Rhode Island’s hospitals provided $21.5 million in charity care in 2004, up 37 percent from the previous year and nearly double the free care provided to the poor in 2001, a new report from the R.I. Department of Health shows.
In addition, the hospitals wrote off $52.2 million in bad debts last year, and they logged $29.4 million in Medicaid “shortfalls” – underpayments that didn’t cover their costs. The bottom line: $103.1 million, or for every $20 in net patient revenue generated by the institutions, they provided about $1 of uncompensated care.
Providing free care isn’t inherently a problem for the hospitals; it’s part of their mission. As Edward J. Quinlan, president of the Hospital Association of Rhode Island, put it, “It’s an appropriate role and obligation for nonprofit hospitals.”
But for an industry with, at best, thin profits, and often losses, the trends are “disturbing,” Quinlan acknowledged, and the financial impact is inescapable.
Francis R. Dietz, president of Memorial Hospital of Rhode Island, put it more starkly.
“We have always had an open-door policy for people, and we’ve been proud of it,” he said. “But this year, we had a loss of $1.2 million, and a lot of it had to do with free care and bad debts. … There is no doubt that our mission is causing this hospital financial strain.”
The impact on hospitals is by no means uniform. Rhode Island Hospital, with its South Providence location, large emergency room and easy bus access, provided about 40 percent of the state’s charity and overall uncompensated care in 2004, a PBN data analysis shows.
Memorial, in Pawtucket, took the biggest hit percentage-wise when compared with net patient revenues, providing free care equivalent to 6.8 percent of its income. Miriam Hospital, on Providence’s East Side, and South County Hospital took the smallest hits, 3.0 percent of patient revenues each (Rhode Island Hospital did 6.5 percent).
And Butler Hospital, providing psychiatric care, had the biggest share of charity care, 2.3 percent, compared with a statewide average of 1.0 percent.
Health Insurance Commissioner Christopher F. Koller said insurance coverage is declining across Rhode Island and that’s the main driver of the fast rise in uncompensated care. Since 1999, a recent survey by Koller’s office showed, the share of Rhode Island employers offering health insurance to their workers has dropped to 87 percent from 92 percent, and as premiums have skyrocketed in that period, take-up rates have plunged, with only 68 percent of full-time workers now accepting coverage, down from 80 percent in 1999.
The ranks of the uninsured, meanwhile, swelled by 43,700 to nearly 114,000 from 2000 to 2004, including 15 percent of the adult, non-elderly population, according to the Kaiser Family Foundation.
The hospital figures show “a trend in the same direction,” Koller noted, and they don’t even cover the full spectrum of free care being provided in Rhode Island, which also includes community health centers, ambulatory care centers, and the Rhode Island Free Clinic.
“The first solution is to make people insured,” Koller said. But it’s also important to steer people toward less costly care options when appropriate, he added – say, primary care doctors or health centers instead of emergency rooms.
Of course some hospitals are major primary care providers themselves. Part of Memorial’s charity care challenge, Dietz said, is that many patients who go for primary care then return for surgery or other needed services they can’t pay for.
Women & Infants Hospital, on the other hand, has succeeded at keeping its uncompensated care numbers low by helping women to enroll in RIte Care early in their pregnancies, or make other financial arrangements so they’ll be able to afford prenatal care, Chief Financial Officer John M. Sutherland III said.
“Many of those patients, unless you get them into the system, it’s hard to get them to even come in,” Sutherland said.
Women & Infants also has an advantage not shared by other hospitals: Insurers, for the most part, don’t impose large co-payments or deductibles for its services, Sutherland said. Others, however, report seeing bad debt jump as health coverage gets skimpier.
“The presumption by the business community that when they put co-pays or deductibles on their employees, those employees are going to be able to pay it, is not valid,” Dietz said. “But they still come to us for care, and we’re not going to turn people away.”
After about six months, Dietz said, Memorial writes off the unpaid bills as bad debt.
Looking ahead, hospitals predict a continued rise in uncompensated care, but more than ever, they also expect their experiences to reflect economic fluctuations. That’s because the state health department wants to make anyone with an income under 200 percent of the federal poverty line eligible for charity care – a standard that many hospitals have already adopted.
As of 2003-2004, U.S. Census figures show 11.5 percent of Rhode Islanders were under the poverty line. But at least as many hovered in the 100- to 200-percent tier; the median household income was $47,021, just 22 percent above the threshold for a family of four.
When the Lifespan hospitals adopted the 200-percent standard in March 2004, said CFO Mamie Wakefield, “we did see some increase” in charity care, but given that “these patients were never going to be able to pay off their debts,” it seemed worthwhile to at least save the time, effort and expense associated with debt collections.
In fact, to maximize eligible patients’ use of charity care, Wakefield said, the hospitals have “invested in a lot of people,” financial counselors, to meet with patients and help them with the paperwork to qualify for charity care or, even better, RIte Care. It’s not even just the uninsured, she said – patients with large co-pays or deductibles are also encouraged to apply.
The hospitals in general are embracing the new 200-percent standard because they say it’s more realistic than the current standard of providing at least the same ratio of free care as in the previous five years. But with the state also looking to create a uniform application to be used at all the hospitals, Dietz said he hopes makes its patients’ lives easier.
Memorial has had trouble getting people to apply for charity care, he said, because “a lot of people are refusing to fill out the forms.” Whatever the state comes up with for the entire industry, he said, “it has got to be simple, and it’s got to be user friendly.”
