There’s no doubt about it, hospitals in Rhode Island are fiscally “sick,” suffering losses of $100 million over the last two years and $42 million in operating margin losses during the first six months of this fiscal year alone. The culprit?
“Mounting financial pressures from public and private payers,” said Edward J. Quinlan, president of the Hospital Association of Rhode Island, as well as ever-increasing costs related to uncompensated care.
Beyond Cash Donations: How New Forms of Giving Are Transforming Not-for-Profit Accounting
Evolving Funding Landscape for Not-for-Profits Not-for-profit organizations are being asked to do more with less,…
Learn More
According to Quinlan, hospitals in Rhode Island last year provided $98 million in charity and uncompensated services, a significant increase over the $90 million spent in 1997.
With no public acute care hospitals in Rhode Island, private hospitals therefore treat all patients, regardless of ability to pay, something “no other element of the health care delivery system” is required to do, said Quinlan, adding that there are approximately 110,000 Rhode Islanders who currently lack health insurance. Another factor in the continuing financial demise of the state’s hospitals concerns private insurance payments, Quinlan said, citing recent data from the federal Medicare Payment Advisory Commission that shows private insurers reimburse Rhode Island health care providers for less than 100 percent of their costs.
“The national average is 116 percent,” Quinlan said, with only hospitals in Massachusetts, New York and the District of Columbia coming in lower than Rhode Island.
Not only do hospitals get paid less than a dollar for every dollar they spend, they have to wait longer and longer to get it, Quinlan said, with insurers and third-party payers now owing hospitals in Rhode Island more than $300 million for services already provided.
“The average time it takes for a hospital to be paid is 81 days,” with delays having increased more than 28 percent in Rhode Island since 1994, compared to the national average of just over 1 percent.
According to the Rhode Island Department of Health Hospital Financial Operations Dataset, hospital Net Patient Receivables increased from $181.7 million in 1994 to $285.9 million in 1998. Year-end HARI estimates for 1999 place the Net Patient Receivables at more than $300 million, Quinlan said, and according to information provided to the state by the various health plans, insurers take more than 60 days on average to pay claims, with payment delays increasing by 25 percent since 1997.
With hospitals facing payroll demands, purchasing supplies and services and other fiscal requirements, “it is becoming more and more difficult for hospitals to manage daily operations,” Quinlan said, attributing these delays to fallout from the “artificial suppression” among third party insurers in Rhode Island during the 1990s.
Because insurers had “to keep premiums low” in order to gain or increase market share increased competition. Quinlan said companies have dealt with their losses by lowering claim payments to health care providers, including hospitals, physicians, laboratories, etc.
He said “there’s no difference from where we sit, regardless of owner status,” whether an insurer is a for-profit company like United Healthcare of New England or a state regulated not-for-profit agency like Blue Cross & Blue Shield of Rhode Island.
According to data from the state Department of Business Regulation and compiled by HARI, in 1997 United Healthcare claims sat in accounts receivable for 77 days, Neighborhood Health Plan of Rhode Island claims for 86 days and Blue Cross & Blue Shield claims remained in accounts receivable for 64 days.
Scott Fraser, spokesman for Blue Cross & Blue Shield of Rhode Island, the state’s largest health insurer, said last week that far from being late in paying as the HARI figures would suggest, “our numbers show it’s a very, very high percentage [of claims] paid within 30 days.”
“I would use a little bit of caution” interpreting the numbers, he said, adding that Blue Cross is not trying to be “difficult” by delaying claims. Fraser said Blue Cross doesn’t start counting days until they get what they refer to as a “clean claim,” one with all necessary information that doesn’t have to be sent back. He said Blue Cross currently returns about five percent of all claims for more information.
Hospitals, on the other hand, start counting “in some cases from the moment [a] person checks in,” Fraser said. Viewed this way, these lengthy delays can’t really be blamed on private insurers, Fraser said. “It would be the hospital doing the billing.”
Another factor that’s continuing to send hospitals reeling, Quinlan said, is massive Medicare cutbacks wrought by the Balanced Budged Act of 1997, which took “$400 million out of our hospitals” in reduced Medicare payments, far above the original estimates of $220 million. “That’s a tough reality,” he said, adding that last year’s Balanced Budget Act refinements only put about $25 million back in.
Several bills are being considered by the General Assembly to try and reverse these negative trends and strengthen hospitals, including a Prompt Payment bill. Sponsored by Rep. Suzanne M. Henseler, D-North Kingstown and Sen. Elizabeth Roberts, D-Cranston, the bill would require insurers to pay all medical service providers within 30 days.
A bill sponsored by Rep. Peter T. Ginaitt, D-Warwick and Roberts would require insurers to pay hospitals monthly in an amount equal to one-twelfth of the total amount paid by the insurer to the hospital for the previous fiscal year (with year-end reconciliations).
And a bill sponsored by Rep. Steven M. Costantino, D-Providence, and Sen. J. Clement Cicilline, D-Newport would shift responsibility for collecting co-pays and deductibles from hospitals, doctors and other medical providers to insurers. Quinlan said that of the more than $90 million per year in uncompensated care provided in Rhode Island every year, more than $20 million relates to patients not paying required co-payments and deductibles.
The co-pay bill would require insurers to pay providers the full, negotiated rate for the services less an administrative fee, because “insurers are better suited to collect the funds.”
HARI, a trade association with 12 member hospitals (HARI includes every hospital in Rhode Island except Butler and Bradley) is also seeking a state budget article to increase the reimbursement rate for Medicaid outpatient services. Quinlan said hospitals presently receive only 64 percent of the cost for providing such services.
Patrick L. Muldoon, president and chief executive officer of South County Hospital, a 100-bed community facility in Wakefield, said last week that although last year they about broke even, this fiscal year (from October through September) the hospital is already in the red for about half a million dollars.
Fraser said Blue Cross officials have been working with hospitals the last few months trying to develop some type of payment arrangement that’s acceptable to both sides, and that Blue Cross also suffered severely these last few years, registering $78 million in losses over 1996, 1997 and 1998. Although the company just “turned the corner” in 1999 with a surplus of about $9 million .
