Kaiser Member Upset Over Hospital Charges

But after receiving a complaint, the Oregon Insurance Division insists the claim was processed correctly

October 11, 2012 -- Susan Chaney is convinced insurance companies are some of the highest profiting companies in America at the expense of people such as herself who deserve the right to affordable healthcare.

She spoke out after her husband, Jerry, a diabetic, was hospitalized at Kaiser Sunnyside in January for a foot ulcer that had gone undiagnosed.

After receiving the bill, Chaney realized their deductible and co-insurance hadn’t been met. That, she said, was never the issue.

Chaney became upset when Kaiser sent paperwork known as an Explanation of Benefits indicating that its medical center had billed $20,809.45 for the surgery, medical equipment and hospital stay, while the allowed amount was $28,300.65. Kaiser paid $24,644.32 toward the bill, while the Chaney’s were left owing $4,029.92.

“How does the hospital get paid $8,000 more than the cost of care?” asked Chaney who sent a complaint to the Oregon Insurance Division. “Everyone seems to think we’re trying to get out of paying, but that’s not the case. This is one reason people can’t afford healthcare is when they have to pay more than the actual cost. We’re the lucky people; we have insurance. But this is absolutely ludicrous.”

Earlier, Chaney had contacted Congressman Earl Blumenauer’s office in Portland, speaking with his casework manager Emily Hebbron who encouraged her to file a complaint with the Insurance Division.

“I want to make sure she gets an answer,” Hebbron said. “And I comment her for looking at the hospital bill so closely. Not everyone would have done so.”

The Insurance Division did look into this issue, according to a letter sent by Dennis Kuckartz, a consumer advocate. “When the allowed amount is greater than the billed charges, the benefits are calculated on the billed charges,” he wrote. “Even if Kaiser Permanente would have only allowed the billed charges, Mr. Chaney’s liability would have been the same. The claim was processed correctly.”

That explanation doesn’t satisfy Chaney. ”I still contend that this is what’s wrong with the entire system. I do not feel that a hospital or doctor or anyone for that matter should be able to negotiate a higher payment than the cost of care. Add that to the fact that then Kaiser tried to ‘strong arm’ us into making payments of nearly $400 a month on our portion when they had  already received $4,000 more than the actual cost of care is absurd. After months and many, many phone calls Kaiser did finally agree to take only $175 per month until our portion is paid.”

For its part, Kaiser couldn’t discuss the case because of HIPAA rules, but when asked to explain the difference between billed and allowed amounts, David Northfield, media relations manager, told The Lund Report:

“The billed amount is the charge for the service or services (the "real" charges"). The allowed amount is the amount that is considered for payment. It can be more than, less than, or equal to the amount billed depending on negotiated contracts or payment methodology.”

When members disagree about the information in an Explanation of Benefit, they should contact Kaiser Permanente’s Membership Services to review the information and have the charges explained and told about how the claim was processed, Northfield said.

“If the member is not satisfied with the response, the member call will be escalated to a lead or supervisor. If the member speaks to the lead/supervisor and is still not satisfied, we advise the member can put their concerns in writing and send to Member Relations.”

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Kaiser has some explaining to do to the public and its members because with all effort the insurance industry has put into driving healthcare costs down, it isn't enough for their spokes person to say that the allowed amount can be MORE than the billed amount when most insurers are paying LESS than the billed amount! Kaiser is verticially integrated so it is really taking money out of its left pocket and putting it into its right pocket when it pays its own providers but seriously what is with higher allowed amounts? Please do tell. Is this how Kaiser pays provider incentives? Every member of Kaiser should call in flooding Kaiser's member service line asking these questions. I am not even a Kaiser member but I am dying to understand why an insurer would negotiate contracts rates higher than the amounts billed!

While this seems wrong, it's very likely that her claim was paid based on the DRG, not the actual cost. Some contracts between providers and insurers involve an agreement to pay the same amount for a specific episode of care, regardless of actual cost. In this case her cost of care was less than that amount, but in many cases this helps keep the cost of more complex stays down. Without this form of agreement hospitals would be encouraged to 'upcode' or bill for more services. This actually keeps costs in line.