Hospital CEOs pressed on prices by Congress

Leaders of some of America’s largest and most well-known hospital systems fielded tough questions from lawmakers in Washington Tuesday.

The House Ways and Means Committee held a hearing focused on the high costs of healthcare, the latest in a series. But in Tuesday’s session, some lawmakers placed much of the blame on hospitals.

Rep. Jason Smith, a Missouri Republican who chairs the Ways and Means Committee, set the tone in his opening remarks. While he said hospitals make their communities better, Smith also said larger systems and growing consolidation are driving up prices.

“The corporatization of American hospitals means that our local hospitals and physicians have been replaced by mega-corporations that put quarterly earnings over quality care, and grow larger simply for the sake of growing larger,” Smith said.

Smith noted that there are other factors at play, including insurance companies and drug manufacturers. But he warned hospitals against pointing fingers.

“The blame game didn't work with insurers, and it won't work today with us,” Smith said. “Simply put, hospitals are charging an insane amount for care.”

The leaders of HCA Healthcare, CommonSpirit Health, NewYork-Presbyterian, and ECU Health all appeared at the hearing. They acknowledged that costs for Americans are too high, and they pledged to work with lawmakers and stakeholders on solutions.

But they also said that more Americans are losing coverage, and that will place more pressure on hospitals.

Democratic lawmakers also said that Republicans, who hold the majority in Congress, are trying to deflect blame for Medicaid cuts that are expected to leave millions more Americans without coverage.

Wright Lassiter III, president and CEO of the CommonSpirit health system, said hospitals will face more problems with more people losing coverage.

“When public coverage falls short and more people become uninsured, uncompensated care rises, pressures on hospitals intensify, and access becomes harder to sustain,” he said.

• Read more: Hospitals seek help from Congress, and face tough questions

‘Too expensive for too many’

Sam Hazen, CEO of HCA Healthcare, acknowledged that hospitals have a responsibility to help with affordability. A for-profit system, HCA operates 190 hospitals and more than 2500 sites of care, making it the largest system in America.

“Healthcare in this country has never been better nor more advanced, but it is also too expensive for too many people,” Hazen said.

He added, “Providers must also deliver care more efficiently with higher quality and greater consistency.”

Hospitals have received more criticism about the lack of transparency in billing.

“We are working to give patients better information about the cost of their care, while recognizing that true transparency requires coordination across the entire system,” Hazen said.

Hazen and other hospital leaders faulted insurance companies for driving up costs through delays and denials, including rejections of requests in the prior authorization process.

Lassiter also criticized payers for delays in payments from Medicare Advantage plans, which are popular with consumers but also the source of criticism for hospitals over hassles in paying claims. He said billing for Medicare Advantage patients is about 25% more expensive than for traditional Medicare patients, and denials divert staff and time from patient care.

“Medicare Advantage plans are the most challenging today,” Lassiter said. “We have $4.3 billion in unpaid Medicare Advantage claims, with nearly $1 billion of that being more than 150 days past due for care that common spirit has delivered to patients and communities that you represent.”

Dr. Brian Donley, president and chief executive officer of NewYork-Presbyterian, pointed to growing administrative demands that lead to “unnecessary cost and frustration for both patients and providers.”

But he also said that hospitals need to be part of the solution in lowering costs.

“The cost of care is a real and growing concern,” Donley said. “I recognize that hospitals are one part of a broader healthcare system that contributes to these costs, and I take that responsibility seriously.”

Prices and premiums

While acknowledging other factors, some lawmakers on the committee hammered hospital leaders about rising costs.

Rep. Adrian Smith, a Republican from Nebraska, said hospitals are raising prices, which is contributing to higher premiums from insurance companies.

While acknowledging “issues in the health insurance industry,” he said, “High prices lead, obviously, to high, high premiums.”

The Nebraska lawmaker asked Hazen why HCA charges commercial insurers more than three times the Medicare rate. He also asked about savings from advances in technology and research.

In response, Hazen pointed out that hospitals are seeing growing demand, as they’re treating more patients with a greater degree of health complications.

“The patients we’re taking care of are more complex, and require more services,” Hazen said.

Rep. Darin LaHood, an Illinois Republican, says the entire healthcare industry must work to address surging prices.

“I believe that rising costs should be addressed comprehensively by the entire health care system,” LaHood said. “Insurers, hospitals, drug manufacturers and PBMs all share responsibility for improving affordability and access, and I would argue we have an obligation and responsibility to move forward with that.”

LaHood also said he hears from more residents and employers about the negative impact of hospital consolidation, including higher prices.

“Those pressures can increase costs without necessarily improving quality, or access in rural communities and I have a very rural district,” LaHood said.

Dr. Michael Waldrum, CEO of ECU Health in North Carolina, said that the health system has added hospitals and practices because they were at risk of shutting down..

“The assumption that we are consolidating out of profit motive … is wrong in rural America,” Waldrum said.

‘Misaligned incentives’

Hospital leaders also faced sharp questions about the 340B federal drug discount program, with some lawmakers saying the savings aren’t being passed onto those with lower incomes.

The 340B program, which enables hospitals to buy outpatient drugs at lower costs, has been the source of significant tension in Washington. Hospitals say the program helps them provide essential services to vulnerable urban and rural communities. Critics say the program has grown far beyond its intended purpose of sustaining safety-net hospitals and has become a source of profit for big systems.

Some lawmakers also faulted hospitals for their opposition to “site-neutral” policies which would allow Medicare to pay the same rate for some outpatient procedures, whether they are done in a hospital or an ambulatory surgery center. Supporters of such policies say Medicare would save billions, but hospitals point out they face greater regulatory burdens and take all patients.

Michael Abrams, managing partner at Numerof & Associates, told Chief Healthcare Executive® that the hearing illustrated a number of problems driving up costs.

“At the core, the system still rewards volume over value,” Abrams said. “That structure shapes behavior across both hospitals and insurers. What hospital corporations want is more patients, to whom they deliver more services, for which they are reimbursed as generously as possible.”

Abrams contends that hospitals’ opposition to payment reform and price transparency rules challenge their ability to generate revenue. And he said the hearing showed it’s not a single issue driving up costs.

“It is a system of misaligned incentives, and until those incentives are addressed directly, the pressures driving hospital pricing will continue,” Abrams said.

Democratic lawmakers argued that cuts to Medicaid over the next decade are going to make it harder for Americans to get care, and could lead to hospitals closing their doors.

Rep. Mike Thompson, a California Democrat, said the HR1 tax package brokered by President Trump and Republicans will hurt public health. He also pointed to the expiration of tax credits supporting the Affordable Care Act, which could leave more Americans without coverage.

“Congressional Republicans cut a trillion dollars from Medicaid and failed to extend the premium tax credits that help millions of Americans better afford their insurance coverage,” Thompson said. “This doesn't assure patient access. It hampers it.”