Health Management Assoc

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

Study: Better records could boost self-pay collections

Wed, 16 Apr 2008 06:59:55 -0400

Struggling to manage your bad debt load? You're not alone--but some of the pain may not be necessary. According to a new study, a good percentage of the self-pay accounts hospitals write off could probably have been collected upon if hospitals tightened their financial screening procedures. The study, which was done by Nashville, TN-based vendor nTelagent, analyzed receivables between 90 and 180 days old from January 2007 to January 2008. They drew the records from 40 providers, some of which were existing clients.

Researchers found that 30 percent of the self-pay accounts were written off as bad debt because patient's incomes and net worths weren't obtained or verified. However, when nTelagent did the research, it found that more than 16 percent of the patients being studied could be classified as having high income and/or high net worth, while another 33 percent had moderate household income or net worth. nTelagent suggests that all of these accounts could have been re-billed or outsourced to collections. Meanwhile, another 17 percent of written-off accounts might have qualified for government assistance or charity care programs, the vendor reported.

To learn more about the study:
- read this InsideARM piece

Related Articles:
In 2007, bad debt rising for hospitals
Bad debt hits Health Management Assoc. earnings
FL hospital sued over sale of $1.9B in bad debt

IRS seeking input on instructions for Form 990

Wed, 09 Apr 2008 06:59:54 -0400

As most FierceHealthFinance readers know, the IRS released a redesigned Form 990 last year. The new Form 990, which has sparked much discussion and controversy among not-for-profit healthcare organizations, includes a new schedule for hospitals (Schedule H) and tax-exempt bonds (Schedule K). Schedule H, which is likely to prove taxing to hospitals for the first year or two, requires hospitals to provide a lot of information on operations that it didn't before, including community benefit levels, charity care, aggregate bad debt expense, Medicare shortfall information and more.

Now, the IRS is asking the healthcare community to let it know whether its instructions for filling out this form, which include tools designed to make it easier to answer questions and to promote uniform reporting, are clear enough for public use. Through June 1 of this year, it's accepting comments on the draft instructions. The agency will post all comments on its website. To comment, you can email thoughts to Form990Revision@irs.gov in text form. Yeah, I know, this doesn't sound very exciting, but the truth is, if you don't like what they've got, it never hurts to declare that clearly in a public forum. Hey, sound off while you can!

To learn more about the Form 990 update process:
- read this Modern Healthcare piece (reg. req.)

Related Articles:
Trend: Non-profits broadening charity care access. Charity care report
In 2007, bad debt rising for hospitals. Hospital report
Bad debt savages HCA, LifePoint profits. HCA, LifePoint report
Bad debt hits Health Management Assoc. earnings. Health Management Associates report
Ratings firms slam nonprofit hospital finances. Financial ratings report
Officials say 'prove it!' on charity care. Charity care report

Trend: Non-profits broadening charity care access

Wed, 12 Mar 2008 07:59:58 -0400

Hoping to make a good showing when they file their first Form 990 with the IRS, not-for-profit hospitals are already beginning to make big changes to their charity care policies, according to one financial analyst. Though it will be a year or two before hospitals must file the Form 990--Schedule H, which defines and discloses their charity care spending and policies on charity and bad debt--some hospitals are already taking aggressive steps to demonstrate that they're doing the right thing. Many are lowering the threshold at which a patient can qualify for free care, according to Jeff Schaub, senior director with the Fitch Ratings public health care group. In fact, some hospitals have raised the free-care limit drastically, from 100 percent to 400 percent of the poverty level, he said. Meanwhile, it also relieves for-profits of some of their charity-care load, which could have other long-term competitive results.

All of this doesn't do much to clear up the muddy waters around the issue of what charity care really is vs. what bad debt is. It's worth noting, however, that this essentially shifts costs that would have been classified as bad debt into the charity care side of the balance sheet. The Healthcare Financial Management Association, for its part, suggests that financial execs rely on the Financial Accounting Standards Board's definitions of the two when attempting to demonstrate that they're upping charity care levels.

To learn more about this issue:
- read this InsideARM piece

ALSO: With Form 990 forcing hospitals to take a closer look at their bad debt, a great number of facilities are likely to begin selling that debt, experts predict. Article

Related Articles:
In 2007, bad debt rising for hospitals. Report
Bad debt savages HCA, LifePoint profits. Report
Bad debt hits Health Management Assoc. earnings. Report
Ratings firms slam nonprofit hospital finances. Report
Officials say 'prove it!' on charity care. Report