N.J. looks to close fee loophole utilized by Meadowlands Hospital Medical Center

Monday, September 19, 2011 - Star Ledger

New Jersey is set to clamp down on a North Jersey hospital that insurance companies claim is billing them as much as 3,000 percent more than its own outpatient surgery centers charge for the same treatment.

Part of the plan by Gov. Chris Christie’s administration to contain rising auto insurance rates targets the business practices of Meadowlands Hospital Medical Center in Secaucus, bought in December by the owners of three surgery centers in Bergen and Essex counties.

Since then, the new owners have been referring auto accident victims from their same-day surgery center to Meadowlands to take advantage of a fee loophole, according to insurance executives and confirmed by the Department of Banking and Insurance. The state limits what same-day surgery centers may charge, but it does not regulate what hospitals may charge for most outpatient care. And at Meadowlands, that difference can be substantial insurers and state officials say.

According to the Insurance Council of New Jersey:

• Same-day surgery centers that perform knee arthroscopy — inserting a tiny camera after small cuts are made to the knee — can bill an insurance company no more than $3,000. Meadowlands hospital, doing the same surgery on an outpatient basis, charges $90,000, or 3,000 percent more.

• Same-day surgery centers administering steroid injections to an accident victim’s lower back can charge up to $3,800. Meadowlands Hospital charges $67,715.

• A plasma back injection, used as an alternative to steroids to reduce disc inflammation and pain, would cost $13,350 at a same-day surgery center. Meadowlands bills $161,510.

Meadowlands’ business operations are among the issues Sen. Joseph Vitale (D-Middlesex), said he plans to raise when he and the rest of the Senate Health, Human Services and Senior Citizens Committee meet today at the Statehouse to discuss the impact of the growing number of for-profit hospitals in the state.

"There are a lot of questions to ask,’’ Vitale said.

Banking and Insurance Commissioner Thomas Considine proposed new auto insurance rules in August that would set a price limit on what hospitals can bill for 2,000 never-before regulated outpatient procedures.

The rules would close the loophole in auto insurance regulations that has helped to drive up premiums in the last two years after several years of decline, he said.

"The common perception is insurance companies have all in the money in the world," Considine said.

"In 2007, New Jersey was the 13th most profitable market in the nation. Last year, it had fallen to 50th, and virtually all of it was driven by PIP," he said, referring to personal injury protection or medical costs.

Meadowlands officials are vigorously opposing the changes. Last week, they got help from 10 state legislators — five Democrats and five Republicans — who sent the governor a letter warning the new rules would threaten the financial health of the state’s fragile hospital industry.

"We have serious concerns with such an attack on our state’s struggling acute care hospitals, and we ask that you join us in opposing any effort to impose ambulatory surgical rates on all services performed at hospitals," according to the Sept. 15 letter to Christie.

Surgery centers "do not share a fraction of the costs of operating a hospital and are not burdened with charity care,’’ according to the letter, in a rare display of bi-partisan agreement. "Paying hospitals and (ambulatory surgery centers) at the same rate is simply unfair.’’

"It is unlikely that reducing hospital reimbursement will be followed by a reduction in consumer auto insurance premiums. Certain hospitals, however, may be forced to close or reduce services, and hardships experienced by others may be exacerbated,’’ according to the letter.

The Banking and Insurance department has received 12,000 comments on the proposed rules, and the overwhelmingly majority, save for a few hundred, support the changes, Considine said.

He said many letters are from policy holders who have been encouraged by their auto insurance companies to write letters.

Most auto insurance policy holders are reimbursed no more than $250,000 per accident under the personal injury protection coverage of their car insurance. People will burn through their limit fast if prices are not brought under control, he said.

Considine said he has had to confront more than a few hospitals for exploiting the rules, but singled out hospitals run by surgery center operators as the biggest repeat offenders.

"They are taking advantage of what we saw was a loop hole in the fee schedule," he said. When asked whether he knew of any hospital besides Meadowlands that was bought by surgery centers operators in the last two years, Considine said he did not.

Most hospitals do not charge the exorbitant rates, said Deana Lykens, president of the Insurance Council of New Jersey, a trade association. Another hospital charged $4,458, a more typical price, for a steroid injection in the lower back, compared to $67,715 Meadowlands billed, she said.

"Some of the numbers that we have seen coming out of Meadowlands show how the system is being abused," Lykens said.

A spokesman for Meadowlands said the owners, Richard Lipsky and Tamara Dunaev and their for-profit company MHA, Inc., declined to comment for this story.

According to presale documents filed with the state, MHA made its business model clear before the Department of Health and Senior Services approved the sale with Liberty Healthcare System in November. Their stewardship would revive the failing hospital that otherwise would have closed, taking jobs and health care services with it, according to the documents.

Their three surgery centers — Essex Surgery Center in Hackensack, Roseland Surgery Center in Roseland, and Bergen Ambulatory Surgery Center in Saddle Brook — perform a total of 15,000 procedures a year, and the hospital "anticipates being able to draw from its existing referral base," according to pre-sale records they filed with the health department.

The New Jersey Hospital Association, the largest trade group representing hospitals, called the state’s proposal "a good compromise."

Association spokeswoman Kerry McKean Kelly said, "It strikes a good balance between reining in healthcare costs and protecting hospitals."