INDIANAPOLIS-The pending merger of two of Indiana's largest hospitals has pushed a new community-benefits reporting law into the spotlight.
Starting this year, most Indiana hospitals are required to report their community-benefits spending to the state, under a law signed by Gov. Evan Bayh in 1994. Community benefits include charity care, which is care to the poor that's given with no expectation of payment.
The law was a compromise agreed to by the state's hospitals, which beat back an effort to link specific levels of charity care to a not-for-profit hospital's tax-exempt status. However, the proposed consolidation of Methodist Hospital of Indiana and Indiana University Medical Center, both in Indianapolis, has some rethinking that old idea.
The pending merger exposed the fact that, under the law, hospitals can report community benefits in a variety of ways, making comparisons difficult. And, it exposed what some suspected: Charity-care loads vary significantly by hospital.
"We believe there is a disproportionate charity-care burden in Indianapolis," said Martyn Howgill, senior vice president of Methodist. "We spend $30 million at Methodist (on charity care), and we've done that without any legal requirements or a gun to our heads. We anticipate continuing that commitment."
A blue-ribbon task force appointed by Bayh cleared the IU-Methodist merger but said the hospitals should continue to provide the same levels of charity care that they provided in the past. The task force, led by state Attorney General Pamela Carter, stopped short of mandating a specific amount of charity care, but the panel said state officials need to keep examining charity-care levels in the future.
Many involved in Indiana's healthcare community believe it's only a matter of time before the state requires hospitals to provide certain levels of charity care to the indigent.
"It's certainly a subject that should be looked at and studied," Howgill said.
Uncertainty about the financial impacts of managed care and industry consolidation was one of the reasons the panel didn't require the hospitals to spend a specific percentage of their revenues on care to the poor.
"The task force grappled a lot with charity care," said Katie Humphreys, Bayh's director of health policy. "They talked about a percentage but didn't want to tie the hospitals' hands."
One of the purposes of the new community-benefits reporting law was to compare the benefit levels provided by each hospital. That information only is beginning to trickle into the state because hospitals were given up to 120 days from the end of their 1996 fiscal year to turn in reports.
Community Hospitals Indianapolis, for example, used the report of St. Vincent Hospitals and Health Care Services, Indianapolis, for their newly created network's 1995 report. The two Indianapolis hospital systems consolidated in 1994.
St. Vincent follows charity-care guidelines of its parent corporation, St. Louis-based Daughters of Charity National Health System, St. Vincent executives said. Its charity-care expenses have been no less than 25% of operating income since 1988 when it began following DCNHS guidelines.
St. Vincent reported $25.9 million in combined benefits, calling $20.2 million of that "charity care." It included $4.7 million in unreimbursed costs for its Medicaid patients for fiscal 1995 ended June 30.
St. Vincent's costs were $5.7 million on Medicare shortfalls, which it reported as community benefits (See chart). It also had $8.4 million in "bad debt," meaning unpaid medical bills. St. Vincent enumerated the bad debt at the end of its report.
The law requires community-owned, church-owned, not-for-profit and investor-owned hospitals to report annually the amount of their charity care, the financial value of community education they provide and the value of other community-benefit activities.
Of Indiana's 113 acute-care hospitals, 56 are not-for-profit, 49 are owned by state and local governments, and eight are investor-owned, for-profit facilities.
"It's going to take some refinement and clarification before it gets to a point where the data is used to come up with (new healthcare) policy," said Robert Wehling, association director of hospitals at IU Medical Center.
The law exempts government-owned hospitals such as IU Medical Center, which includes University Hospital and Riley Hospital for Children.
However, IU told MODERN HEALTHCARE that its costs for charity care and uncompensated care from Medicaid patients totaled $29.6 million in fiscal 1995, which ended June 30. Those figures include bad debt.
The reporting process `'will require much standardization," Wehling said. "You wouldn't want inaccurate data to lead to bad policy decisions, or you could inadvertently hurt a group of individuals in the community."
Methodist Hospital of Indiana reported $32.2 million in costs "spent to benefit the uninsured and underinsured" for fiscal 1995 ended Feb. 28 (See chart). Methodist also included in the report another $40 million in other benefits to the community. But some hospitals say the law still needs improvements so all hospitals are on the same playing field when they write their reports.
"It's a good thing to do, but it needs to be evolutionary," said Sister Sharon Richardt, vice president of mission services at St. Vincent. "Our standards are different than others who report charity care."