Rhode Island’s health care system is on the cusp of unprecedented changes in 2021.
COVID-19 buffeted the financial health of the state’s not-for-profit hospitals.
Care New England Health System, the state’s second-largest nonprofit hospital system that includes
Butler Hospital,
Kent County Memorial Hospital and
Women & Infants Hospital, reported a $13 million net loss and a $28 million loss on patient care operations during its 2019-20 fiscal year.
CNE now is at a crossroads. In September,
Lifespan Corp. and
Brown University’s Warren Alpert Medical School proposed a merger with CNE, which would consolidate eight of the state’s nonprofit hospitals into an integrated academic health care system. Most recently, StoneBridge Healthcare, a for-profit company whose mission is “to buy, save and turn around deeply distressed hospitals,” offered to purchase CNE for $250 million and promised to fully fund CNE’s pension program and make substantial investments in its member hospitals.
State officials responsible for evaluating different merger proposals must prioritize our community’s most vulnerable residents in evaluating these competing offers. A close examination of the community benefits provided by the acute care hospitals in the CNE and Lifespan systems underscores the importance of uncompensated care for uninsured and underinsured Rhode Islanders. Uncompensated care – the sum of financial assistance, bad debt and Medicaid losses – is reported on each hospital’s Form 990, an annual tax form filed by nonprofits to the IRS. We analyzed publicly available data from Guidestar, an information service specializing in tax filings for nonprofit organizations, to compare uncompensated care at acute care hospitals affiliated with Lifespan and CNE from 2015 to 2017.
A 2020 study in JAMA Network Open found that the volume of financial assistance and bad debt decreased in states that expanded Medicaid eligibility after the passage of the Affordable Care Act in 2010. Notably, Rhode Island’s two largest hospital systems continue to provide high levels of uncompensated care after the state expanded Medicaid. The relative proportion of financial assistance, bad debt and Medicaid losses varies among hospitals and often changes from one year to the next.
Financial assistance is free or reduced-cost care that hospitals provide to indigent patients. At
The Miriam Hospital – a Lifespan member – financial assistance as a percentage of program service revenue increased from 1.43% in 2015 to 1.5% in 2017. Women & Infants – a CNE institution – saw its financial assistance increase from 0.46% of program service revenue to 0.49% during the same period. Other CNE and Lifespan hospitals reported a modest decline in financial assistance as a proportion of program service revenues.
Bad debt, or care provided to patients who cannot pay their outstanding bills, is a growing challenge for hospitals as a result of the growing popularity of high-deductible health insurance plans. At Kent Hospital, for example, bad debt increased from 4.16% of program service revenue in 2015 to 4.39% in 2017. Miriam also saw an increase during the same period, from 0.72% to 0.76%. Other institutions – including
Newport Hospital,
Rhode Island Hospital, and Women & Infants – reported a reduction in bad debt during this period.
Financial losses associated with publicly insured (Medicaid) patients are the largest component of uncompensated hospital care. The Medicaid shortfall in 2017 ranged from 2.55% of program service revenues at Rhode Island Hospital to 5.59% at Women & Infants.
At a time when many small businesses are struggling – or have closed altogether – and thousands of Rhode Islanders find themselves unemployed, the demand for uncompensated hospital care is likely to increase significantly in 2021. As Ben Teasdale and Kevin Schulman argued in a recent article in the New England Journal of Medicine, the “increasing prevalence of high-cost sharing plans and the widening gap between private and public payers each threaten access and create cracks in a previously recession-proof industry.” In 2017, the acute care hospitals in the CNE and Lifespan networks provided a total of $168.6 million in uncompensated care to patients in Rhode Island. In this context, any merger or acquisition plan for Care New England must preserve nonprofit hospitals’ ability to care for uninsured and underinsured patients.
Robert B. Hackey is a professor of health policy and management at Providence College. Jessica Houle is a PC senior majoring in health policy and management.
