Charity care, bad debt mount to millions for GR hospitals

November 29, 2010
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Community benefit spending by Grand Rapids hospitals brushed the highest mark ever for fiscal 2010.

Approximately $150 million went toward community benefits. Much of that spending is driven by charity care for growing numbers of uninsured or underinsured patients and bad debt.

At Trinity Health’s Saint Mary’s Health Care, the number of patients using HealthLink clinics and programs for the uninsured and poor increased by 10 percent, according to HealthLink Director Brad Mathis.

For the 2010 fiscal year that ended in June, Saint Mary’s tallied $28.8 million in community benefit spending, slightly more than 2009’s $28 million. That includes: $9.9 million in charity care, in which the hospital provides discounts; $4.48 million in Medicaid payments that fell short of the cost of care for those patients; $6.4 million for clinics under the HealthLink program for the uninsured: Browning Claytor, Clinica Santa Maria, Heartside Clinic, Sparta Health Center, the HIV/AIDS program and the Wege Residency teaching clinics.

With about 116,000 patient visits, Saint Mary’s HealthLink clinics handle about 16 percent of the total doctor visits by the poor and underserved in Grand Rapids, Mathis estimated. He said the clinics, which employ 43 people and train about 30 residents, are operating at capacity.

The growth in both charity care and bad debt at Saint Mary’s slowed between fiscal 2009 and fiscal 2010, CFO Steve Pirog said.

“It unfortunately gets passed on to the community, to the payers, to the employers,” he added. 

Uncompensated care losses have been growing quickly at some hospitals and straining budgets. For example, Northern Michigan Regional Hospital in Petoskey announced in November that it is eliminating three service lines and laying off as many as 65 people largely due to a 162 percent increase in bad debt and uncompensated care over the past five years.

Community benefit is a way to measure the care that a nonprofit hospital brings in exchange for tax-exempt status, said Jim Lee, vice president of data and policy at the Michigan Health and Hospital Association. All of Michigan’s acute care hospitals are nonprofit, although Attorney General Mike Cox last week approved the purchase of Detroit Medical Center by the publicly traded Vanguard Health Systems. 

“Michigan hospitals have been providing this data voluntarily for over a decade,” said Lee, whose organization issues an annual report aggregating community benefits provided by its members across the state. “It’s about reporting their stewardship of resources within the community. It’s not just about tangible benefits that people see. It’s beyond just patient care.”

Those benefits could include, for example, health education, special events and clinics, he said.

At Metro Health, CFO Tim Susterich said the fiscal 2010 loss on care for Medicaid patients was $21.4 million, compared to $20.8 million in 2009.

“I see, because of the budget issues we’re dealing with and the economy, this number only getting larger because the state did cut the Medicaid reimbursement rates by 8 percent effective Oct. 1,” Susterich said. “We’re just seeing an increasing number of Medicaid-eligible individuals because of the economy. So we’re seeing it both on the volume side and on the rate side.”

Charity care came to $12.3 million for fiscal 2010, up from $8.1 million in 2009, Susterich said, a 37 percent increase. That includes the 40 percent discount Metro Health offers to patients who are uninsured.

“There’s also just increased charity as well as people are becoming less and less financially viable. More and more are qualifying for the charity program,” Susterich said.

Bad debt jumped from $11.4 million in 2009 to $15.1 million for fiscal 2010, despite the discount program.

“Metro’s charity care and Medicaid losses as a total is 12.7 percent of our net revenue, and 11 5 percent in fiscal year ’09,” Susterich said. “That does not include bad debt.”

Metro Health is still compiling additional community benefit spending for programs such as community education in 2010, he added.

Spectrum Health saw its total community benefit spending skyrocket by 46 percent, from $79.4 million in fiscal 2009 to $115.9 million for fiscal 2010, including $30.5 million in combined shortfalls in payments for Medicare as well as Medicaid patients.

Saint Mary’s and Metro Health do not include shortfalls from Medicare payments in community benefits calculations.

“Our overall general sense is that that’s something that all the hospitals — for-profit and not-for-profit — traditionally participate in,” Mathis said. “That’s the rationale for us not including it. That goes for all of Catholic health care in general.”

According to Spectrum Health Hospitals CFO Joe Fifer, Spectrum’s list of $115.9 million in fiscal 2010 community benefits includes: shortfalls in Medicaid payments of $23.8 million and in Medicare of $6.8 million, and $17.5 million on unreimbursed medical education costs, which are partially reimbursed through Medicare payments; $4.6 million on community partnership programs and $527,000 for community program administration; $1.67 million on clinics; $1.8 million on research; $10.3 million on donations and contributions; $6 million for community partnership programs as required under the consent decree that allowed the creation of Spectrum Health.

Charity care at Spectrum Health went from $8.6 million in fiscal 2009 to $10.38 million in fiscal 2010. Bad debt went up from $29.2 million to $36.2 million in the same time period.

Fifer said it’s difficult to ascertain how much bad debt is due to the higher co-pays and deductibles now being faced by people with commercial insurance. “We think it has had a significant impact on the amount of services being desired or obtained,” he added. “It’s definitely had an impact on our industry.”

Fifer called Spectrum Health’s $6 million annual commitment for community programming “locked and loaded forever” by the consent decree. But the system spends another $22 million on “serving the underserved and clinics and all kinds of things,” he pointed out.

“The amount of money we put into community programs blow away that $6 million required amount. I never think about the $6 million. It’s a no-brainer because we go beyond it every year.”

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