Overcharged in the emergency room

When 8-month-old Jeong-whan Park fell off a bed and bumped his head, his parents took him to the emergency department at Zuckerberg San Francisco General Hospital. It took doctors little time to determine Jeong-whan was fine, and they discharged him 3 hours later. Two years later, Jeong-whan’s parents got a bill in the mail for $18,836 — of which $15,666 was for something called “trauma activation.”

If your air conditioning went out in the middle of a heat wave — a life-threatening situation for many elderly people — the technician doesn’t demand $15,666 just to show up. They will probably charge a standard fee for a service call, but the fee is both transparent and reasonable. The same applies to plumbers, electricians, and every other trade we know of — no matter how dire the emergency to which they are summoned.

HVAC techs, plumbers, and electricians don’t charge outrageous service fees because they can’t. They operate in markets where they face competition to please consumers who are spending their own money. If they charged $15,666 just to come to your house, they would be out of business before the next heat wave hit. Hospitals operate in markets where government blocks competition, which would otherwise result in lower prices. Government also encourages open-ended insurance, which allows hospitals to price-gouge because most patients are too heavily insured even to notice, much less punish the price-gougers.

The combination makes it possible for hospitals to hit patients with huge trauma activation fees, no matter how inconsequential their injuries. For example, St. Mary’s Medical Center charged a woman $13,626.35 for an hour’s worth of treatment for her burned fingers, of which $12,500 was the trauma activation fee. Another hospital billed a bicyclist with road rash $12,500. A third hospital charged $33,000 to treat superficial cuts.

But, the prize for the most outrageous trauma activation fee probably goes to Lawnwood Regional Medical Center in Florida. Eric Leonhard was wheeled into the ED at Lawnwood with a broken pelvis — and wheeled out again in less than an hour because they didn’t have the right specialist to treat him. But that didn’t keep Lawnwood from billing him for $32,767, which comes to about $800 per minute.

There is nothing inherently wrong with charging a standard fee to ED patients on top of whatever services they consume. Operating a trauma center is expensive, and hospitals must cover their costs. A trauma activation fee is like a “cover charge” for being wheeled into the emergency room with a major trauma.

But something is clearly wrong with the amounts of these fees and how often hospitals assess them. There can be no ethical justification for, in the case of Jeong-whan, charging $18,836 for a physical exam. Insurers negotiate many of these fees down, but the prices can still be outrageous. For patients who don’t have a health plan that negotiates lower rates with the hospital — either because the hospital was out-of-network or the patient was uninsured — the trauma activation fee can be a terrifying surprise that destroys a patient’s credit rating.

While the abuse of “trauma fees” is scandalous, it’s also a drop in the bucket. In a recent book, we chronicle hundreds of examples of how bad policy allows everyone in the health care system — hospitals, doctors, pharmaceutical companies, nursing homes, air ambulance services, etc. — to overcharge patients and taxpayers.

If we want to make it harder for the U.S. health care system to gouge patients, we should focus on eliminating provider monopolies and increasing competition. If hospitals had to compete for our business, they wouldn’t even consider using any of these schemes to rip people off. Open-ended insurance has compounded the problem, by protecting providers from cost-conscious consumers. Why should a hospital lower its trauma activation fee if an insurer is ultimately on the hook – and higher trauma activation fees provide a higher starting point for negotiation between the hospital and the insurer?

What should we do in the interim? We aren’t prepared to suggest the use of tar and feathers on hospital administrators — but maybe it is time to start naming and shaming hospitals that abuse trauma fees. Maybe someone should ask Mark Zuckerberg whether he knows what the hospital that bears his name is up to

David A. Hyman and Charles Silver are adjunct scholars at the Cato Institute and professors at Georgetown University Law Center and the School of Law at the University of Texas at Austin, respectively.  Their book Overcharged: Why Americans Pay Too Much For Health Care is available now.

The article “Overcharged in the emergency room” was originally published in The Orange Country Register – https://www.ocregister.com/2018/07/22/overcharged-in-the-emergency-room/