Anesthesia overcharges, and competition that increases prices

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close up of stethoscopeFew people who read their medical bills would be surprised by a high charge for anesthesia. It seems to be a topic that others have experienced, as I did a while ago (see blog post here).

But here’s a story by Adam Marcus at Anesthesiology News that is likely to surprise you: it’s about a New York anesthesiologist who says he has found fraud in anesthesia billings that could total more than $1 billion nationally.

The doctor, Berton Forman, runs a medical billing analysis firm called Rockville Recovery Associates Limited,  “who stands to make millions should he win the suits, said a major insurer for whom he conducted a fraud inquiry to detect precisely such misconduct failed to act on his findings out of fear that it would lose the business of preferred provider organizations (PPOs). These companies act as middlemen between physicians and insurers and, according to Dr. Forman, force the latter to sign contracts that prevent them from carefully auditing claims. In return, insurers receive discounts, ranging from 10% to 35%, from providers in the network, savings that in theory they can pass along to plan members.”

One case, in California, involves Sutter Hospitals in the north of the state, and two PPO plans, MultiPlan and Private Healthcare Systems Inc., which MultiPlan has since purchased. Dr. Forman says that the hospitals passed on false anesthesia bills to insurers and the two PPO’s. The suit charges that the hospitals were billing insurers for anesthesia when no anesthesiologist was present, and that the charges often were inflated. “Sutter hospitals routinely charge, on average, $3,000 to $5,000 …  when they are entitled to no more than $150 to $250…, if anything,” says the article in Anesthesiology News, a monthly trade magazine.

The California insurance commissioner is quoted as saying the amount of charges is “in the hundreds of millions of dollars, if not more.”  The hospitals and MultiPlan have denied wrongdoing.

The article says the case began with an investigation Rockville undertook for Guardian Life Insurance of

New York, which hired him to look for fraudulent claims. Dr. Forman, Marcus writes, looked at claims for six years and then gave Guardian evidence of $46 million in overcharges. Guardian declined to pursue the case. Dr. Forman is suing Guardian for breach of contract, saying that the company was reluctant to challenge the PPO’s that were passing on the bad claims because it did not want to lose their business. Guardian is quoted as saying Dr. Forman’s statements are unfounded.

We often hear of people complaining of anesthesia bills, perhaps because the practice of “nonparticipating anesthesiologists” is so widespread. People often tell us that they arrive at a hospital or other place that takes part in their plan  for surgery by a participating surgeon, only to be told — either before or after — that the anesthesiologist does not participate, and so must be paid at a different rate.

I’m planning to start reading Anesthesiology News much more closely — not only because of Adam Marcus’s piece, but also because of pieces like this:

“For patients, more competition does not necessarily mean lower prices or better quality of care. In fact, a new study has found that the prices of some medical and surgical interventions spike in areas where competition is fiercest. And in some cases, patients regularly pay more for worse outcomes,” writes Jennifer Hanawald  in Anesthesiology News.

In two related studies, she writes, a team from the University of Chicago “examined data on the treatment of four diagnoses covering a range of electiveness and complexity—heart failure, acute myocardial infarction (AMI), heart valve replacement and cholecystectomy—at hundreds of hospitals.

“The researchers found that with rising competition, determined by the number of hospitals offering the same treatment within 20 miles, cost for procedures also increased. But the link was not linear; mean cost shot up at the highest levels of competition.

“‘We have shown that the cost for these four procedures was directly related to the competition,’ said David Glick, MD, associate professor of anesthesia and critical care at Chicago, senior co-investigator of the studies. ‘Normally in the business world, if more companies offer the same service, you would expect this to lower the price. But in fact, it didn’t.’ …

“Dr. Glick argued that since patients are not aware of prices and quality metrics, it is not surprising that quality and competition do not have the same relationship in hospital care that they do in other areas of business. ‘Competition really only works to lower prices when the people who are paying are the ones who are making the decisions,’ he said. ‘Insurance companies can separate consumers from the financial consequences of their health care choices.’”