Kathy Lui was all set to have her first baby at Hahnemann University Hospital this August.
Lui, a 28-year-old nurse, wasn’t going to pay any out-of-pocket costs for her delivery because her health-care plan, which she gets through her employer, St. Christopher’s Hospital for Children, designates Hahnemann as a “tier 1” hospital.
But last month, when Philadelphia Academic Health System, which owns Hahnemann and St. Christopher’s, announced it was going to shut down Hahnemann, Lui was suddenly left without any tier 1 hospital options in her plan. That meant her delivery was going to cost a lot more: To deliver at Thomas Jefferson University Hospital, a “tier 2” hospital, the price would be at least $2,800 in deductible and co-pay, likely more.
Thousands of employees at St. Christopher’s and Hahnemann who are covered by the Philadelphia Academic insurance plan could find themselves in a similar bind unless the hospital owners change to their insurance plan. Selina Green, a 56-year-old nurse at Hahnemann, said she had to pay $750 for an endoscopy this month at an ambulatory care center because she couldn’t do it at Hahnemann, where it would have been free.
And Marcia Garcia Bulkley, a physician assistant at St. Christopher’s who’s undergoing chemotherapy for non-Hodgkin’s lymphoma, didn’t have to pay anything out of pocket for her series of five-day hospital stays at Hahnemann, or the chemotherapy she got while she was there. Three weeks away from her final scheduled treatment and currently in remission, the 57-year-old is waiting to see what her doctor advises. But if she goes one more round of chemotherapy at another hospital, she’ll have to pay at least $2,300 in co-pay and deductible.
Hahnemann, which has started shutting down service lines like its maternity ward, is slated to close on Sept. 6, at which point employees would lose health-care coverage through their employer. St. Christopher’s fate is up in the air: Four local health-care institutions have joined forces to explore buying the North Philadelphia children’s hospital.
Increased health-care costs for these workers is yet another consequence of Hahnemann’s impending closure. The fallout has already included a scramble to find new hospitals for nearly 600 medical residents to finish their training, including foreign students who are facing deportation if they don’t find a program soon enough; union workers wondering if they can find new jobs at comparable pay and benefits; and the diversion of thousands of patients, many of whom are low-income and black or Latino, who rely on the hospital’s emergency room for care. Last week, Drexel University announced it would have to cut 40 percent of its physicians and clinical staff because of its relationship with Hahnemann.
Philadelphia Academic did not respond to repeated requests for comment. Workers interviewed for this story said they had yet to hear about any changes to their health-care plan.
It’s unclear how many of the 4,000 workers — 2,500 at Hahnemann and 1,500 at St. Christopher’s — are covered by the health-care plan, but it’s available to union employees, like Lui, who’s part of the Pennsylvania Association of Staff Nurses and Allied Professionals, as well as those who aren’t part of a union. There are at least 900 workers, represented by District 1199C of the National Union of Hospital and Health Care Employees, who are eligible for coverage through the union’s plan.
“Tiered” health plans were developed to drive customers to specific health-care providers, usually those that negotiated lower rates with the payer. An Independence Blue Cross executive said in 2013 that they also “injected greater price sensitivity to the consumer," since in the past consumers couldn’t distinguish between providers’ prices because insurance paid them.
These kinds of plans are becoming more popular, said Karen Pollitz, a senior research fellow at the Kaiser Family Foundation, but are far from the norm. Among large firms, 14 percent used tiered plans in 2018.
There are no legal standards that tiered networks have to meet, she said. There’s nothing that says an employer must have a “tier 1″ option. (There is a federal “network adequacy” provision that requires health plans to make enough options available to consumers, but it only applies to plans purchased on the marketplace, not employer-sponsored plans like the Philadelphia Academic one.)
Still, it would be unusual for a tiered plan to lack a “tier 1” option, said A. Mark Fendrick, director of the Center for Value-Based Insurance Design at the University of Michigan.
In fact, according to Urban Institute fellow Robert A. Berenson, it’s unusual to have only one hospital in the top tier. (St. Christopher’s is also in tier 1, but it only serves children.) Usually, he said, a health plan “can’t get away with just having one.”
In the case of Philadelphia Academic, it makes sense why it would put its own hospitals in tier 1, Berenson said. For one, it drives “good-paying” patients to their hospitals — that is, folks who aren’t on Medicaid. Employer-sponsored plans pay hospitals twice or even three times what Medicare pays (and Medicaid pays less), according to a RAND Corp. report released last May.
And Hahnemann can charge its parent company less. Which means it’d be more costly for Philadelphia Academic to add a new “tier 1” hospital, Berenson said.