You won't be surprised to learn that
the University of Pittsburgh Medical Center's (UPMC)
out-of-network fees are way above the national average. According to data compiled
by the Center for Medicare and Medicaid Services, UPMC charges more
than many of the nation's most highly regarded hospitals, such as the
Cleveland Clinic, and twice as much as its only real competitor,
Allegheny General Hospital (AGH). In 2010, UPMC's average charge for
inpatient care was $121,765, compared to $74,406 at the Cleveland
Clinic and $55,205 at AGH.
Out-of-network fees originated in the
1980s, when Medicare and Medicaid began reimbursing hospitals
prospectively rather than after-the-fact for some procedures.
Insurance companies then began to negotiate discounts for their
subscribers, in exchange for channeling those subscribers to
“approved” doctors and hospitals. By 1990, only people without
health insurance and international visitors were charged the “full
cost” of medical services—the out-of-network rate. For people
with health insurance, the “full cost” is really just funny
money—an unrealistically high charge that appears on their
statement. Health insurance pays only a fraction of that cost, and
the remainder is waived.
However, in June 2013, out-of-network
fees may become real money for many Western Pennsylvanians if UPMC,
the region's largest hospital chain, carries out its threat not to
negotiate an agreement with Highmark, the region's largest health
insurance company.
If we accept the Medicare reimbursement
rate as the real cost of hospitalization plus a modest profit for the
provider, then UPMC has an average markup of 850%. Dr. Gerald
Anderson, a health policy expert at Johns Hopkins University,
is quoted as saying, “I think they have an ethical problem in trying
to say they should be paid eight times more than what it costs to
provide the service.”
This brings us to the presumed motive
for UPMC's and Highmark's behavior—monopoly control and the
ability to fix prices. Large corporations move toward monopolies
through two types of integration, horizontal and vertical.
Horizontal integration occurs when
companies buy out competitors that provide the same product or
service, thereby increasing their market share. For the last decade,
UPMC has been aggressively buying other hospitals in the region. AGH
is its only major remaining competitor. If it provides an essential
service and has no competitors, it can charge whatever it wants.
Vertical integration occurs when a
company controls several stages in the supply chain that produces a
product or service. For example, a company that sells natural gas to
consumers may also own gas wells and control prices by speeding up
or slowing down production. Or a movie studio may own a theatre
chain which preferentially books its films and refuses to book films
by competitors. In 1998, UPMC started its own health insurance
division, the UPMC Health Plan. Highmark retaliated by agreeing to
purchase AGH. Of course, both hospitals and insurance companies can
use the threat of out-of-network fees to pressure clients to purchase
the complementary service from its own affiliate.
It appears that both UPMC and Highmark
are trying to obtain monopoly control of the health care system in
Western Pennsylvania. Since our very lives are at stake, if either
of these “nonprofits” achieves their goal, they will be in a
position to make us what organized crime calls “an offer we can't
refuse.”
Of course, this kind of outrageous profit-taking would disappear under a single payer health care system.
