Uncompensated Care

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:
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Trend: Non-profits broadening charity care access

PA hospitals' margins up, but uncompensated care rises

Anne Zieger — Tue, 17 Jun 2008 18:31:44 -0400

A new report from the Pennsylvania Health Care Cost Containment Council concluded that the overall financial health of the state's hospitals improved, though uncompensated care levels rose faster than the statewide increase in net patient revenue. The agency found that many of the state's 170 hospitals improved their performance in fiscal 2007, though the rising cost of uncompensated care was a big issue. All told, the hospitals' total income margin grew by more than a full percentage point in fiscal 2007, from 5.39 percent in 2006 to 6.51 percent in fiscal 2007. Meanwhile, uncompensated care was up $74 million this year, or 12.2 percent, to $678 million, climbing from 2.17 percent in fiscal 2006 to 2.27 in fiscal 2007.

Among the best performers in the state was the University of Pennsylvania Health System, whose dominant hospital, Hospital of the University of Pennsylvania, made almost $215 million from patient care last year, along with another $55 million in investment and endowment income. The hospital's operating margin was a whopping 14.28 percent in an area where 4 to 5 percent margin is considered a reasonable result. At the other end, Tenet-owned Hahnemann University Hospital had an operating margin of negative 18 percent, a loss of $65 million. About one-quarter of the state's hospitals posted negative total margins for fiscal 2007. Generally speaking, small community hospitals in rural areas didn't perform as well as larger ones in more urban areas.

To find out more about the state's hospital market:
- read this article from The Philadelphia Inquirer
- read this press release from the state

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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:
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AHA says IRS form 990, Schedule H need revision

Wed, 21 May 2008 06:59:58 -0400

The American Hospital Association has filed a letter with the IRS arguing that the agency could do more to accommodate small, cash-strapped institutions in its instructions for filling out Form 990 and the accompanying Schedule H aimed at not-for-profit hospitals. The AHA's input comes as part of the IRS comment period on the draft instructions, which will remain open until June 1st.

In its nine-page comment letter, the AHA raised a number of concerns over core definitions. For example, it cited worries over the agency's definition of "subsidized services," which would exclude physician clinics, skilled nursing and ancillary services. The AHA argued that these services can often be part of a non-profit's charitable mission.

The AHA also cited several definitions that it considered to be too broad, including "key employee" and "facility," which it argued would result in healthcare organizations having to engage in onerous amounts of reporting which don't provide value to the organization itself.

To get more information on the AHA's critique:
- read this Modern Healthcare article (reg. req.)
- read the AHA letter (.pdf)

Related Articles:
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Study: Uninsured ranks could be much lower

Wed, 14 May 2008 06:59:56 -0400

I know, you do everything you can to qualify patients for government programs when they're uninsured and need care. Despite that, uninsured patients continue to generate high bad debt levels for providers; in fact, according to the American Hospital Association, the industry provided $31.2 billion in uncompensated care in 2006.

Millions of patients are slipping through screens designed to hook patients up with government programs, according to research by the National Institute for Health Care Management Foundation. For example, one in four who are eligible for Medicaid or the State Children's Health Insurance Program aren't enrolled, a total of about 12 million people.

Of course, the problem doesn't lie just with the provider's eligibility screening process. Often, the uninsured are overwhelmed by the administrative requirements involved in applying for such programs, while current enrollees frequently are dropped when they don't fill out renewal forms. Meanwhile, a 2005 law requiring applicants to show proof of citizenship to be eligible has also led to delays in enrollment for many citizens, foundation researchers said.

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

Related Articles:
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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)

ALSO NOTED: FL hospitals see dramatic growth in uncompensated care; LifePoint wants to buy; and much more...

Wed, 07 May 2008 06:59:50 -0400

> Costs for uncompensated care have gone through the roof in Florida, according to the state's hospital association. Article

> With solid profits under its belt, LifePoint Hospitals pursue acquisitions aggressively. Article

> A coalition of powerful interest groups have sued to block the state's planned 10 percent Medi-Cal cut, arguing that such a cut could compromise services to the poor. Article

> Skilled nursing facilities are protesting planned reductions in Medicare payments, cuts CMS says are necessary to better account for resources uses in caring for medically complex patients. Article

And Finally... Without this system, you could hit a whale, and that can't be good. Article

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

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MI hospital defaults on bonds, discusses selloff

Wed, 09 Apr 2008 06:59:55 -0400

Things have gotten ugly for financial managers at North Oakland Medical Center. The 178-bed hospital, which is based in Pontiac, MI, defaulted on $38.5 million in bonds issued by the Pontiac Hospital Finance Authority. The hospital lost $13.4 million from operations in fiscal 2007, and had a meager 18 days cash on hand on Dec. 31, according to Standard & Poor's. The hospital missed a January 15 bond payment, which lowered its S&P rating on the series from B to D.

Executives say that they've been squeezed by their role as a safety-net hospital, which resulted in their spending $21 million in uncompensated care over the last three years. It hasn't helped that admissions have fallen from 7,600 in 2006 to a projected 5,000 this year.

Given these conditions, North Oakland execs are in talks to sell the facility to one of several local chains, including Henry Ford Health System, Trinity Health and William Beaumont Hospitals.

To learn more about the hospital's fate:
- read this Crain's Detroit Business piece (reg. req.)

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