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Patients get caught up in health care cost dispute

| Monday, April 4, 2016, 9:00 p.m.

Patients admitted to Western Pennsylvania hospitals for one night or longer are increasingly finding themselves caught in hospital-and-insurer payment disputes that can drive up their bills, according to data from the Healthcare Council of Western Pennsylvania.

Compared to four years ago, insurance companies are disagreeing more often with doctors and hospital staff about what conditions warrant inpatient admission, according to data collected by the council, a group that represents hospitals. Insurers are increasingly classifying multiple days of treatment as outpatient services and paying the hospitals less, according to the council.

The disagreements can cause frustration and might increase bills for people whose insurance plans pay differently for inpatient and outpatient services, hospital administrators said. A patient might pay a predetermined amount, known as a deductible, for an inpatient stay, while the plan requires them to pay a percentage, known as coinsurance, of an outpatient bill.

“People get very confused about it, it causes a lot of problems and it changes their financial responsibility,” said Daniel Simmons, senior vice president and treasurer of Monongahela Valley Hospital in Washington County.

The insurers' decisions also affect hospitals' bottom lines by cutting into a source of revenue that is declining as a result of broader changes in health care.

“I understand we need to cut health care expenses, but we also need to be able to care for the patients based on the physicians' understanding of that patient,” Simmons said.

Sam Marshall, president and CEO of the Insurance Federation of Pennsylvania, said hospitals have not approached his organization about the trend and he was not familiar with specifics of the situation.

“I get that there's going to be, at times, tension between the provider and the insurer because the hospital wants more money and the insurer wants to hold the line on the cost,” Marshall said.

When insurers disagree with hospitals about inpatient status, they often identify a doctor's services during the stay as “observation” services, which Medicare defines as services used to help a doctor determine whether an inpatient stay is warranted.

Based on projections from the first quarter of 2016, the Healthcare Council of Western Pennsylvania estimates that 56 regional hospitals that shared data will report about 182,000 observation cases for the fiscal year. In fiscal year 2012, about 52 hospitals shared the data, reporting about 146,000 cases.

The observation designations will cost the group of hospitals about $150 million for the year, according to the council.

“Obviously, that's a significant financial impact. It's a very good financial impact if you're an insurance company; it's a very bad financial impact if you're in the hospital business,” said Denis Lukes, the group's vice president of payer relations and reimbursement.

For Medicare patients, observation determinations have a hidden consequence. Medicare covers the cost of rehabilitation in a nursing home after a three-day inpatient stay but does not cover the cost if the hospital or the insurer designates a three-day stay as “observation.” Hospital administrators said they have seen stays up to nine days designated as observation.

Hospital administrators said they refer to national guidelines created by firms InterQual and Milliman for what constitutes an inpatient stay.

Wes Venteicher is a Tribune-Review staff writer. Reach him at 412-380-5676 or

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