Healthcare billing is too complicated, as JPS Hospital’s fraud case settlement shows

John Peter Smith Hospital made a costly mistake in its billing of federal health care programs. It’ll cost a fine, $3.3 million of your tax dollars. And while the public hospital system says the problem is addressed, the situation points to the complicated mess of medical billing and how hospitals get paid.

The settlement stems from a 2018 whistleblower complaint alleging that the hospital was “upcoding” bills — essentially charging more than what systems such as Medicare pay by indicating a doctor had to spend more time and effort caring for a patient.

The whistleblower, a former JPS compliance officer, contends that she alerted hospital leadership to the problem. JPS officials say an internal audit discovered the software errors that were responsible and that the hospital rectified the problem.

The facts and timeline remain murky. It’s noteworthy that the U.S. Justice Department declined to pursue the case initially, meaning the whistleblower had to pursue a civil case. Tarrant County commissioners, who oversee the hospital system, should ask for details and ensure that responsible parties were held accountable or that faulty systems have been fixed.

The sad reality is that, even if this was an innocent mistake, it might have been cheaper and more efficient to agree to pay the fine and move on. It happens in the corporate world all the time. Extended lawsuits that are won can still be a net loss.

It’s a serious matter. Medicare spends hundreds of billions of dollars each year, and every unnecessary payment represents a draw on the taxpayer and care that could otherwise be delivered to those who need it.

But doctors and hospital officials will tell you that fudging billing codes and other maneuvers is common, not just with government health programs but with private insurance, too. We’re not saying that’s what happened with JPS in this case. But it happens in every large hospital system.

Hospital finances have to factor in care for the uninsured that they’ll never be able to pay, underpayment from private insurers who set limits on prices and consistently low reimbursement rates from government programs. A procedure’s price isn’t based on what it costs the hospital or what the providers are paid; it’s based on who’s paying and how much they are willing to spend. The bigger the payer — and Medicare is the biggest on the block — the more leverage it has on prices.

Balancing all this is tricky for providers, and adding an additional billing code or two among tens of thousands of bills is surely common. Some allege that there’s a math to it: Add extra bills, knowing some will be rejected but others will be paid without scrutiny. A few will even say it’s justified because reimbursement rates aren’t realistic.

Some healthcare analysts hope that more transparency in prices will help bring health spending down, or at least slow its growth. The federal government this year began requiring hospitals to publish rates for common procedures. It remains to be seen if enough patients will comparison-shop to make a difference, or if transparency can identify the worst outliers and force improvements.

With Medicare in particular, there’s a reckoning coming that’s been building for years. Federal analysts project that a key fund for the old-age program will run out of money by 2026, forcing some combination of tax increases, benefit cuts or reduced payments to providers. The pressure of the baby boomer generation retiring makes this inevitable, and every dollar saved in curtailing improper billing will ease the burden, if only a little.

As big, urban hospital systems go, JPS is well-run. Last year, one ranking declared it the top hospital in the nation. It’s a vital piece of our community, especially during the coronavirus pandemic. And there’s no reason to think the problems revealed in the whistleblower settlement are systemic.

But every large system needs thorough review every now and then. County officials should take the opportunity to ensure JPS is on track to remain at the top of the charts.