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 HMOs Sucking New York Hospitals Dry :  Published December 2006 All Rights Reserved


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HMOs Sucking New York Hospitals Dry


Patients, doctors and hospitals in New York are being “strong armed” by HMOs who “game the system to shift to their members, to publicly supported hospitals, and ultimately to the tax paying public, what should be the financial obligations of the HMOs,” according to David P. Rosen, CEO of three hospitals in New York City.

Testifying today in Manhattan at a joint hearing of the New York State Assembly Committee on Health and the Committee on Insurance, Rosen, CEO of Jamaica Hospital Medical Center, Flushing Hospital Medical Center, The Brookdale University Hospital and Medical Center, and the MediSys Health Network, addressed legislative concerns about “consolidation in the health insurance industry and its impact on health care services, patients and providers.”

Citing the report released 28 November 2006 by the New York State Commission on Health Care Facilities in the 21st Century that recommended hospital closings throughout the state, Rosen said that “the HMOs are like the 800 pound gorilla sitting in the living room that is being ignored in discussions of how to fix our broken healthcare system.”

Rosen told the legislators that “the abuses of the health insurance industry are a direct result of the concentration of financial and market power in an industry that operates free of meaningful regulation and enforcement. The consolidation of insurers with overwhelming market share has enabled their exploitive business practices which have been foisted upon consumers and providers.”

“Our experience is that consolidation has severely impacted the ability of service providers —particularly not-for-profit hospitals— to negotiate fair agreements with the HMOs, and has consequently diminished their ability to provide vital health services,” said Rosen.

He pointed out that in 2005, New York’s hospitals lost a combined $100 million, the same year in which New York-licensed HMOs’ profits exceeded $1 billion, making “New York State the most prolific producer of profits for HMOs in all states in the country, despite the fact we are not even the most populous state.”

Rosen described to the legislators specific instances of abuse by HMOs, for which “there is no real regulatory oversight and no real consequences for HMOs that abuse the power our ‘regulators’ have allowed the HMOs to accumulate. The results of this regulatory void are the excessive profits the HMOs drain from our healthcare system and the attendant abuses that inevitably emerge with such unchecked incentives to cash in.”

He made a parallel between the backdating of stock options by United HealthCare as part of the compensation for its top executives and the backdating of United’s Oxford subsidiary of its written acceptance of a new contract with Jamaica Hospital “in an illegal effort to keep the Hospital in its network.”

Rosen described how Oxford treats “in-network hospitals as out of network hospitals if an out of network doctor makes the referral or provides some service,” and how he has documented for the New York State Department of Insurance and Department of Health how United’s subsidiaries “shift what should have been their expenses on to their members by simply informing the member that the hospital is out of network even if the hospital is in network.”

He said this “misinformation disseminated by United and Oxford has been the source of at least seven citations by NYS DOH of United’s violation of the NY Public Health Law over the past three years.”

“Each time,” Rosen said, “United provided a required Plan of Correction and each time the DOH tested it, it notified United that United had failed to remedy the violation.”

“There are many other instances of repeated violations of the New York Public Health Law that Oxford and United engaged in for years, and cited by the DOH, that continue, while neither United nor Oxford have lost their licenses to do business in New York,” said Rosen.

As a remedy he recommended that in recognition of the “direct correlation between the excessive profits HMOs generate and the financial weakness of our hospitals,” that new regulations be created to “compel reinvestment by HMOs into our healthcare system, similar to the requirement that property and casualty insurers make contributions in proportion to their share of the market to support the State Guaranty Fund.”

In recognition of the need for stronger enforcement tools he also proposed that the legislature create a “new statutory cause of action that may not be arbitrated whenever a service provider can establish a pattern of statutory or regulatory violation, to allow the service provider to recover a penalty and attorneys’ fees,” similar to the way “the SEC’s enforcement apparatus is supplemented by statutes permitting stockholder class action suits.”



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