Angry that your hospital is closing? Blame health insurers

By Mike McGann, Editor, The Times @mikemcgannpa

There is widespread anger and frustration over this week’s announcement that Tower Health would close Jennersville and Brandywine hospitals — without doubt, that anger is completely deserved.

While Tower Health deserves a healthy amount of the blame — the company’s mismanagement and clear dishonesty with local elected officials trying to save the hospitals in recent months are a big part of what put us in this situation.

But as bad as Tower Health is — and rest assured, they’re bad — we will continue to see hospital cutbacks and closures in the coming months and years for one reason: health insurance companies.

You may have heard a bit about inflation of late; the prices of a lot of things are going up.

What you may not have heard about is that medical reimbursement by those “nice” folks at Independence Blue Cross and Aetna (now owned by CVS) keeps going down. Yeah, down.

Even as costs for everything in the medical field have skyrocketed, what insurance companies pay providers and hospitals keeps getting squeezed down (and I’ll note premiums keep going up, too — so it is interesting that insurance companies are managing to cut expenses and raise revenue all at the same time, especially one that is supposed to be “non-profit” — IBX).

And yes, they’re not the only villains — Big Pharma has joined in the looting by charging silly amounts for simple drugs like insulin and some of those costs are being reflected in higher insurance premiums.

But it is health insurance that is slowly killing off health care providers. 

There’s a great story about hospitals creating wildly inflated costs for materials and procedures in The Los Angeles Times this week.

While no one can argue that health care pricing should be much more transparent and seems insane at times, it misses out the dance that hospitals must do to get money from insurers.

Let me explain it in simple terms: say you go to Emergency Room for stitches for a cut.

The materials and time probably cost the hospital between $250 and $300, meaning in a normal world the charge for be about $500, allowing for overhead and so on. If you don’t have insurance, you’re probably going to see a bill for $1,500 to $2,000, maybe more.

If you do have insurance, the hospital might get $100 from your insurer and be forced to write off the rest of the charges.

That doesn’t cover the cost of materials, let alone staff costs and other overhead.

Plus, they need to have a whole group of employees who do nothing but chase claims. Insurance companies deny them all the time for often nonsensical reasons. The insurance companies also “lose” them, forcing providers to refile them. Some of them never get paid, others take months or years.

Unless hospitals can band together to negotiate higher reimbursements, it becomes impossible to survive. Tower Health tried this and failed miserably — but they got a big assist from IBX and Aetna (if you’re angry, stop shopping at CVS: Rite Aid and Walgreens work just as well and aren’t killing hospitals and strangling specialists out of business).

So, yes, the management of Tower Health rightly deserves a ton of criticism for how it handled this mess. Lying about your plan never works out as a long-term strategy, which means you have to worry whether the rest of the Tower Health hospitals are likely hanging by a thread.

But it is important to remember what brought us here: insurance companies are sucking the life and money out of health care, hurting and limiting treatment and forcing providers out of the market. 

Like Big Pharma, the insurance industry has purchased enough state and federal legislators to dictate how they’re regulated, which means largely not at all. The truth is, spending a few $100 million to make billions is a good business model. Unfortunately, it is corrosive to democracy and is slowly killing our health care infrastructure.

The private sector is failing us. We need robust, well-funded public options to compete with these private insurers.

Greed is literally killing us — closing our hospitals and driving doctors out of their practices.

How many of us have to die before we do something about it?