Auto insurers join growing attacks on hospitals for massive cost-shifting

Historically cost-shifting has been an open secret, an inefficient but industry-acknowledged method for hospitals to recoup the cost of uncovered care. However, just how rampant the practice can be was unknown--until now. For the second time this month, hospitals have been accused of significantly overbilling certain insurers to shift costs away from lower-reimbursed sources of care, such as Medicare, Medicaid and the uninsured. An investigation by the Sacramento Bee revealed that some California hospitals have been charging commercial insurers 53 percent over costs. Now the Insurance Research Council (IRC) in Malvern, Pa., estimates that cost-shifting resulted in $1.2 billion in hospital overcharges in 2007 for bodily injury liability claims in 38 states.

The extent of the cost-shifting is forcing automobile insurance to scrutinize and negotiate hospital bills prior to payment. "The conventional wisdom is that hospitals aggressively seek to shift costs from public insurance programs to private payers such as auto insurance companies," says Elizabeth Sprinkel, senior vice president of the IRC. "With this study, we now have information on the magnitude of cost shifting and a better understanding of the need for supportive state laws and effective tools that will enable auto insurers to pay hospitals appropriately and help control auto injury claim costs."

To learn more:
- read the IRC report summary
- read this Keene Sentinel editorial on cost-shifting