Insurance Companies to Wield Bigger ?No-No? Stick

The victim of a traumatic injury may sometimes find herself staying in a hospital longer than anticipated because, as a result of an embattled immune system, she develops a high fever or other complication.

Another patient may become an extended hospital patient because, six hours after a planned gall bladder surgery, doctors discover that a missing #10 surgical blade has been left behind in the patient’s abdominal cavity (i.e. “patient complains of stabbing belly ache’).

In the past, the additional costs associated with both of these events would likely have been paid by insurance companies. But in an effort to reduce costs and improve patient safety, a number of private insurers will refuse payment for fully preventable medical errors such as that forgotten scalpel, the development of bedsores, or performing the wrong procedure entirely.

According to The Wall Street Journal, a host of major insurance companies—Aetna, WellPoint, UnitedHealth, and Cigna—are all considering harder-line contracts with hospitals that seek to protect both consumers and the companies’ bottom lines.

While many hospitals already evaluate instances of medical errors on a case by case basis, often forgiving part or all of the associated costs, mistakes—sometimes further exacerbated by unintelligible bill coding—still occur. While the most sensational errors are statistically rare, the Centers for Disease control reports that hospital-caused urinary tract infections can add as much as $10,000 to a patient’s bill; some bloodstream infections cost as much as ten times that amount to treat. These “everyday blunders” make up $4.5 billion in additional healthcare spending each year.

The move to blacklist a greater number of what were once considered ordinary events will certainly impact hospitals, patients, and insurance companies. But these policies also have the potential to affect ARM companies that specialize in recovering healthcare bad debt. By contractually prohibiting hospitals from billing patients for “never-events” that drive up bills, healthcare consumers will be off the hook for hundreds or thousands of dollars they might have otherwise owed for prolonged hospital stays.

That hypothetical reduction in bad debt, however, is predicated on the notion that hospitals—obligated to absorb additional expenses as a result of these new insurance guidelines —will not be inclined to pass on those costs to consumers in other ways.