In late 2007, Centinela Hospital in Inglewood was losing nearly $1 million a month and had piled up $15 million in debt. Among the causes of the crisis: $25 million in overdue bills.
Collecting that money would have given Centinela a measure of relief. But the bills went unpaid, and the century-old medical center was sold. The new owners slashed services, closed half the operating rooms and laid off a third of the employees.
Who owed Centinela that elusive $25 million? According to hospital officials, it was health insurance companies.
"Insurers have found a very creative way of denying, delaying or slowing payments in a way that is having a real impact on patient care and some of our survival," said Von Crockett, Centinela's chief executive. "Every single doctor and hospital is writing off money they are legally owed but don't collect. It's an insane situation."
Doctors and hospital executives say collecting payments from insurers has become an expensive headache that is driving up the nation's healthcare costs.
Billing disputes and protracted payment delays are one consequence of a massive consolidation among health insurers that has created de facto monopolies in much of the country, the Los Angeles Times found.
Two decades ago, the top 10 insurers covered about 27% of all insured Americans. Today, four companies -- WellPoint Inc., UnitedHealth Group, Aetna Inc. and Cigna Corp. -- cover more than 85 million people, almost half of all those with private insurance.
A 2007 survey by the American Medical Assn. found that in two-thirds of metropolitan areas, one health insurer controlled at least 50% of the market. In the Los Angeles area, two companies dominate -- Kaiser Permanente and WellPoint's Anthem Blue Cross.
As a result, doctors and hospitals have little negotiating power and few options when an insurer rejects a bill. Some physicians are dropping out of insurance networks or turning away new patients. Others have moved to cash-only practices. Some smaller hospitals and solo-practice physicians say they are being driven out of business entirely.
The insurance industry lays much of the blame for billing problems on doctors and hospitals. Insurers question or reject claims "when we don't get full information or when we get duplicate bills," said Karen Ignagni, president of America's Health Insurance Plans, the industry's lobbying arm in Washington. "Efficiency is a two-way street."
In some cases, she said, insurers are simply trying to ensure that doctors treat patients consistently and in accordance with the highest medical standards -- that they're not wasting premium dollars by overusing costly treatments or ordering unnecessary tests.
"Utilization review is coming back," she said, referring to heightened scrutiny of doctors and hospitals. "You can't run a health plan today without using some of these tools and techniques" to control costs.
But Ignagni acknowledged that billing processes were inordinately complex. She said insurers were aware of providers' complaints and were trying to streamline billing systems.
"No question that administrative simplicity has to be job one," she said.
Reading the fine print in policies
Arcane and ever-changing coverage rules are a leading cause of fee disputes. Patients and physicians are compelled to pay special attention to the fine print in healthcare policies.
Dotti Smith, office manager for a group of surgeons affiliated with St. Mary's Hospital in Long Beach, recently billed a major insurance company for a gallbladder operation. The insurer had preauthorized the surgery and the surgeon was a member of the insurer's network of preferred physicians, Smith said. But the company refused to pay the $3,100 bill.
Why? The patient was enrolled in a subcategory of coverage with a smaller network of doctors that did not include the Long Beach surgeon.
The surgeon's office contacted the patient, who replied that the bill should be her insurer's responsibility.
Smith said the time she spends on billing issues has doubled over the last six years.
"It used to be a breeze," she said. "You'd bill Blue Cross or Blue Shield, and you'd get paid. Now you have to constantly stay ahead of the ball."
Doctors, nurses and other staff members are spending more and more time haggling with insurers over claims or obtaining advance approval for treatments.
Dr. John A. Glaspy, a UCLA oncologist, said that nurses who used to care for patients full time "now spend 40% of their 60- to 70-hour workweeks filling out forms and phoning for authorizations."
Walking through his office suite at UCLA Medical Plaza, Glaspy pointed to offices of clerks and medical assistants busy securing insurance approvals for even routine procedures.
"We have one employee just getting radiological approvals, eight to 10 a day," he said. "That's $45,000 in salary, plus benefits, not going to healthcare. It can take us a whole day just to find out who to get the authorization from."