The amount of money hospitals spent on care for the poor dropped in 1994 for the first time in more than a decade, according to data released last week by the American Hospital Association.
That, coupled with the disclosure that the number of hospital closings hit a 14-year low that same year, confirms that 1994-the year the country debated national healthcare reform-will be recorded as one of the all-time best financially for acute-care hospitals.
Last month, the AHA said aggregate profits earned by acute-care hospitals jumped 17.3% in 1994 to a record high of $13.8 billion (March 25, p. 2).
The information released last week by the AHA reveals one cause and one symptom of the record profits. The symptom is a low number of hospital closures (See related story below).
On the cause side, hospitals spent $300 million less on indigent care in 1994 than in 1993, the AHA said.
Hospitals' "unsponsored care" tab and Medicaid shortfall totaled $16 billion in 1994, down 1.8% from 1993's total of $16.3 billion. That's the first time since at least 1980 that those costs actually dropped, AHA data reveal.
Also, the $16 billion represents just 5.9% of hospitals' total expenses that year, down from 6.2% in 1993. That's the lowest share devoted to unsponsored care and Medi-caid shortfalls since 1984, when those costs represented 5.6% of total expenditures.
Unsponsored-care costs are the total of hospitals' charity care and bad debt offset by special tax subsidies for indigent care.
Medicaid shortfalls are the difference between what it cost hospitals to treat Medicaid recipients and what they were paid for that care.
The AHA said hospitals' charity-care and bad-debt costs, which combined are known as uncompensated care, totaled $16.8 billion in 1994, up 7% from $15.7 billion in 1993.
But that jump was more than offset by a drop in hospitals' Medicaid payment shortfall to $2.5 billion in 1994 from $3.7 billion in 1993, and an increase in special tax subsidies to $3.3 billion from $3.1 billion.