More MS news articles for January 2000

One Hospital Gives Its Patients Free Care;
If Only It Were Legal

January 5, 2000

By LUCETTE LAGNADO
Staff Reporter of THE WALL STREET JOURNAL

BROWNS MILLS, N.J. -- "There should be no price tag on life." That's the motto of a little-known hospital here with a remarkable policy: It won't send a bill for care to any patient, rich or poor.

Deborah Heart and Lung Center is a throwback to an era when many hospitals saw themselves as charities. At a time when care is costly, when many hospitals are riveted on the bottom line and when millions of Americans are uninsured and struggling to find care, Deborah's free service would seem to be a godsend.

If only it were legal.

The U.S. Department of Health and Human Services says that Deborah, because it accepts Medicare without requiring patient co-payments, is in potential violation of an array of civil and criminal laws. HHS is currently trying to decide what to do about it. The hospital has asked for a waiver so it can stay as it is. If it doesn't get one and persists in defying the laws, the hospital faces the possibility of prosecution and stiff fines.

Money Trail

There is more to the story, though, than a saintly institution under the gun. The government says Deborah could get itself right with the law if only it would bill those patients who can afford to pay. But Deborah's philosophy inspires an army of volunteers who troll states up and down the East Coast for contributions. Ceasing to be free to all patients might spoil a potent fund-raising pitch that brings in millions of dollars each year, the government says.

Deborah (pronounced deBORah) was founded 78 years ago by Dora Moness Shapiro, the wife of a garment manufacturer, as a tuberculosis sanitarium for poor immigrant Jews from Manhattan's Lower East Side tenements. Yellowed ledgers in the lobby of what was once called Deborah Jewish Consumptive Relief Society bear the scrawled names of early patients and their native countries: Russia, Hungary, Poland and Austria. After the scourge of TB faded, the hospital took on another specialty, cardiac care. Although it started billing insurers -- and thus isn't really "free," the government says -- Deborah has never charged patients. The reason is a deeply ingrained part of the 161-bed hospital's philosophy: Wealth shouldn't matter when it comes to access to medical care.

The U.S. used to have a number of free hospitals, such as the City of Hope Cancer Center in Los Angeles, which didn't even have a billing department until the 1970s. But one by one, most changed or vanished. The City of Hope now bills patients, though it tries far harder to collect from the affluent than from the poor. Deborah and St. Jude Children's Research Hospital in Memphis, Tenn., founded by the actor Danny Thomas, are among only a handful left that never bill patients.

Thou Shalt Not Waive

Generous? Sure. Legal? Almost surely not, according to the HHS Inspector General's office. To accept Medicare money but waive the patient's co-payment flouts several statutes, it says.

A federal antikickback law says a provider can't give "remuneration" in exchange for getting Medicare business. And a co-payment waiver counts as remuneration. There is also a civil statute that bars giving inducements to "influence" patients.

Moreover, Medicare has no obligation to pay for hospital care if the patient is getting it free. After all, Medicare is insurance, which covers potential losses, but there is no loss to cover if the hospital is giving care away. So such a hospital risks filing a false claim, as barred by the False Claims Act, the Inspector General's office says.

Finally, routinely waiving co-payments while other hospitals demand them may amount to an unfair competitive practice, says the Inspector General's office.

The office is trying to be flexible. "We recognize these policies are a singular vestige of their charitable origin and continuing mission," says HHS lawyer Kevin McAnaney. "We recognize that and appreciate it. But standing alone, an institution's history will not protect an improper practice from sanctions."

There are sound reasons for laws requiring some Medicare co-payments, he says; patient co-payments, even if nominal, clearly protect Medicare from being overused and misused. And if one hospital is allowed to collect Medicare but not bill patients for a co-payment, what's to stop a less-ethical provider from doing the same simply to attract business, and then performing services, perhaps excessive, that Medicare gets stuck with?

"Look," says Alwyn Cassil, a spokeswoman for the Inspector General's office, "we don't stay up nights thinking, 'How can we go after the good guys?' " Deborah appears to be in that category, in the view of many at the Inspector General's office, even though it once overbilled Medicare. When the office set up a voluntary fraud-disclosure program in 1995, Deborah quickly came forward, settled allegations of overbilling, and paid $840,000.

Don't Be Afraid

In 1996, a federal statute warned hospitals they could face substantial penalties if they routinely waive Medicare deductible and co-payment charges for outpatient care. At St. Jude, "we were all amazed that we were violating the law by giving free care," says Richard Shadyac, head of the hospitals' fund-raising arm. He sought a waiver in the form of an advisory opinion, which would give some protection from prosecution. The Inspector General "made us jump through hoops," he says, but granted one last April.

The Inspector General's office had to struggle to find a way to let St. Jude continue. "If you read the St. Jude's decision, it is not a totally legal analysis. It is a recognition that this is an old historical practice and to the extent we can honor it" the feds will, Mr. McAnaney says.

Deborah sought a waiver, too. But its case is more complicated.

This old-fashioned hospital is facing some very modern problems. One involves its corps of volunteer fund-raisers, largely women, who rattle coin canisters at street corners and malls, sponsor raffles and organize bus trips to Atlantic City. As more women work, fewer young women have time for such efforts. Volunteers' median age has risen to the mid-70s, and some ply their rounds with canes or even wheelchairs. There are 48,000 volunteers now, down from 75,000 at the peak.

In 1996, the volunteers raised $6 million, while estates of the dead brought in just slightly more. Within two years, the proportion dramatically shifted: The volunteers brought in $4 million while estates generated $11 million. (Foundations and corporations chipped in $3 million more.)

Scramble for Patients

The contributions cover Deborah's losses, which ran about $14 million last year. One reason for the losses is that fewer patients are coming in. It might seem that a free hospital would be flooded with patients, yet Deborah's in-patient count is only 58% of its beds. The hospital's remoteness, in the Pine Barrens of south-central New Jersey, appears to be a factor. Another reason is that, given the legal challenge, the hospital doesn't dare tout its free-to-patients policy in its marketing.

And above all is today's fierce competition for heart-surgery patients -- the well-insured ones, that is. There is money in open-heart surgery, so much that it now is done by 15 hospitals in New Jersey alone. Yet Deborah does 30% of the heart surgery on uninsured patients in the state, it estimates. Deborah says it sees signs that some heart doctors are referring their uninsured patients to Deborah -- which then must absorb the full, huge cost of open-heart surgery -- while sending their insured patients to other hospitals.

It is Deborah's effort to combat this that has complicated its relations with the HHS Inspector General's office. Deborah, whose surgeons are salaried, has begun allowing outside cardiologists to perform procedures on its premises. This alarms the government because unlike salaried doctors, outside doctors stand to benefit -- by getting more business -- from the hospital's policy of exempting all patients from Medicare co-payments.

There are indications it would have been possible to render an advisory opinion favoring Deborah before this issue arose, but since then the situation has been at an impasse.

Just Bill Them

Still, the Inspector General believes there is a way to allow Deborah to stay faithful to its past while poking its toe into the future. Mr. McAnaney says it is perfectly legal for a hospital like Deborah not to bill the poor: There is a provision in the law that says it is permissible to waive Medicare co-payments for patients who really can't afford to pay them. So, his suggestion is this: Start sending out bills to those who can afford the co-payments.

The problem is that this would amount to a fundamental shift in Deborah's long-standing mission and philosophy. "Who is rich and who is poor?" asks Spero Margeotes, Deborah's chief executive. "You can't turn around and say, 'Well, I am going to bill you but I am not going to bill you,"' he says. Referring to the Inspector General's office, he adds: "We have been doing this from long before they even came into  existence."

He acknowledges that an additional factor -- though he says it is a much lesser one -- is that the fund-raising network might falter if Deborah began billing some patients. Some of its dedicated volunteers say they might drop out if the hospital changed its policy.

"You know what it is like to come out of a major surgery and know that you are not stuck with $50,000 in bills?" asks Richard Barney, a 62-year-old former Port Authority cop who had heart surgery at Deborah in the 1990s and is a volunteer fund-raiser. "Everyone is treated equally here, whether you can't pay or whether you can pay."

The hospital's reach, as it turns out, extends almost to the Inspector General's office. An attorney there recently attended the funeral of her grandmother in Philadelphia. Exploring her room later, the attorney was moved to find a pin showing that her grandmother had been part of Deborah's army of volunteers.

Write to Lucette Lagnado at lucette.lagnado@wsj.com