Leighton Dodd walks in and unfurls a stack of medical forms. He slides them around a desk pointing out dates, charges and definitions, constantly reminding people that he’s 83 and “not crazy.”
Dodd has been getting chemotherapy for two years. Every month, he receives a daily dose of a drug named Azacitidine for five consecutive days.
One day’s treatment used to cost a total of $1,160.18.
Then, in October, the cost nearly tripled. And Dodd, a former Lynchburg mayor with a golden key to the city hanging on his living room wall, started asking questions.
In August 2014, Centra Health purchased Lynchburg Hematology Oncology, an eight-doctor private medical practice operating out of a rented office on the second floor of the Alan B. Pearson Regional Cancer Center.
Lynchburg Hematology Oncology’s 5,600 patients were notified of the change in ownership by mail with a letter that said the clinic would “become an outpatient department of Centra Lynchburg General Hospital” effective Sept. 1.
“Depending on specific insurance, some patients may pay more out of pocket for these services and procedures than they would at one of our other facilities,” the letter said.
Dodd, who is on Medicare, remembers receiving the letter but thinking little of it.
“It didn’t tell me anything,” he said.
Then in October, his insurer was billed $16,124.35 for five days’ worth of treatment.
Just one month earlier, the same treatment — provided by the same doctors and nurses in the same facility — cost $5,800.90.
Dodd, a feisty man by anyone’s definition, started calling Centra officials and requesting copies of his medical bills in line-item fashion. Frustrated by weeks of seeking answers to the cost discrepancies, Dodd turned to The News & Advance, bills in hand, for an answer.
What, he wanted to know, is going on?
Dodd's case illustrates a care cost dynamic that is becoming more prevalent as hospital systems — in Central Virginia and nationwide — purchase private practices like Lynchburg Hematology Oncology: The Centers for Medicare and Medicaid pay hospital outpatient departments more than private providers.
“Hospitals have had tremendous bargaining power from the get-go and they have convinced the Centers for Medicare and Medicaid Services (CMS) that it is more expensive to provide services out of a hospital than out of a private, free-standing facility,” said Marni Jameson, executive director of the Association of Independent Doctors.
Jameson, whose agency is lobbying for site-neutral fees across the country, wants to put an end to the higher fees that CMS allows hospital outpatient departments to charge.
The American Hospital Association opposes any kind of equalized payment rate for Medicare.
So does the Virginia Hospital and Healthcare Association.
“There is a reason the price ought to be different,” said Chris Bailey, executive director of VHHA. He said hospitals treat more complex cases, accept Medicaid — which private physicians do not have to — and care for the uninsured regardless of their ability to pay.
Virginia’s hospitals, for example, in 2012 provided more than $600 million in free or discounted care and incurred $454 million in bad debt expenses — $54 million of that charity care, and $39 million of bad debt was Centra’s alone.
The higher rates paid to outpatient departments, Bailey said, “support the broad social purposes of the health system.”
When the rules were set, the higher rate was justified because hospitals have more overhead costs — for example, 24/7 care and emergency rooms; a higher severity of cases; and higher licensing, accreditation and regulatory requirements.
Recently, states have begun taking a closer look at the discrepancy between CMS’s reimbursements to Hospital Out Patient Departments (HOPDs) and private practices and the unintended consequences.
In October, Connecticut passed legislation that requires hospitals to notify patients of the higher costs at outpatient facilities prior to the delivery of care.
And in February, a U.S. Appeals Court blocked St. Luke Health System’s acquisition of the Saltzer Medical Group in Idaho on the grounds that it violated antitrust laws. St. Luke’s said it purchased Saltzer to integrate care and enhance efficiencies, but the court found it created a monopoly.
Jameson said monopolies decrease the number of providers available, which is not good for competition and can decrease access and as well as the quality of patient care.
The association believes employed physicians have quotas to meet and may be required to refer patients to fellow employed physicians, despite the higher costs to patients.
“They have to keep it all funneled into the Mother Ship,” Jameson said. “The patient doesn’t know this; they don’t know they just got sucked into this big machine,” Jameson said.
MedPAC, the independent Medicare Payment Advisory Commission established by the federal government in 1997, estimates that site-neutral billing policies would save the country $900 million annually.
“It is not illegal and it has been going on a long time (and) it is one of the many ways hospitals overcharge,” Jameson said.
Lewis Addison, Centra’s Chief Financial Officer, said Centra’s charges are determined by Medicare and the vast majority of patients affected by the cancer clinic’s purchase are Medicare patients who will see no difference in their out-of-pocket costs.
Systemwide, Medicare makes up 52 percent of Centra’s business — that’s about 10 percent more than at most community healthcare systems. Combined, Medicare and Medicaid make up two-thirds of its business.
Dodd admits the differences in any out-of-pocket costs passed on to him have been so small he can’t recall them. Medicare and his supplemental insurance have continued to pay his medical expenses, just as before.
But that, said Dodd, is not the point.
“The fact that Medicare is paying three times as much for the same service affects all taxpayers, including me,” Dodd said. “It’s not what it’s doing to me directly, it’s what it’s doing to me indirectly.
“Where does Medicare get its money? It comes from the taxpayers,” said Dodd.
“If you walk into the hematology, oncology practice now, from a patient perspective you are no different than if you walk into the emergency department here or at Gretna,” Addison said. “From a patient and billing perspective, there is no difference.”
Addison said Centra has been providing hospital-based services at Pearson since it opened and points to the $4.9 million linear accelerator installed in 2014 to treat tumors as an example of the kind of expenses and benefits that come with being part of Centra.
According to Addison, the only change Centra made after taking ownership of the hematology oncology clinic was the manner in which patients are billed.
“In the hospital setting, we are required to separate out the professional piece (from the) part for all the building, facility, the nurses, the drugs and supplies and all that stuff,” he said.
Patients in Centra’s outpatient departments all get two separate bills from Centra, per CMS regulations, and in turn CMS provides reimbursement for the bills. The first bill, a physician bill, covers the cost of the doctor’s services. A second bill, called a uniform bill, includes the costs of the facility, nurses and drugs.
“The same things that were charged for before on that one bill are now charged for on two bills,” Addison said. “We didn’t invent any new charges.”
Outpatient costs are part of how “we stay viable” in providing the whole range of services, Addison said. Centra could make the choice to bill patients at the lower private-practice rate, but there would be consequences, he said.
“You’d simply have to say we’re not going to do all we can as far as remaining economically viable in this community, and that’s really not, I don’t think it would be a prudent thing to do,” Addison said.
Such cuts would mean lost revenue that would pressure other parts of the healthcare system, forcing Centra to make different decisions about its programs and staffing, he said.
“There’s not one of us that wants a mediocre hospital,” said Dr. Thomas Eppes, past president of the Medical Society of Virginia and Chair-Elect of the American Medical Association.
Eppes, who runs a private practice in Forest, said by their very nature hospitals need to be able to provide emergency rooms, heart units and care for the indigent.
“There’s got to be room for hospitals to be excellent and to be cost-conscious,” he said.
“Under current policy, Medicare usually pays more for services in outpatient departments even when those services are performed safely in physician offices,” a 2014 MedPAC report said.
“For example, Medicare pays more than twice as much for a level II echocardiogram in an outpatient facility ($453) as it does in a freestanding physician office ($189).” The commission reports that in 2013, the number of HOPD echocardiograms increased 7 percent, while physician-office echocardiograms declined by 8 percent.
Ambulatory Surgery Center Association estimates that Medicare pays private practices $964 for cataract procedures, but hospital outpatient departments charge $1,671 for the same surgery.
MedPAC faults this reimbursement policy for creating “a financial incentive for hospitals to purchase freestanding physicians’ offices and convert them to HOPDs without changing their location or patient mix.”
Lynchburg resident Darlene Etheridge believes those incentives are one of the reasons Centra purchased the hematology oncology clinic, where she was getting treatment.
After fending off breast cancer, Etheridge was well enough to take a closer look at the flood of bills that accompanied the disease.
“When you’re actively fighting cancer and there’s two years of active treatment, it’s really not about the money for you, but when you get better, you see the money,” Etheridge said.
Unlike Dodd, whose cancer treatments had been fully paid for by Medicare and his supplemental insurance plan, Etheridge was trying to figure out how to pay substantial bills and exactly what she was being billed for.
“I am trying to reconcile the charges for your services with the same service provided me on my previous visit to Dr. Oldham on May 5, 2014. On that visit, I had venipuncture and pathology tests for which the providers share totaled $78.20, before adjustments. On my most recent visit on November 3, your provider charge totaled $525.51 before adjustments for the same testing. Because I have not yet met my deductible I am responsible for these charges. Why was I charged so much?,” Darlene Etheridge wrote to Centra’s patient accounting services in December.
She did not receive a reply, Etheridge said.
Centra sent her to collections, which informed her that the charges were accurate and needed to be paid.
They said “they were sorry, but ‘it’s out of their control’,” Etheridge said.
Centra does employ numerous patient-assistance programs — from drug samples to co-pay discount cards — designed specifically to help patients afford care. The system also offers financial counselors who can work one-on-one with patients to help them coordinate payments.
That doesn’t help Etheridge, though; she wants to know why Centra charges her more than $200 for a Vitamin D test, while Central Virginia Family Physicians charges her neighbor $52 for the same test.
She said if Centra had informed her that her healthcare costs were going to triple, she would have asked what she could do to keep them down.
“They should have told me so I had the option of going someplace else.”