Our Point of View

May 8, 2008

Kaiser Permanente Members Receive Inappropriate Bills from Non-Kaiser Permanente Hospitals in Southern California

Kaiser Permanente members in Southern California may have received a letter within the last week from a non-Kaiser Permanente hospital demanding payment for treatment services. We want our members to know what we are doing about these inappropriate bills, since we can understand why this letter would cause concern and confusion.

The letters are from: Chino Valley Medical Center, Desert Valley Hospital, Huntington Beach Hospital, La Palma Intercommunity Hospital, Montclair Hospital Medical Center, Paradise Valley Hospital, Sherman Oaks Hospital, and West Anaheim Medical Center.

We are deeply concerned that the owner of these hospitals, a company called Prime Healthcare, has chosen to put patients in the middle of an ongoing business dispute that is more appropriately handled between Prime and Kaiser Permanente.

Kaiser Permanente has been working to resolve payment differences with Prime for over a year regarding services provided by Prime's facilities to KP members. Prime has brought five lawsuits against KP, and those cases are now pending. Instead of waiting for the courts to resolve these lawsuits, Prime is now going around the judicial system to try to directly collect amounts from patients. There are several thousand KP members who have received care at a Prime hospital emergency room at some point over the past two years, and during the first week of May 2008, many of those patients received a letter stating they needed to ‘pay now' or have the nonpayment reported to credit agencies.

These letters sent by Prime Healthcare are inappropriate, reprehensible, and unnecessarily scaring patients. We will do whatever is necessary to protect our members, and we are taking every possible step to prevent Prime from inappropriately seeking payment from our members or unfairly attacking our members' credit ratings. Here is what we are doing to protect our members and their credit ratings:

• We are immediately sending cease and desist letters to Prime.
• Unless Prime commits to not carry through on its financial threat to our members, we are going to court in the next few days to ask the courts to intervene and protect our members from this inappropriate effort to collect these amounts.
• We are calling our members, starting today, to inform them about the steps we are taking, we are also sending letters, and we have set up a special hotline for our members to call and receive the latest information.
• We are sending letters to KP members who have received services from Prime, informing them that we are taking steps to protect them from Prime's actions.
• We are also prepared to help our members act on their own behalf to stop Prime's inappropriate collections processes.

Disputes over reimbursement are common in the healthcare industry, and best resolved as are other business disputes: between the two organizations through good faith mediation and arbitration, and through the courts if necessary. Part of how Prime operates is to cancel all payment contracts from health plans, a move which sets up these kinds of disputes over payment. These patients came to a Prime Healthcare-owned hospital seeking emergency medical care, and these patients now find themselves being put in the middle of this dispute created by Prime.

One reason for the disputes about payment is that Prime often charges patients at levels higher than other community levels. For example, in Prime's Desert Valley hospital, costs for drug-eluting stents increased from $16,000 in 2005 to $63,900 in 2006. A comparison of other Southern California hospitals by the CA Office of Statewide Health Planning and Development found no other hospital charging more than $14,260 for a drug-eluting stent. The same ChargeMaster data shows costs for a one-day use of a mechanical ventilator went up from $256 in 2005 to $6,144 in 2006, an increase of over 2,000 percent in one year. Costs for a urine drug screen went from $38 in 2005 to $134 in 2006, an increase of over 250 percent. Kaiser Permanente has already paid Prime Healthcare Services more than $18 million for services in 2007 alone. Prime is now seeking over $25 million more. Once the disagreement with Prime is determined by the courts, Kaiser Permanente will pay the proper amounts, as determined by the courts, to settle these claims.

Additionally, Prime's hospitals have refused to notify Kaiser Permanente when our patients arrive at a Prime facility, which is a violation of the law. We expect every non-Kaiser Permanente hospital that sees our members in their ERs to medically screen and stabilize our members' medical condition as required by law. We have a system for prompt doctor-to-doctor telephone consultation between Kaiser Permanente physicians and community physicians. This consultation allows Kaiser Permanente physicians to provide relevant information from the member's medical record to the non-Kaiser Permanente providers to help them treat our members effectively. Kaiser Permanente pays more than $1.2 billion each year to non-Kaiser Permanente hospitals in California for emergency and related care received by our members. Unlike the vast majority of hospitals in California, Prime Healthcare hospitals do not take advantage of the critical patient information that Kaiser Permanente can provide to physicians treating patients in emergency situations.

Prime Healthcare's hospitals are wrongly attempting to collect funds that either will be paid by Kaiser Permanente (upon resolution of these cases) or rendered unnecessary by the court's rulings. If you received one of these letters as a Kaiser Permanente member, please let us know by calling our member services department, providing us with a copy of the letter, and we will keep you informed of our actions to prevent this wrong-headed effort by Prime Healthcare.

Sincerely,

Benjamin K. Chu, M.D., M.P.H., M.A.C.P.,
President, Southern California Region