Hospitals Count The Good They Do

December 10, 2007
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GRAND RAPIDS — The Grand Rapids area’s three hospitals spent millions of dollars on community benefits such as health clinics and charity care in fiscal 2007.

While each hospital uses unique criteria to account for community benefits, all three include health programs provided to the public, charity care and shortfalls on Medicaid payments. The hospitals say community benefits range between 7 percent and 9 percent of their revenues obtained from patient care.

Spectrum Health reported last month that it spent $98.5 million on community benefits, slightly less than the $100.7 million reported for fiscal 2006.

Spectrum Health CEO Rick Breon attributed part of the $2.1 million difference to a drop in uncompensated care for Medicare and Medicaid, but noted that spending for community outreach and health improvement programs increased by $1.6 million.

Spectrum Health pegged Medicare and Medicaid shortfalls at $74.3 million, and spent $24.3 million on community outreach and health improvement programs. Under the agreement that allowed Blodgett and Butterworth hospitals to merge in 1997, Spectrum Health is obligated to provide $6 million annually for community programs, which the health system provides through Healthier Communities.

CFO Mike Freed said Medicaid reimbursements improved in fiscal 2007.

“There was some improved funding for Medicaid, in particular, that kind of mitigated that for the 2007 fiscal year,” Freed said. “We expect that to continue to get worse in 2008.”

Spectrum Health receives 76 cents for every $1 of Medicaid care, which covers mostly the poor and children, and 93 percent for every $1 of care under Medicare, which serves those age 65 and over.

“Somebody must be paying for that, and that’s you and I, people in the business community, people who are privately insured,” Freed said. “If Medicare and Medicaid were paying their fair share, you and I wouldn’t have to put up this money and cover this hidden tax.”

Freed said that community benefits amount to 8 percent of “delivery system revenue” of $1.26 billion, excluding the health system’s insurance arm, Priority Health.

At Saint Mary’s Health Care, which is owned by Trinity Health of Novi, Medicare shortfalls are not counted as a community benefit, in accordance with Voluntary Hospital Association/Catholic Hospital Association criteria. “We consider Medicare just a part of the cost of doing business,” said Bradford Mathis, who coordinates HealthLink programs and community benefits.

Saint Mary’s spokeswoman Micki Benz said community benefits amounted to 7 percent of operations revenue of $408 million. Mathis said Trinity Health’s community benefit was $62 million for its nine Michigan hospitals. Saint Mary’s accounted for $22 million, including outreach and health improvement programs at $12 million, Mathis said.

“The other thing that we really look at is, what is the return on investment,” he said. “Although the dollars are certainly important, we really try to focus on how are we improving the care in the lives of the people we are coming into contact with.”

For example, he said, for the past 18 months or so, Saint Mary’s has put a focus on measuring diabetes care for patients, not just at the urban clinics that are part of the HealthLink program but at the hospital-owned primary care practice Advantage Health. The measures include such components of routine diabetes care as blood pressure checks, three-month blood tests for glucose levels and measures of blood lipids.

Results so far indicate that the clinics, which serve a patient base that’s heavily minorities — who face a higher rate of diabetes — lag behind in adherence to the cares standards. It’s an issue the clinics will continue to focus on, Mathis said.

“How much you spend does not necessarily indicate what the community is getting for that money,” he added. “Essentially, it’s the community’s money being invested back in the community. Just because you invest a gazillion dollars doesn’t mean it’s money well-spent.”

Metro Health’s community benefit for fiscal 2007 was $15.8 million, said spokeswoman Ellen Bristol. That includes Medicare and Medicaid shortfalls, charity care and the Breton Health Clinic. Metro Health’s community benefits amount to 8.75 percent based on net patient revenue of $183.7 million for the fiscal year ending in 2007.

For each $1 it spends on Medicare care, Metro Health receives 93 cents. For each $1 spent on Medicaid care, the hospital receives 79 cents, she said.

“What’s missing is all the community service stuff we do,” Bristol added, such as a free flu shot program. “We know just from informally adding up a few things we could think of off-hand, we had several hundred thousand (dollars) of those.”

In its MHA 2007 Community Benefits Report, the Michigan Health and Hospital Association estimated that, based on 2005 information from 132 of the state’s 146 nonprofit hospitals, community benefits statewide amounted to $1.7 billion. That included $110 million of charity care, $825 million in Medicare shortfalls, and $394 million in shortfalls from Medicaid and other government programs.

Bristol said Metro Health is awaiting new MHA direction for calculating community benefit.

Community benefit is increasingly being looked at as a measurement of a nonprofit’s commitment to its cause and to justify federal nonprofit, tax-exempt status.

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