Can hospitals be persuaded to do the right thing for the uninsured?
We think they can.
The unfairness of hospital billing practices to the uninsured is obvious, and acknowledged in the hospital world. At little or no expense, and without government intervention or funding, the industry could eliminate tens of billions of dollars of inflated debt for the uninsured each year using two proven solutions – uninsured discounts and presumptive eligibility. These solutions promote affordability, cost virtually nothing, and reduce hospitals’ legal exposure in the process.
Charity Gap Project set out to determine how effectively the industry uses these two solutions. In 2022 CGP reviewed the uninsured discount and presumptive eligibility policies of roughly 3,000 hospitals. CGP found that some hospitals have embraced these solutions, others have used half-measures, and a shockingly high number have done little or nothing. The Hospital-by-Hospital spreadsheet on this website shows the wide variation with respect to the use of uninsured discounts.
The under-utilization of these two solutions is so profound that simply persuading more providers to adopt measures already in place at hundreds of other hospitals would generate massive relief.
In an effort to spur action, in July 2023 CGP reached out directly to hospital administrators, pointing out their own organizations’ approaches to uninsured discounts and presumptive eligibility, and making the positive case for reform. CGP received a single substantive response — not from any of those hospitals, but from the American Hospital Association. AHA blamed the debt crisis on incomplete Medicaid expansion, high deductibles, and “skinny” health plans. AHA never addressed CGP’s primary point. Specifically, even if legislators, regulators, and lobbyists never make any progress on more difficult policy initiatives, the industry could still eliminate an epic amount of “painful but pointless” debt by using uninsured discounts and presumptive eligibility. That conclusion is undeniable.
Uninsured Discounts
Hospital services for the uninsured are often unplanned, with prices that are not negotiated. Charge levels are inflated for reasons that have little to do with the uninsured. Whereas Medicare, Medicaid, and many commercial payers pay at steeply discounted levels, often without regard to the nominal billing rates, at most hospitals an uninsured patient who does not secure financial assistance will owe the “full retail” amount.
An uninsured discount represents the obvious means for flushing inflated dollars of debt from the system. These discounts, already in place at many hospitals, are broad and automatic, and do not depend on completion of an application for financial assistance or quantification of household income.
Based on its review of hospital practices, conducted in 2022, CGP determined that only about one-third of hospitals extended any uninsured discount. The discounts in place were often based on a percentage of the hospital’s charges or, more frequently, the level of reimbursement paid by Medicare, Medicaid, and commercial payers.
Across a broad universe of providers, CGP assessed that Medicare paid an average of 21 percent of charges, and all institutional payers paid an average of 28 percent. Imposing debt on the uninsured for 100 percent of charges, while accepting much less from institutional payers, is hard to justify. Since hospitals know the rates are inflated and unaffordable, and that the historical return on uninsured receivables is pennies on the dollar of charges, this approach is almost gratuitously harsh.
Presumptive Eligibility
Hospitals point to financial assistance as their solution for high rates. Unfortunately, millions of people live in the “financial shadows,” unable or unwilling to complete a traditional application for assistance. No one should be surprised that a system that depends on patient engagement, compliance, and a calculated income figure would serve as a barrier to so many.
Determining patients presumptively eligible, even in the absence of completed applications, is the obvious way to deal with this problem. In fact, some hospitals report that they identify all factually eligible patients using sophisticated analytics. Others use weaker methods, for example extending financial assistance based on life circumstances, eligibility for certain means-tested programs, and credit scores. Unfortunately, many providers still do not use presumptive eligibility at all.
With some hospitals having solved the problem – for example, eliminating “full retail” levels of uncollectible debt for the cost of a vendor – one can reasonably question why so many other hospitals have done so little.
Reducing Legal Exposure
The reforms promoted here would also reduce legal exposure in the industry. Inflated hospital rates have long generated litigation, including many class actions. With plaintiffs typically asking the court to throw out the full chargemaster prices, much of the historical class action litigation has gotten hung up on the challenges of arriving at an alternate price and, often, determining the reasonable value — value, not billed amount — of hospital services on individual accounts. As discussed in the accompanying White Paper, future class action litigation is likely to feature a distinct argument that, with so many hospitals using uninsured discounts and presumptive eligibility to instill a measure or fairness, it is an unfair business practice for hospitals not to employ those solutions.
Hospital Fair Pricing Pledge
In letters sent to nearly 3,000 hospital administrators in July 2023, CGP outlined the problems, assessed each hospital’s use of uninsured discounts and presumptive eligibility, and invited the hospital to sign a non-binding Fair Hospital Pricing Pledge.
At that time the Pledge simply called on a hospital to (i) consider improvements to its financial assistance program generally, (ii) consider use of a meaningful uninsured discount, e.g., at least to its “amount generally billed” (AGB) — the average paid by Medicare, Medicaid, and commercial payers insurers, and (iii) consider expanded reliance on presumptive eligibility techniques. Far from a contract, or even a demand, the pledge is an aspirational call for a hospital’s attention.
Hospital-by-Hospital Spreadsheet
A hospital’s policies on these issues can be viewed as a litmus test of its approach to the plight of the uninsured. While presumptive eligibility policies can be nuanced, uninsured discount policies are more straightforward. When posted, the linked hospital-by-hospital spreadsheet will show a particular hospital’s policy with respect to uninsured discounts, in most cases illustrating the disparity between (i) the percentage of charges billed by the hospital to the uninsured, and (ii) the level paid to a hospital by Medicare and/or the average paid by a hospital’s institutional payers (Medicare, Medicaid, commercial payers).
A Phased Persuasion Campaign
In an industry committed to “best practices,” CGP’s goal is to prompt hospitals to re-examine their use of available remedies for undoing the unfairness of inflated billing rates and offer assistance to hospitals considering reforms. This website, the Hospital Fair Pricing Pledge, the Hospital-by-Hospital Spreadsheet, and the White Paper are tools incorporated into CGP’s phased approach for meeting that challenge.
In July 2023, CGP reached out to hospital administrators across the country. CGP is broadening its outreach to include national influencers, hospital trustees, community leaders, and consumer’s rights groups and attorneys.
Consulting Services
CGP offers hospitals reimbursement consulting services aimed at calibrating charge levels due from uninsured patients, and identifying patients deemed deserving of financial assistance even in the absence of completed applications. For more information please contact us at [email protected].
How to Help
The public can best support the uninsured by urging local hospital leaders to revisit and strengthen their uninsured discount and presumptive eligibility policies.
White Paper
Click below to review a memorandum discussing the origins of this debt crisis and the hospital industry’s underutilization of reform solutions.
About Charity Gap Project
With roots in patient financial services and litigation, CGP has studied policies and practices at over 3,000 hospitals, not as an academic exercise, but in anticipation of (i) encouraging hospitals to embrace uninsured discounts and presumptive eligibility, (ii) offering consulting services to hospitals interested in reforming financial assistance programs, (iii) increasing visibility of these issues, and (iv) engaging consumer rights groups and attorneys in the effort.
CGP’s founder, Curtis Ullman, has been a litigator in private practice in San Francisco and Phoenix. For over 30 years he represented hospitals in finance, indigent health care, and reimbursement matters. He also co-founded a hospital revenue cycle management company.
Contact Us
Charity Gap Project
P.O. Box 44410
Phoenix, AZ 85064
Curtis Ullman, President
[email protected]
Communication by telephone can be initiated by email to Curtis Ullman.
Documents and messages can be sent to [email protected].