Near my old office just off U.S. Highway 75 in Dallas sits a hospital that was originally built by physicians. It is close to a hospital medical district, known as Medical City. Forest Park Medical Center was part of a small chain of investor-owned, for-profit hospitals. They are now bankrupt and have been sold off to bigger hospital systems.
At the time of its construction, the business writers were posting glowing articles about how these investor-owned facilities were going to provide better care for patients. The facility near my office was very nice. According to interviews, the chain was designed to attract wealthy patients who would not mind paying a little extra for five star amenities. What I did not know was the setup was largely a scam. This type of fraud is characteristic of health care. The hospitals purposely refused to join networks so they could bill charges far above the norm – knowing some patients would be none the wiser while others would have their share of the outrageous bills written off.
Here’s how it worked. The chain would not affiliate with any network, allowing the hospitals to charge higher prices than surrounding hospitals. Much, much higher in some cases. They avoided Medicare and Medicaid — selling those leads to others — as those payers would not reimburse them. Forest Park sought out patients insured by large employers, BlueCross, CIGNA, UnitedHealth, etc. The hospitals would bill employers and insurers high prices and then balance bill patients when possible. Obamacare’s narrow networks and increasing use of HMO coverage rendered the business model unprofitable and put the chain out of business.
It just came to light that Forest Park also paid bribes and kickbacks to doctors in return for referring their unsuspecting patients to the facility. Twenty people at the facility have been indicted on federal charges for a massive bribery and kickback scheme that paid $40 million to doctors for steering patients to the facility.