Hospital losses on publicly insured patients rose at double-digit rates while the cost of uncompensated care increased by 8% last year, the American Hospital Association said.
Medicare losses at U.S. general acute-care hospitals rose 20% to $18.6 billion in 2006, and unpaid costs on care for Medicaid patients climbed 15.3% to $11.3 billion. Uncompensated carewhich includes two expenses, charity care and bad debtclimbed 8.3% to $31.2 billion. But as a percentage of overall expenses, uncompensated care remained fairly steady at 5.7% compared with 5.6% a year earlier, according to the Chicago-based trade groups statistics (See Cover Story, p. 6).
Such expenses are at the heart of an ongoing debate over how to measure the value of community aid provided by not-for-profit hospitals in exchange for certain tax breaks. The AHAs latest figures come as the Internal Revenue Service readies to establish a national standard for how and what to count toward so-called community benefits, one that is likely to exclude losses on Medicare and bad debt (Oct. 15, p. 8). Meanwhile, Sen. Chuck Grassley (R-Iowa) called for an Oct. 30 round table with government, healthcare and charity officials to address proposed reforms. Charitable hospitals benefit from very significant tax breaks, Grassley said in a written statement. Its important to understand what theyre doing to help those in need to justify such beneficial treatment under the tax laws.
Industry insiders have uniformly endorsed including as a community benefit the write-offs for patients who quality for hospitals charity programs or Medicaid, the safety net insurer financed by state and federal tax dollars. But the AHA and a second powerful trade group, the St. Louis-based Catholic Health Association, have split over the two remaining expenses: Medicare and bad debt, or the cost of unpaid bills from patients who do not qualify for aid.
The two organizations put forward rival reporting criteria. The IRS earlier this summer released a draft of proposed standards that adopted the Catholic trade groups more conservative model. The agency said in June the new reporting form may be required as early as tax year 2008. The AHA continues to lobby for less restrictive criteria and more time for hospitals to adopt the new reporting rules.
The magnitude of the Medicare and Medicaid shortfalls just keep rising, said Caroline Steinberg, the AHAs vice president of trends analysis, who argued such losses prove particularly troubling considering that the insurers account for roughly half of hospitals business. Last year marked the first time the AHA released losses on the pair of subsidized insurers.
Steinberg said private payers end up shouldering the costs as hospitals seek to offset losses from public plans. The real question is how long is the private sector willing to cover the shortfalls from Medicare and Medicaid? she said.