Don’t give price-gouging hospitals a coronavirus windfall

The Trump administration reportedly is considering using powers established by national disaster legislation to pay hospitals and doctors for treating uninsured patients with the coronavirus. This may be needed to ensure that hospitals in poorer neighborhoods are not overwhelmed by the rising cost of delivering uncompensated care. But, as a condition of providing such additional federal funds, the administration should insist that hospitals receiving assistance prohibit surprise billing at their facilities.

The World Health Organization has reported that 14 percent of those infected with the coronavirus developed severe respiratory problems, and that a further 6 percent became critically ill — suffering respiratory failure, septic shock or multiple organ failure. According to Healthcare Bluebook, a three-day hospitalization for pneumonia in the United States might usually cost around $6,300 — but the added complexity, risks of contagion and prevalence of complications will make the cost of treatment of coronavirus patients often much higher.  Furthermore, the high rates of obesity, diabetes and cardiovascular disease in the American population mean that associated hospitalizations in the U.S. may well exceed those in other developed countries.

Although deaths from the disease have been concentrated among the elderly, in China 85 percent of those admitted to hospital (and 73 percent of those severely ill) were under the age of 65. As a result, a pandemic in the United States should be expected to hospitalize a significant number of the nation’s 28 million uninsured.

Much of this cost burden will fall upon hospitals, who effectively serve as insurers of last resort in American health care. Under the Emergency Medical Treatment and Active Labor Act of 1986, hospitals are required to stabilize the medical condition of patients arriving with emergency medical needs. In order to qualify for nonprofit tax exempt status, hospitals must also establish income thresholds below which they provide free and discounted care to uninsured patients. Hospitals must also bear unpaid debts associated with patients of all income levels (insured and uninsured), which they are unable to collect.  

As a result, the American Hospital Association estimated that hospitals provided $41 billion in uncompensated care in 2018. According to the AHA, 31 percent of U.S. hospitals in 2016 had negative operating margins. Additional funds, therefore, may be needed to finance the anticipated spike in uncompensated care from the coronavirus.

However, an influx of coronavirus patients also can be expected to fill otherwise empty beds and bring a surge of new revenues to hospitals — particularly in affluent neighborhoods where all but a few patients are likely to be well-insured. Indeed, a recent study by Ge Bai, Farah Yehia and Gerard Anderson found that the hospitals in the best financial shape dedicated the smallest share of their funds to charity care.

Nonetheless, hospitals in poorer neighborhoods, where many patients are uninsured and spare capacity is normally scarce, likely would find themselves under increasing financial strain. The proposal for the federal government to pay for uninsured cases is therefore a reasonable way of targeting assistance at gaps in funds — particularly because the unanticipated nature of the virus means that the establishment of such limited assistance on a short-term basis will do little to deter the purchase of normal health insurance coverage.

But the Trump administration should demand reforms in return for these extra funds. Although the tale of a Florida man billed $1,400 for coronavirus test may have been misreported, the broader fear that patients will be billed extortionate amounts at hospitals by out-of-network providers is real. Over recent years, providers of emergency medical services increasingly have threatened patients with inflated out-of-network bills, to drive up reimbursement rates they may claim from insurers. As a result, in 2014, around 20 percent of inpatient emergency department cases led to surprise out-of-network bills.

While patients may have some ability to choose the hospital from which they receive treatment for the coronavirus, the hospital rather than the patient has full control over the choice of emergency care doctors and ancillary staff that will treat them there. Hospitals should bear the responsibility of prohibiting “surprise billing” at their facilities by ensuring that all associated providers are in the same networks as the hospital itself.  

Hospitals have resisted these proposed reforms because the status quo has worked out fine for them. But if the federal government is to provide additional funds for hospitals to deliver care to coronavirus patients that federal law already requires them to provide, it should demand protection from surprise billing for all patients as a condition of additional assistance.

Chris Pope is a senior fellow at the Manhattan Institute. Follow him on Twitter @CPopeHC.