SICK OF HOSPITAL BILLS

• Share

(2 of 4)

A big issue in the Scruggs lawsuits and the state probes is soaring hospital charges. You've heard of the $10 aspirin? It's that pricey because hospitals mark up costs an average of 232%--as much as 673% at the 100 priciest institutions, according to a recent study by the Institute for Health and Socio-Economic Policy. Hospitals do this largely because insurers negotiate discounts off the list price, creating incentives to inflate charges. That expensive aspirin also subsidizes other items and services--a widespread practice.

Yet the uninsured are typically the only ones forced to pay sticker price. The lawsuits complain that hospitals then aggressively pursue patients for the full charge, sometimes garnishing wages, placing liens on homes, and in some cases lumping the bad debt into their calculation of charity care, a controversial accounting practice. "There's nothing charitable about it," contends Scruggs, noting that medical debt is a leading cause of personal bankruptcy.

In 2001, Laverne Dumas, one of the plaintiffs in a suit against Provena Mercy Center in Aurora, Ill., went into the hospital for a severe sinus infection and was sent a $12,338 bill that included $650 a day for the room and $6 for each ibuprofen pill. Uninsured and living mainly on her husband Joe's $800-a-month pension at the time, she says she tried to negotiate a payment plan, but the hospital refused. Provena won a judgment, and today the couple pays $100 in monthly installments, with scant hope of paying off their $27,000 in hospital bills (owed not just to Provena). Says Joe, 63: "We didn't go in expecting charity, but we didn't expect exorbitant prices either."

Was Provena overly harsh? Patrick Coffey, a lawyer for Provena, says the Dumas signed forms promising to pay their bills and "agreed that the charges were fair. We reject the notion of any legal basis or merit to their claims." But the state of Illinois revoked a tax exemption for a Provena hospital based on findings that the hospital wasn't providing enough charity care; Provena is appealing.

The AHA says hospitals must set the same charges for everyone. Secretary of Health and Human Services Tommy Thompson wrote to the AHA in February, however, saying the suggestion that hospitals must charge list prices "is not correct and certainly does not accurately reflect my policy." A Texas hospital administrator is blunt about why hospitals pursue the medically indigent: "The driving force is to badger them so they don't come back."

Scruggs was vaguely aware of such problems but didn't have the basis for a case until a couple of whistle-blowers from Georgia contacted him last March. Dr. John Bagnato and Charles Rehberg, the administrator of Bagnato's private practice, had spent hundreds of hours probing hospital finances--particularly those of Phoebe Putney Memorial, a hospital in Albany, Ga., where Bagnato was chief of surgery. Bagnato's private practice, Albany Surgical, had tried to open an outpatient surgery center across the street from Phoebe, and eventually he and Rehberg suspected the hospital of meddling in state rules that had blocked the plan. (Phoebe denies interfering.) Inspired, the pair began investigating hospital finances. The deeper they delved, the more they became convinced that Phoebe and other nonprofits weren't living up to their charity mission.