charity care

HCA boosts income, stabilizes bad debt expense

Anne Zieger — Tue, 05 Aug 2008 18:04:57 -0400

Hospital giant HCA, Inc.'s results are in, and particularly given that the U.S. is looking at a recession, they're fairly impressive. HCA said that its second-quarter net income shot up 21.6 percent to $141 million during the quarter ending June 30, 2008, compared with $116 million during the same period last year. HCA execs said that revenues grew 3.7 percent to almost $7 billion, despite drops in surgical volume and flat admissions numbers.

But that's not its only accomplishment, according to one expert observer. Lehman Brothers analyst Adam Feinstein said that one of the most positive aspects of this quarter's report is that HCA has managed to stabilize its bad debt expenses. During the second quarter, the chain set aside $813 million, or 11.7 percent of revenues, to cover doubtful accounts--as compared with $753 million, or 11.2 percent of revenues, during the same quarter last year.

True, charity care and uninsured discounts climbed almost 23 percent during the quarter to $869 million, overshooting the company's reserves. But at least the company didn't hemorrhage money on patient debt this quarter.

To learn more about HCA's performance:
- read this Inside ARM article

Related Articles:
HCA sees debt rising until patients get insured
HCA income up, but bad debt still significant
Bad debt savages HCA, LifePoint profits
Insurer troubles could mean more bad debt for providers

NJ hospitals in dire straits after charity budget cuts

Anne Zieger — Wed, 09 Jul 2008 00:09:11 -0400

While hospitals in every state are struggling to fund charity care and bad debt, things in New Jersey are particularly bad. Not only does the state have 1.3 million people without insurance--and a law in place requiring hospitals to treat anyone who visits--but also, the state now faces major cuts in the funding that paid for these impoverished patients. Gov. Jon Corzine (D) recently signed a state budget that cut $111 million from the charity care fund. Now, hospitals that were already struggling are facing even worse problems.

Hospitals say that the stage was set for the hospitals' financial weakness well before the charity cuts, in part due to patients cherry-picking from ambulatory surgery centers. Now, with half of the state's hospitals operating in the red, observers and hospital leaders expect to see many more closures.

These closures are particularly likely to occur in communities populated by high numbers of poor patients--the ones who will find it most difficult to transfer to another hospital. For example, Plainsfield, NJ-based Muhlenberg Regional Medical Center--which serves a poor, ethnically-mixed community--has begun the process of closing down its acute care beds after operating continuously for 130 years. It lost $16.8 million last year and expects to lose another $18 million in 2008.

To learn about the hospitals' troubles:
- read this Washington Post piece

Related Articles:
NJ officials say more hospital closures are OK
NJ hospitals going under as state bailout cash ends

Case study: WY hospital expands charity care

Anne Zieger — Wed, 25 Jun 2008 01:24:53 -0400

A Wyoming hospital has expanded its charity care policy to allow more patients to qualify for free care, one of many not-for-profits taking steps to make sure they will make the right impression when they fill out their Form 990 Schedule H. Right now, Wyoming Medical Center incurs about $30 million annually in uncompensated care expenses, 80 percent of which comes from bad debt and 20 percent of which pays for charity care. Elsewhere, it's more common for there to be a 50/50 split, according to hospital CEO Nancy Brandt. To address this inequity, the hospital will now use a sliding scale when it comes to charity care, and allow patients at 200 percent or less of the federal poverty level to apply for free care. It will also let patients with income of up to 275 percent of the federal poverty level to apply for some form of subsidized care. To help facilitate the application process, the hospital is switching out its five-page application for a much simpler one-page application that is estimated to take five minutes to complete. While the previous form asked questions about patient circumstances, the new form will ask questions only related to income verification.

To learn more about the hospital's program:
- read this InsideARM article

Related Articles:
AHA says IRS form 990, Schedule H need revision
Trend: Non-profits broadening charity care access

Helping to qualify the uninsured

Anne Zieger — Thu, 19 Jun 2008 03:43:01 -0400

Despite the fact that it's critical for hospitals to qualify uninsured patients for charity care programs ranging from federal and state insurance to institutional programs within your own organization, sometimes it just doesn't happen. However, there will be many vendors at this year's show who hope to improve your track record. One eligibility services vendor who will be attending is Advanced Patient Advocacy, which boasts that it can achieve a minimum of 35 percent reduction of uncollectible receivables. Others, like MedAssist and Eligibility Plus, offer eligibility help as part of a suite of A/R management services. Some companies focus largely on Medicaid and other state programs, while some, like DECO, also extend their services to helping patients pay for care from sources like SSI/SSDI and funding for victims of crime in addition to state and federal insurance programs. Given the bad debt hit most hospitals are taking these days, I suspect these vendors will get an enthusiastic hearing. If given a choice between pursuing self-pay patients on their own, and discovering a better-financed party who will pay for that patient, hospitals would be crazy not to consider choice two.

Equity firms partner for $100M buyout of eligibility firm

Wed, 11 Jun 2008 06:59:55 -0400

In a move that further underscores the industry's renewed determination to get patients registered appropriately for state and federal medical programs, a group of private equity firms have partnered to acquire Chamberlin Edmonds & Associates of Atlanta, which provides specialized eligibility determination services to hospitals. It helps hospitals qualify patients not only for Medicaid and federal and state programs, but also, SSI, Society Security Disability and charity care programs, and even crime victims compensation funding.

Chamberlin Edmonds guides uninsured patients through the process of applying for reimbursement for uncompensated care, particularly federal and state disability programs. It has more than 160 customers in 27 states. Chamberlin Edmonds' top executives should remain with the company. The private equity firms involved in the buyout include New York's Charterhouse Group, Highlander Partners and MTS Health Investors. The deal is valued at about $100 million.

To learn more about the deal:
- read this Modern Healthcare article (reg. req.)
- read the equity firms' release

Related Article:
Study: Uninsured ranks could be much lower

Bad debt expense drops at for-profits for Q1 '08, Fitch says

Wed, 28 May 2008 06:59:58 -0400

Well, in a season of battered markets, here's some welcome good news. According to Fitch Ratings' For-Profit Hospital Industry Quarterly Diagnosis, bad debt levels actually fell among for-profit hospitals as a percentage of revenues, from 18.4 percent in the fourth quarter of 2007 to 17.7 percent in the first quarter of 2008. Things were bad last quarter, hitting many for-profit chains' bottom lines hard, and analysts had actually anticipated higher levels of unpaid medical bills this quarter.

Among the for-profit chains, Tenet had the lowest bad debt expense this quarter, with 12.1 percent of revenues, followed by LifePoint Hospitals, with 13.5 percent adjusted bad debt expense as a percentage of revenues. Tenet's numbers were improved by lower uninsured and charity care admissions.

In the recent report, Fitch analyst Lauren Coste said that relatively low unemployment rates were the main reason the for-profits' bad debt didn't climb. Also, she noted that hospitals have adopted more conservative accounting practices over the past couple of years, which have limited industry exposure to special bad debt charges. However, this interlude may not last. If job losses climb, or if states cut Medicaid funding, bad debt could begin to accelerate again, Coste noted.

To learn more about the report:
- read this InsideARM article

ALSO: Missouri hospitals wish they had it so good. According to the state's trade association, hospitals there saw uncompensated care grow 32 percent. Article

Related Articles:
In 2007, bad debt rising for hospitals
Bad debt savages HCA, LifePoint profits
Bad debt hits Health Management Assoc. earnings

Urban NJ hospitals take big charity funding hit

Wed, 28 May 2008 06:59:57 -0400

A new state formula for funding Medicaid could cut $142 million in charity care payments for treating the uninsured from hospital budgets, taking funding away completely from 22 of the state's hospitals, according to a review of the proposed changes by the New Jersey Hospital Association. The formula, which is part of the state's proposed $33 billion budget, would lead to cuts for a total of 62 hospitals, while boosting up to 18, according to the association. The biggest loser would be Jersey City Medical Center, which would see an almost $42 million cut, or almost 50 percent of its charity care aid. Meanwhile, University Hospital in Newark would get $96.5 million, a boost of just under $400,000. The formula is intended to target the funding to those who need it most, according to the state Department of Health and Senior Services.

To learn more about the proposed fund shift:
- read this article from The Star-Ledger

Tough challenges on the horizon

Wed, 21 May 2008 06:59:59 -0400

I hate to be a downer, but from where I sit, next year's shaping up to be pretty scary for providers.

For one thing, several leading health plans have vowed to raise premiums in 2009. As we've discussed here previously, this is sure to drive some employers to cut benefits and others to drop health coverage entirely. Ultimately, this means more bills patients can't pay.

Meanwhile, with financial markets still recovering from subprime losses, providers haven't been able to count on investment income this year to cover the gaps in their own income. Next year may not be much better.

Then, there's the gridlock that's likely to take effect after the presidential election for at least the first six months or so, regardless of which party wins the day. Lobbyists are doubtless hoping to get their final licks in now--on critical issues like the planned 10 percent Medicare cut for doctors--but there's only so much they can get done before November.

The only real question mark here, in my view, is whether federal officials will spend more money in the near term to help hospitals and doctors pay for electronic medical records.

They might. After all, the Bush administration is terribly gung-ho on the subject. That could at least provide some welcome capital for a critical, capital-intensive project most hospitals have underway or planned for the near term.

Otherwise, as I see it, this is a time for living on a shoestring for a while if there ever was one. Disagree? Drop me a line and let me know what you think. - Anne

Weighted by free care costs, Henry Ford earnings fall

Wed, 21 May 2008 06:59:54 -0400

Henry Ford Health System is actually one of the lucky ones--after all, the not-for-profit made $105.8 million on $3.47 billion in revenue during 2007. The thing is, the health system's earnings are down substantially from the previous year's showing, largely because its cost of providing free care nearly doubled. Health system officials said that rising free care costs were driven by job losses and related losses of employee benefits in Michigan.

Henry Ford's 2007 earnings took a dive from the $134.9 million it made in 2006, despite its admissions rising due both to increases at existing facilities and new inflows from two facilities it acquired. That's because the cost of providing care to the uninsured and uninsured climbed from $13.4 million in 2006 to $25.3 million last year. Meanwhile, bad debt write-offs were $47.5 million, up from $42.2 million in 2006.

To learn more about Henry Ford's financial picture:
- read this Detroit Free Press piece

Related Articles:
After big losses, Henry Ford prospers
Henry Ford bans pharma perks, vendor drop-ins
Case study: Henry Ford offers high-touch amenities

Case study: ND system must cut $15M in costs

Wed, 14 May 2008 06:59:54 -0400

It's a sign of the times. Struggling with the boogeymen faced by most of its peers, including inadequate reimbursement and rising uncompensated care levels, Fargo, N.D.-based MeritCare Health System is cutting a substantial $15 to $30 million from its budget. It's not that the system is in trouble--it had excess income of about $19.5 million last year, and admissions were up as well--but clearly, execs aren't happy with the trends they see.

The not-for-profit system, which had approximately $800 million in annual net revenue, performed $24 million of health service last year for which it no longer expects to be paid, and also delivered about $2.5 million in charity care. Also, execs are worried about Medicare reimbursement, which is set about 80 percent of the national average.

To address these issues, MeritCare may leave about 300 positions vacant as employees leave, consolidate some of the system's 18 clinics and delay clinic renovations, said Bruce Pitts, the system's executive vice president for clinical services. But the system won't postpone salary raises, as that could hurt retention, Pitts said.

To learn more about MeritCare's plans:
- read this ModernHealthcare article (reg. req.)
- read MeritCare's annual report (.pdf)