The nation's hospitals spent only 5.4% of their overall expenses on uncompensated care in 2002-the lowest percentage in the last decade-but that percentage may rise if hospitals heed guidelines released by HHS last week that encourage them to offer discounts and assistance to uninsured and underinsured patients.
The amount hospitals spent on caring for the poor increased to $22.3 billion in 2002, the first increase in two years, but the percentage of total expenses that amount represented declined as hospitals were faced with rising costs in other areas, according to data from the American Hospital Association.
The AHA released the data to Modern Healthcare the day before HHS released a set of questions and answers designed to give hospitals guidance on how to offer billing assistance to the uninsured without running afoul of Medicare's billing rules. The AHA had requested guidance and regulatory relief from HHS.
It was purely a coincidence that HHS released the guidelines one day after the AHA released its data, spokesman Richard Wade said. "We had no idea when it was coming."
The impact the HHS guidelines will have on the amount of uncompensated care hospitals provide in the future is difficult to predict, Wade said. The number of uninsured patients is the driver, he said. "We know the numbers are going to go up," he said. "Whether this has some effect, it is hard to say."
The release of figures on uncompensated care comes at a time when hospitals have been criticized by lawmakers, patient advocates and unions for billing and collection practices that target some of their most financially vulnerable patients. Last December, the AHA sent a letter to HHS Secretary Tommy Thompson urging him to create less stringent federal regulations so hospitals can better respond to the needs of the uninsured (Dec. 22/29, 2003, p. 8).
In 2001, hospitals spent $21.5 billion, or 5.6% of their total expenses, on uncompensated care. Uncompensated care includes charity care, which is given with no expectation of payment, and bad debt, which is care for which payment was expected but not received.
The 4% increase in spending is because of the growth in the number of uninsured, estimated at 44 million in the U.S., as well as a rise in bad debt, said Carmela Coyle, the AHA's senior vice president of policy. "We know we have more people without insurance," Coyle said. "It is certainly what hospitals expect. We don't see changes in the number of uninsured."
Hospitals' efforts to offer discounts and billing assistance to the poor are inadequate, said K.B. Forbes, executive director of Consejo de Latinos Unidos, a national patient advocacy group. "Their conduct is egregious," Forbes said. "It makes so much sense for hospitals to charge a universal discounted pricing structure for the uninsured."
Bad debt is on the rise as more employers are cutting back on benefits for workers as a response to higher insurance premiums, Coyle said. That leaves employees underinsured and responsible for a larger portion of their healthcare bills. In many cases, patients cannot afford to pay the deductibles, which forces hospitals to take on more bad debt, she said.
The percentage of expenses that uncompensated care represented declined as hospitals reported an overall increase of 8.6% in total expenses, Coyle said. Hospitals are experiencing higher labor and malpractice insurance costs, which are driving the overall growth in costs, she said.
The statistics are based on the AHA's annual survey of hospitals, which included 4,927 hospitals in 2002. The survey included 4,908 hospitals in 2001.
In one example of how uninsured billing practices have become a lightning rod for criticism, executives at six-hospital Provena Health learned last week that the Illinois Department of Revenue was revoking the state property tax exemption at its 199-bed Provena Covenant Medical Center in Urbana. The reason cited was that the hospital didn't operate with a charitable purpose. The state decision, if upheld, means Covenant will have to pay $1 million in back property taxes and pay taxes in the future. The hospital lost $700,000 on operations last year. The system plans to appeal the ruling.
"It is very disheartening to think that a Catholic hospital which provides almost $1.3 million in cost for charity care could be seen as a for-profit entity," Mark Wiener, the hospital's president and chief executive officer, said.
Gerald Griffith, a lawyer and chairman of the healthcare department at Griffith, Honigman, Miller, Schwartz and Cohn, said that tight state budgets usually play a role in the decision to revoke tax-exempt status.
"When the money gets tight, the government looks around for other sources of revenue," he said. "That is a significant factor."
Led by states like Pennsylvania and Utah, challenges of the property-tax exemptions of not-for-profits hospitals were common in the early 1980s through the mid-1990s. Those challenges waned with the booming economy of the mid- to late 1990s.
-with Mark Taylor