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February 23, 2004
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ARCHIVE: Hospital Profits

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INTRO: Private hospitals around the state had significant profits last year according to an annual report released this month by the State Department of Health Care and Policy. In Clark County alone, hospital profits are up 141 percent and hospital bills in the state are rising 1 billion dollars a year.

PLASKON: If hospitals had collected on all 8 billion dollars worth of bills last year, they would have earned 5.5 billion dollars in profits. Instead, public and private hospitals combined only made 87 million dollars. Vernon Manke compiles hospital profit statistics for the state.

MANKE: The billed charges are no longer recognized as what the hospital earns as revenue.

PLASKON: The 8 billion dollars in hospital charges to patients last year are based on what's called Master Charge Lists. Each hospital sets their own list of prices for each service provided.

WELCH: The bottom line is you have to charge the same thing for everyone. That is the law.

PLASKON: Bill Welch is president and CEO of the Nevada Hospital Association. The hope is someone will pay those prices, but few do or can afford them. Because of that insurance companies have found a loophole.

WELCH: I acknowlege that you are going to collect a different amount for the same services from different payer groups.

PLASKON: The bills to patients last year amounting to 8 billion dollars is almost 6 thousand dollars for every patient Nevada hospitals saw. The amount hospitals actually collected is about 2 thousand dollars per patient. Few pay the higher cost because insurance companies and unions negotiate contracts with hospitals for services. But the hospitals still technically bill every patient, even though hospitals know they will only collect 30 percent of their billed charges.

RAWSON: I don't want to call it a game, but there is a situation.

PLASKON: Nevada Senator Ray Rawson says hospitals technically bill every patient to convince Medicare that bills spent to Medicare are the actual cost other people are paying. But like unions and insurance companies, Medicare also refuses to pay the full billed charges from hospitals. Medicare determines the cost it will pay for a service by a percentage of the average price hospitals charge across the nation. So Rawson says that's why hospitals bill such high prices - to raise the perceived average price for Medicare.

RAWSON: And so the hospital's bill, knowing that they won't get the billed charge, but that figures into figuring the master calculation for setting the Medicare rates and it is basically driving the Medicare rates up and so in a way it's a game. So there is a device to it that they are driving the rates up, people don't talk about it very much but that's why.

PLASKON: Using that devise, hospitals in Nevada have driven up billed charges by 1 billion dollars every year since 2001. The two largest private hospitals in Las Vegas wouldn't comment, but the Hospital Association says hospitals do it to make a profit. While Medicare is one target of high billed charges it's part of the mix of payers contributing to hospital profits through higher billed charges than most people play. Tourists pay the full billed charges for instance, because they have out of state insurance companies that don't have contracts with the hospitals here. Their payment of billed charges can make a big difference in hospital profits. This year profits are up 141 percent in Clark County, but up only 8 percent over 2001. County Manager Tom Reilly explains it's because profits shot up back then when tourists were stuck in Nevada after 9-11 paying the full rack rate.

REILLY: They didn't go to their preferred provider and they would have to pay billed charges here, ha, and so when that stopped that affected some of the revenues at hospitals too because they couldn't get those billed charges."

PLASKON: During that reporting period the three largest private hospitals in Clark County saw a 25 million dollar drop in profits. The County owned University Medical Center on the other hand, its profits alone dropped that much, not only that, while other hospitals still reported profits, UMC reported 20 million dollar losses. County manager Tom Reilly explains it's because Nevadan's lost their jobs and insurance but still needed health care and UMC was the only place to go.

REILLY: Private hospitals don't have a responsibility for the uninsured, that's what I would think is the big difference.

PLASKON: The uninsured are also part of the payer mix that determine hospital profits. The more uninsured a hospital serves, the lower the profits according to the Nevada Hospital Association. By federal law, private hospitals don't have to provide anything beyond emergency care to the uninsured. So the uninsured end up at UMC which spends approximately 24 percent of operating revenue on caring for them, that's compared to an average of only 3 percent of operating revenue spent at private hospitals on the uninsured. With the increasing population, the number of uninsured being funneled to UMC is also expected to increase. 62 percent of women who walk through these doors and climb these stairs to the Women's Center at UMC don't qualify for any insurance. The lobby is full of pregnant women watching The Ellen Degeneres Show. Since 2001 the number of uninsured outpatients UMC handles has increased from 28 percent to more than 40 percent last year. Reilly explains, that means the hospital has a shrinking number of paying customers and requires tens of millions of dollars every year in taxpayer subsidies to balance the hospital's budget.

REILLYL: So that becomes a real dilemma, as far as how as you balance to keep patients in there to pay for the patients who can't pay.

PLASKON: There are efforts to increase the number of paying patients however. This month a legislative heath care subcommittee met in Las Vegas with a plan to insure employees of small businesses which make up 70-80 percent of the uninsured according to Nevada Senator Ray Rawson. He serves on the committee and says providing health care for the uninsured will come at a cost and take some restructuring of funds.

RAWSON: We have to find some source of dollars that are now being spent on indigents and Clark County has a pretty big program for indigents, so we can use that money to bring in matching money to give insurance to those people with an actual policy.

PLASKON: While the effort may increase the number of insured and paying patients in the county there will also be more competition for those patients. Four new hospitals are to be built in the valley over the next year-and-a-half according to the Nevada Hospital Association. As long as UMC is taking the burden of the uninsured, the county manager says UMC will never make money. The county owned hospital's losses last year were 17 million dollars. County owned rural hospitals around the state lost 5 million. Meanwhile, the rest of the hospitals in Nevada made more than 100 million dollars in profit.

Ky Plaskon, News 88.9, KNPR

nevadahealthcarenetwork.com

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