all levels, the growing lawlessness of law enforcement, the failing electrical grid and so on all earn a whatever.

        However, the racism and the guns get the love. Noticed how even the ostensibly important issues of racism and guns get either stirring and often inflammatory rhetorical BS or useless legislation and propositions. However, nuts and bolts actions that might help are hard, and require time and energy. Mere words are free and actually spending money on, or protecting from predatory businesses, the average Californian just can not be done.

        1. JBird4049

          Since we’re effectively a one-party state, the politicals are more focused on raising money from the donor-class.

          It would help if the California Republican Party was not crazy.

            1. JBird4049

              Oh, they work very hard for their constituents, but we ain’t the constituents being as we are the moneyless deplorables, cripples, homeless, working class, even the middle class, better called as the disposables.

  9. Left in Wisconsin

    That’s some serious backbone, there. The hospitals moaned so they pulled the bill even from debate. The article author is way too charitable to Chiu, letting him rant about how something needs to be done but never questioning why he didn’t just proceed with the process.

    “This certainly does not mean we’re done.” This is one of those statements that, like when your kid says, “I’m coming,” means the exact opposite of what the words say.

  10. rd

    The single best argument for single-payer healthcare:

    “San Francisco General does not contract with private insurers. An investigation by Vox found that the hospital considered patients with private insurance out-of-network for emergency care and was slapping many of them with whopping bills.”

    What does it matter if you have fabulous private insurance through your employer if the providers don’t take it?

  11. DHG

    I never pay such surprises and still have a pocket full of credit cards. Fico 9 will not even be looking at medical collections to calculate your Fico Score anymore as there is so much fraud in the industry. A lot of times medicals do not even need to be repaid to qualify for a home mortgage. These guys are shooting themselves in the foot for not doing something about it but hey most of the public has no idea of what I just said and are sheep who will fork over whatever they want.

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