Mass. AG Probes Hospitals’ Charges to State’s Free Care Pool

February 14, 2006

Massachusetts Attorney General Thomas Reilly is investigating excessive billing by hospitals to a state fund used to pay for uninsured patients.

The investigation of the state’s $800 million “free-care pool” overlaps with a state audit that has uncovered unusually high charges for some items and services, including prescription drugs and radiology exams.

The audit report, prepared by Inspector General Gregory W. Sullivan, concluded that the excessive billing, in addition to weak oversight by the Romney administration, resulted in the excessive overpayments, according to The Boston Globe.

Together, Boston Medical Center and the Cambridge Health Alliance, which includes Cambridge Hospital, Somerville Hospital and Whidden Memorial Hospital on Everett, see the most free-care patients in the state.

Although Reilly’s office did not name the hospitals under investigation, and Sullivan’s report did not associate specific overcharges with specific hospitals, the Globe was able to connect some of the actions to specific hospitals.

Hospital executives acknowledged charging more as a way to offset the financial shortfalls of Medicaid. Hospital officials also said they did not consider the charges excessive, except in cases where extra charges were added accidentally.

Cambridge Health Alliance, auditors found, overbilled for 5,000 prescriptions to the tune of more than $5 million. At other hospitals, the drugs would have cost less than $300,000.

It is not unusual for different insurance companies to pay different hospitals different prices for the same drug, but the free-care pool billings prices varied widely ,according to the auditors.

In some instances, charges were severely inflated. In other cases lab tests that should have been billed together were “unbundled” and billed separately, allowing the hospital to charge more.

The audit also reported instances where hospitals approved patients for free care without verifying their qualifications. In one instance, the pool paid for a patient with an income of more than $100,000 who had sold a house for $400,000 and had a Porsche 911 registered in his name.

Officials at Cambridge Health Alliance and Boston Medical Center would not say whether or not they participated in any of the practices discussed in the audit, but BMC vice president Thomas Traylor said the hospital did not deliberately overcharge the free-care pool.

Cambridge Health Alliance senior vice president and chief financial officer Gordon H. Boudrow Jr. said it had been two years since the last audit by the state Division of Healthcare Finance and Policy. A more recent audit would have caught problems sooner.

The free-care pool also lacks a claims and billing verification system such as Medicaid or private insurance companies.

“The pool is a mystery wrapped in an enigma wrapped in a conundrum,” Inspector General Sullivan said.

“It’s an economic and statistical black hole.”

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