Trend: Hospitals requiring upfront cash payments before treatment

Wed, 30 Apr 2008 06:59:56 -0400

Of late, a growing number of hospitals have been insisting on cash payments before they offer high-ticket services to non-emergency patients if they're not sure they'll get paid. While such practices may not generate the best PR, it's a matter of survival, hospitals say. Even though the current slate of health reform schemes insure all citizens, it seems unlikely to address the problem of collecting payments for costly procedures. For example, Massachusetts plans include many high-deductible options, which still leaves hospitals deep in the red if patients don't pay their share.

Hospitals are being sapped by care for growing numbers of uninsured patients, and say that unless they get tough on patients with some means, some of them simply won't survive. For example, both HCA and LifePoint hospitals saw profits drop substantially during the first quarter of this year, largely due to jumps in bad debt expense--including lower collections on patient accounts. Uncompensated care has been flattening hospitals nationwide, with the burden climbing 44 percent in 2006, to $31.2 billion, from $21.6 billion in 2000. Such debt is helping to push hospital margins well below the the 3 to 5 percent considered appropriate, and sometimes destroys them entirely.

That being said, collecting cash aggressively can rebound when not-for-profits are involved. For example, this week the Wall Street Journal brought some unflattering attention to the M.D. Anderson Cancer Center, which in late 2006 asked a leukemia patient for $105,000 up front because it wasn't satisfied with her insurance coverage. And with federal legislators like Sen. Chuck Grassley questioning not-for-profit hospitals' right to their tax exemptions, coming across as too money-driven has its perils.

To learn more about this trend:
- read this Kaiser Daily Health Policy Report item

Related Articles:
HMA adopts tougher collections strategy
In 2007, bad debt rising for hospitals
Bad debt savages HCA, LifePoint profits
HCA sees debt rising until patients get insured

Not-for-profit financial successes raise questions

Wed, 09 Apr 2008 06:59:57 -0400

According to a December 2006 Congressional Budget Office report, U.S. not-for-profit hospitals get $12.6 billion in tax exemptions and $32 billion in federal, state and local subsidies. That's a pretty sizable chunk of change, though perfectly acceptable if the hospitals use these moneys to fulfill their charitable mission. The problem is, critics increasingly are saying it's too good--and contending that some of the hospitals seem to be spending less on charity care than they're taking in in benefits. Of late, perhaps the most vocal and visible critic has been Sen. Chuck Grassley (R-IA), who has been on a mission for years to force not-for-profits to account for themselves. He may yet succeed in his campaign to force not-for-profits to pay at least 5 percent of annual patient operating expenses or revenues to charity care.

Of course, some not-for-profits are struggling terribly, particularly those in inner cities that take in a large number of uninsured patients. However, critics are drawn to some of the more successful not-for-profit hospitals, which are raking in revenue at a rate that beats even their for-profit rivals. According to data from the American Hospital Directory, 77 percent of the 2,033 not-for-profit hospitals in the U.S. come out ahead financially, as opposed to 61 percent of for-profits. Meanwhile, according to data from the AHD, the combined net income of the 50 largest not-for-profit hospitals in the U.S. went up by a factor of 8 from 2001 to 2006, hitting $4.27 billion.

Certainly, as such hospitals begin to roll out their first Schedule Hs for Form 990, critics will at least have a better idea of where the money is going, and that will hopefully defuse some bad feelings. But in the mean time, it seems not-for-profit hospitals will have a lot of explaining to do if they're coming up with an excess income regularly. Better that than more regulations, right?

To learn more about this trend:
- read this Kaiser Daily Health Policy Report item

Related Articles:
Feds to crank up not-for-profit charity demands. Charity care report
AHA makes headway on community benefit reporting. Community benefit report
IRS to investigate nonprofit hospitals. IRS report
VHA: Charity policy must come from the top. VHA report

health policy report

Trend: Hospitals requiring upfront cash payments before treatment

Not-for-profit financial successes raise questions