The first half of this post can be read at: https://covid19healthdiaries.com/diary?did=303

Pricing and gouging

The private hospital model is certainly based on charging patients for care and treatment, whatever the means of payment. Gouging describes charging well above market rates for a good or service, the seller exploiting instances where demand is high and supply limited or low. Goods that are price inelastic – such as hospital beds in a pandemic - tend to have few substitutes (or none at all), and this allows price setting behaviour at unconscionable rates. COVID has provided an opportunity for gouging and profiteering in a sector long associated with ‘surprise pricing’, non-transparent billing and steeply rising prices for services in general. In India the markup on hospital services is expected to be 25%, this is routine. Now there is multiplying evidence of private hospitals in LMICs and the USA exploiting demand for COVID beds and other services, charging overly high prices for patients, and thereby acting true to form and exploiting government and patient desperation for treatment. Many are being excluded.

There appear be a number of different mechanisms being used to gouge from COVID cases. For example, many hospitals in Asia, the USA and Africa are charging patients extremely high prices for PPE, oxygen, medicines and plasma, or for in-patient testing for the virus.

India Today reported on 12 June that that in some cases nearly 50% of the patient bill for COVID treatment was from PPE costs. Other reports in that country indicate that daily PPE charges could run at 6,000 - 10,000 Rs per day (USD $70-130), and average 18% of the total bill for private hospital treatment of COVID. In Telangana State (covering the city of Hyderabad) the state High Court in July is examining cases of hospital gouging, with PPE costs reportedly being very high in cases of over-billing – and all this despite the state government capping prices for hospitalisation on June 15. While many other Indian states have now set price caps for COVID treatments, PPE costs are being used as one means of (increasingly illegal) circumvention. High PPE costs also figure in the COVID bills and insurance claims of those receiving hospital treatment in the USA. Kenya and Egypt have also seen similar cases.[1],[2] While PPE has been very scarce, it is clear that private hospitals have been transferring costs to patients of hospital infection control and staff and other patient protection, and at hugely inflated prices. How global this practice has been will emerge when serious assessments are made on hospital pricing during the pandemic, and from current investigates of press databases.

Another vehicle has been in charging inflated prices for in-patient COVID tests. The United States has seen wildly diverging prices for in-patient (and out-patient) testing. At the height of the crisis in New York State there were news reports of patients receiving $10,000 bills for testing. We are still seeing testing bills being passed to insures in the region of $7,000, with state-wide variance of prices between $153-2,315 in Oklahoma, for example.[3] In Ireland one private hospital group has charged €275 for in-patient testing, all while the private hospital system in that country is effectively under state control during the pandemic.[4] Similar high costs for testing have been found in the private systems of Pakistan, Bangladesh, Mexico, Kenya and Nigeria. It is just another source of money for the sector, at a moment when testing should be as low as cost or zero cost to meet public health and pandemic response goals.

In many of these national systems the insurers and patients are pushing back, as are governments in many cases, but the gouging on the basis of cost of PPE, testing, medicines and oxygen still appears to be occurring routinely.

Perhaps one of the most unpalatable means of filtering out less well-off patients, and for guaranteeing payment of abnormally high bills, is found in the use of up-front deposits for those seeking admission for COVID treatment. Sadly, India is again very visible here, and the practice is rampant across many Indian states. This is perhaps due to the high degree of civil society scrutiny of public affairs in that country making this more visible than in other LMICs, although the Union government and  weak, laissez faire, state-level private sector regulation is perhaps a more obvious explanation for private hospitals believing they can continue to exclude COVID cases based on the inability to pay up-front. The Indian media has focused on patients being forced to pay Rs 100,000-200,000 (USD$1300-2600) or even Rs 500,000 (USD$6,500) for admission to hospital.[5],[6] These prices for admission are swinging and have left many patients searching through multiple hospitals for beds with no up-front admission costs. The practice has also been found in Kenya, with one Nairobi hospital charging 500,000 Kshs (USD$4,600)[7] for admission; and in Zimbabwe with hospitals asking for $5,000 in USD for access.[8]

In Zimbabwe the message on up-front costs is now very public:

“Kindly be advised that all Covid patients are required to pay USD (American dollars) deposits, $60 (R1,080) for casualty, $3,000 (R54,000) for General Ward and $5,000 (R90,000) for ICU (Intensive Care) hospitalisation,” Obedience Ncube, credit controller for the Catholic run Mata Dei Hospital in Bulawayo, said in a statement.[9]

There is anecdotal evidence of the practice being found in Nigeria and Pakistan, and more systematic searches are presently being conducted in media databases. Nonetheless, these are all cases where the practice has been made apparent by reporting, or because deposits for treatment are the subject of legal action or other government sanction. Other states have been forced to warn against the requirement of up-front payments, as has been the case in the Philippines, Oman, Egypt and Indonesia, indicating that hospitals in those countries have been charging COVID patients prior to admission for COVID treatment. We can infer the practice is more widespread in LMICs than this first-cut research has exposed.

Finally, we have good evidence of more general forms of gouging for COVID treatment by private hospitals across LMICs and in the USA.  The high costs for COVID hospital being reported are not merely a case of hospitals encountering unusually high costs for treatment per COVID case, particularly those needing ICU and ventilation, but are almost certainly a means of offsetting losses initially occurred from the fall-off of elective and out-patient procedures described in the second of these posts. Money is being made and insurance data is one point for further investigation. While cost of per patient treatment for COVID is a moveable feast and surely expensive, hospitals that have gouged in the past appear to be doing so now, in a form of disaster capitalism.

The USA is seeing insurance and patients facing typically huge costs per COVID patients. Patients being treated are encountering both co-payments and high out of network costs (for treatment in hospitals not in their insurance scheme):

‘Charges for a six-day hospital stay for a coronavirus patient with an underlying health condition or complications average more than $74,000 according to FAIR Health, a nonprofit that analyzes claims data, although commercial plans would pay an average of just under $39,000 for the treatment. Cases with fewer complications would still incur charges averaging more than $53,000 for a six-day stay. The consulting firm Avalere recently projected that a typical hospital stay for coronavirus patients is nearly $23,500. But insurers still don’t have a clear picture of potential long-term costs, especially if patients need long rehab after weeks on ventilators, or dialysis if they suffer kidney failure.’[10]

Note that the Fair Health analysis is based on a six day hospital stay, and clearly longer periods in ICU will involve much higher costs. One much reported case in the USA focused on a 70 year-old Seattle man who emerged from months of life saving care for COVID to be presented with a 181 page itemised bill for USD$ 1, 222, 501. There are currently 1.3 million cases of COVID in the USA and huge numbers of hospital admissions (ICU beds are presently full in a number of states, such as Tennessee, Florida and Texas). The total COVID hospital bill will be staggering and only get higher if the pandemic in that country procededs unchecked. The growing number of those uninsured because of job losses have been guaranteed treatment by the President under Medicare with a 20% supplement to for COVID care in safety net hospitals. However, initial allocation for uninsured in the CARES Act in April  (via Medicare )was finite (at some $10 billion) and it is thought that this allocation is already exhausted. There is much uncertainty therefor at the level of hospitals and patients for future treatment of the uninsured. Co-payment and out of pocket payment will rise and medical bankruptcies will escalate.

India is again under the spotlight for gouging. Before state governments were forced to respond to public outrage at prices being charged for hospitalisations, there were a series of reports on the high fees being asked for COVID treatment, particularly in the larger hospitals and multi-site chains like Max and Fortis. One schedule for Max hospitals made headlines in June, listing daily charges of Rs 53,050 without a ventilator, and Rs 72,550 per day with such assistance. Prices for shared wards and so on were also detailed. These prices are clearly way beyond the vast majority of the Indian population, and clearly to much for many Indian insurers who have pushed back against gouging and extended stays in ICU. By May the situation in Delhi was spiralling out of control with the government refusing to act on prices being charged as infections ratcheted up. Pressure from the public and insurers finally produced change and state government intervention in June, following other states that had capped prices (see 4 in coming days).

The final strategy of private provider services is apparent from the bigger hospital chain providers in a few countries threatening closure or withholding capacities in return for subsidy or high prices per patient. The need for surge capacity is very real across LMICs as 2020 has progressed, and the sector has used it as a bargaining chip in negotiations. In South Africa, the big four providers negotiated hard with the government to secure per patient prices for critical COVID care. The four multi-site providers held off for a number of months, with the private sector possessing two-thirds of critical care, they had a strong position to do so. The government eventually agreed to a Rand 16,000 per day price, some USD$1000.[11] If honoured and rates of hospitalizations increase in South Africa (as they are already doing dramatically), this will prove a very costly deal to a struggling health system and government.

Similar deals with private hospitals have been reached in Mexico and in some Brazilian states, albeit with the Mexican government handing over state money with very little negotiation. Australia saw much the same dynamic in late March, with threatened closure (both temporary and permanent) of large hospital chains seeing the government intervene and fund half of all operations in return for surge capacity.

Government responses to all of the credit crunch and service failure is the basis of the next post. However, it is clear from the above that once response to the credit crunch resulting from the disruption to the traditional private sector service model has to been to make money where the can from COVID patients. Private hospitals have used their bed capacity as a bargaining chip to make money out of patients and governments, and tried to insulate themselves from regulation on pricing. Where governments have not intervened, higher than normal costs have been passed back to patients and insurers. Even where governments have intervened in some national contexts and enacted emergency measures, private providers are ignoring or gaming the rules, content to engage in litigation or even fines. Of course, those being admitted are routinely more wealthy and insured, which are the very clientele private providers cater for in normal times. Only a number of states, such as Thailand and Oman, have been categorical in the requirement to provide universal admission and treatment of COVID patients irrespective of the ability to pay. Other LMICs and the USA have stopped short of more aggressive measures toward universal COVID coverage. Money is being made and those unable to pay either stay at home or a refused treatment. They do so both infecting others and dying. What this all means is that the private provision of health and hospital care is less legitimate than ever before.