Overhead overload

Local hospitals have not-so-obvious expenditures resulting in higher costs to patients

An increasing amount of paperwork is among a number of things driving up costs for local hospitals.

An increasing amount of paperwork is among a number of things driving up costs for local hospitals.

Photo By Fuse/Thinkstock

Going to the hospital can be an expensive proposition. So is operating a hospital. Medical centers face an array of hidden costs that drive up the bills sent to patients and insurance companies.

“Health care is really quite a complex operation, and there are a lot of things [involved] that most people don’t realize,” said Kevin Erich, CEO of Feather River Hospital. “A lot of people, when they come to the hospital, they expect to get care and get their needs met. But one of the things they don’t understand about the cost of health care is all the things behind it.”

Last week in Healthlines, the CN&R explored some of the costs directly related to patient care—expenses tied to things as varied as employment laws and the technology marketplace. This week we look at even stealthier costs, shared by Erich and two other local hospitals’ CEOs, Mike Wiltermood of Enloe Medical Center and Robert Wentz of Oroville Hospital.

“There are things that cost hospitals money and sometimes there’s very little benefit to show from it,” Wentz said. Here are some examples the CEOs cited:


If you think hospital patients need to fill out a lot of forms, that’s just the tip of the documentation iceberg. Erich estimates that a full 25 percent of his staff is somehow involved with compiling or completing required paperwork, and Wiltermood said the increasing number of reports has led to the doubling in size of several departments.

Hospitals are required to publicly report data on a number of outcomes and measures. They need to survey patients and report on patient-satisfaction levels. Nonprofit hospitals also need to conduct community-needs assessments, turn those into action plans and report on their progress in annual community-benefits reports.

“The rules require us to be so meticulous about proving we’re doing something, even something patently obvious, that it does really drive up the cost,” Wiltermood said. “I’m not saying there isn’t a reason for that, and there’s certainly a role for documentation and communication … but the reality is that the meticulousness that’s required can be counterproductive … and it’s expanding in its scope.”

Retroactive money grabs

Hospitals’ billing departments need to sort through each insurance provider’s rules—including how they respond to an estimated 68,000 separate billing codes—in order to get payments approved.

Even then, hospitals don’t always get to keep the money they’ve collected. Firms known as Recovery Audit Contractors (RACs) re-examine claims and sometimes find a reason for the insurer to retroactively demand a refund. This can happen years after the fact, when it’s too late for the hospital to re-file a claim.

“This almost becomes like an arms race,” Wiltermood said, “because the government finds a way to deny us payment, and we have to hire contractors to help us understand rules and challenge the decision made by the insurance intermediaries. Then they change the codes, and we have to adjust, and we have to buy new software. It gets ridiculous after a while.”

5150s in the ER

Behavioral-health funding has been a big casualty of California’s state budget crisis. Shortfalls in public services put “a burden back on the hospitals,” Erich said, “because if we don’t have the support systems we need for mental-health patients, there’s no place to send them to get the services they need.”

Even when there is a place to send them, local hospitals find themselves serving as a way-station, sometimes for days.

This phenomenon applies in particular to “5150” cases—instances where law enforcement determines a person is mentally unstable and potentially poses a danger to himself or herself, or others. Butte County Department of Behavioral Health’s Psychiatric Health Facility in Chico can accommodate 16 such individuals. Even so, before Behavioral Health will accept an admission, that patient must visit a hospital emergency room to get a physical health screening.

The hospital may get a small reimbursement for the screening, but not for the time the patient spends in the ER. Meanwhile, that patient occupies a bed and, typically, requires intensive attention from the nursing staff—sometimes from security, as well.

On a recent day, Wentz said, Oroville Hospital housed five such patients.

“They were tying up five medical rooms even though they had no medical need,” he continued. “It’s costing us money, and the people who are trying to access emergency services through our Emergency Department, it’s costing them time.”

Another 5150 patient spent two full days in an emergency room. Wentz explained that the county “didn’t have the resources to take care of her—which we really didn’t, either.”

Of the local hospitals, only Enloe has its own behavioral-health unit. In certain cases, that ward can temporarily accomodate county 5150 patients, but Enloe is not compensated for these stays.

Seismic construction

In 1994, the California Legislature passed SB 1953, the Hospital Seismic Safety Law. The legislation set an absolute deadline of Jan. 1, 2013, for hospital facilities to meet certain seismic standards, and 2030 for an even more rigorous set of standards.

The core idea has merit: After a major disaster (e.g., an earthquake), communities need their hospitals standing. Here’s the rub: “It’s an unfunded mandate,” Erich said. “The government is making those rules but they’re not coming forward and saying, ‘We’re going to give you $100 million to make a hospital that’s seismically compliant.’”

Hospital construction already is more expensive than standard commercial construction because of regulations and oversight specific to health care. That’s a familiar balancing act that impacts many aspects of hospital operations.

“I think that the bottom line with this is the enormous amount of regulatory pressures being put on doctors and hospitals is forcing them into larger and larger groups so they can manage this increasing overhead,” Wiltermood said. “It’s very difficult now for private-practice physicians or private community hospitals to operate as a result. But we have to figure it out.”