Q&A with Steve Riley Part Two: Exposing How Hospitals Can Overcharge for Crucial Treatments
Below is the second part of my interview with Steve Riley, senior editor for investigations at The News & Observer in Raleigh, North Carolina. He led a team from his paper and from The Observer in Charlotte, North Carolina, that produced the Prognosis: Profits series, investigating the financial practices of how North Carolina’s nonprofit hospitals. The series won a Barlett and Steele Award for Business Investigative Reporting. The first part of our interview ran Wednesday. The second part is below.
Q: Describe a little bit how the different hospitals responded, both to the fact that you were doing the investigation and the types of questions you were asking.
A: We were dealing both with individual hospitals and with the state hospital association, which is a lobbying group for the hospitals. In Charlotte, they traditionally had a more combative relationship with their hospitals, and that seemed to continue during the interviews there. One top official walked out in a huff during one of their interviews.
In Raleigh, I think we had a decent relationship, and we got many of our questions answered. But we had very limited access to the heads of the hospitals. In general, the response was that health care was far too complex for us to understand, and that they couldn't possibly explain it to us. The Hospital Association was helpful in granting a couple of interviews and answering many of our questions.
Q: Was there any discussion on the business side of the paper about the wisdom of going after hospitals that, I expect, are big advertisers? And was anyone at McClatchy reluctant for you to take this on?
A: This was one of the best experiences of the whole project. In Raleigh, our publisher, Orage Quarles III, is a member of the board of directors of one of the local hospitals. But he only wanted to know generally what we were doing, and he encouraged us to keep digging. He likes it when we raise hell. In Charlotte, Karen Garloch reports that there was no reluctance at all. Everyone was supportive of the project.
Q: How did you first find out that the hospitals were potentially overcharging for chemotherapy?
A: After the series ran in April, we had a lot of contact with patients, but also from independent doctors who were seeing the trend of hospitals taking over oncology practices. And we also had industry insiders start to call and to offer a road map. We were able to obtain a database of 5,000 cases that showed the charges for the drugs, and we were able to compare that to both the Medicare price and the average sales price. After that, the story came together well.
Q: Even the idea of overcharging is fraught with difficulties. Healthcare in the United States is a true marketplace. Health care businesses can charge what the market will bear and they can charge different customers vastly different prices. How did you decide to define overcharging and how to explain that difference to readers?
A: The most important piece of the puzzle was the database. Being able to compare the huge variations in prices charged by different hospitals, and we're talking huge multiples here, was a big advantage. And being able to compare the hospitals' prices with the average sales price is pretty good evidence. I think the average reader expects there to be some markup, but when you start talking about 10 times, or 100 times, then they get the picture.
Perhaps the best example of the impact of the hospitals taking over the private practices was in our data. A private oncology clinic in Charlotte was taken over by the local hospital chain. And overnight, the price for a given chemo drug quadrupled. It's hard to explain that, and indeed, a hospital executive struggled. He said that they didn't raise the clinic's prices; the clinic started charging the hospital's prices. Beautiful.
Q: What has been the reaction to the series overall and to some of the specific findings your team uncovered?
A: I'd like to be able to say that everything we pointed out got fixed within weeks. But you'd know that's not true. How long have Congress and various administrations and health care advocates been arguing over this? But we have had some impact, or at least there are signs that some discussions are underway. The North Carolina attorney general, Roy Cooper, is taking a look at some of the hospitals' activity for possible antitrust violations, and U.S. Sen. Chuck Grassley has demanded records from three N.C. hospitals to see whether they've been abusing their discounts under a federal program to allow them to buy drugs cheaply.
Health care won't get fixed overnight, and it may not get fixed at all. There are a lot of forces, natural and contrived, pushing from different directions, so it's hard to say where we'll end up. But we're glad to have contributed some solid reporting and happy to have exposed some things that need to be fixed, particularly for the patients in our readership areas and in the state. I think the public is now more aware of what is going on, and some of those people are starting to ask questions. And that's good.
Photo by the Donald Reynolds Center For Business Journalism, via Flickr.