Cost of Charity Soars as Complaints Mount

May 01, 2006 at 02:55 pm by steve

Hospitals provided a record amount of charity care last year, according to a new, in-depth report from a major accounting agency, but received little thanks for the work. Instead, aggressive bill collection practices, inconsistent accounting practices and a "broken" healthcare pricing system all conspired to give hospitals a painfully public black eye for charity care. Meanwhile, a separate national report notes that physicians are providing less charity care than ever, even as the demand for it grows to alarming new heights. Add it all up, says PricewaterhouseCoopers Health Research Institute, and the hospital bill on charity care for poor and uninsured Americans skyrocketed from $20.7 billion in 2004 to $27 billion last year. "There are 45 million Americans with no health insurance in this country, and the hardest hit are the working uninsured who are not covered by government programs but who make too much money to qualify for hospital charity care," says Reatha Clark, a partner in PricewaterhouseCoopers' Health Industries Advisory Practice. "The latter includes a growing population of 'underinsured' families who are covered by employer health insurance but can't afford the increased co-payments and deductibles that employers are shifting to the individuals." But when they can't pay, hospitals frequently find themselves pilloried for the way they try to collect the debts or how they account for the charges written off to charity. Much of the negative press against hospitals has focused on hospitals' reportedly aggressive attempts to collect on their debts and criticism that the uninsured are charged higher prices for services than the discounted prices negotiated by managed care plans or what Medicaid and Medicare pay, adds Clark. "Few hospitals have the profit margin to provide substantial charity care and write off bad debt without regard for whether patients can actually pay. Complicating the matter is that while hospitals apply discounts to the uninsured, hospital charges bear little resemblance to actual costs." The key issue for healthcare leaders and lawmakers, says Clark, is finding a way to make healthcare pricing "transparent and understandable to consumers." Hit with a host of embarrassing media reports, though, many hospitals aren't waiting for Congress or state legislatures to take the lead. And the result has been a mixed effort with a host of conflicting standards. A PwC survey of 100 hospital executives found that 70 percent provide the uninsured with discounts while 15 percent charge an average rate of their collective managed care charges. Also, about three out of every four hospitals said they accounted for charity care in terms of charges rather than costs and 9 percent accounted for charity care as a mix of charges and costs. That's perfectly appropriate by accounting standards, but the conflicting standards made it "nearly impossible" to evaluate the benefit. Adding to the hospitals' difficulties, more Americans may be eligible for charity care but don't complete paperwork because of the personal disclosures required. With no clear regulatory guidance on a standard for defining who is eligible, the system has left itself wide open to the public outcry that has occurred. Also, the vast majority of executives told PwC that part of their bad debt for uncollected bills could be classified as charity care. But while charity care is classified a community benefit, bad debt is not. "There is much that hospitals can do on their own to improve their charity care policies, but they also need to be proactive in demonstrating the amount of charity care and community benefit they provide," says Robert Friz, a tax partner at PricewaterhouseCoopers' Washington National Tax Service. "In this regard, the lack of uniform standards for quantification and disclosure of charity care can make it difficult for hospitals to defend themselves from such challenges. Further, they alone likely cannot solve the bigger pricing transparency problem without a major overhaul of the system, which will involve the public and private sectors working together." For physicians, charity care is increasingly a chore with which they want less and less to do. In a national review of physicians, the Center for Studying Health System Change (HSC), a nonpartisan policy research organization, concluded that the proportion of physicians undertaking charity care slid 8 percent in the last decade, to 68 percent. Over that same period, the number of charity hours recorded per 100 uninsured Americans slid 18 percent, from 7.7 to 6.3. "The decline in physician charity care – long a critical part of the safety net – is alarming given the increase in the number of uninsured Americans," notes Paul B. Ginsburg, PhD, president of HSC. At least in part, says HSC, physicians are being forced to do less charity work to make up for the growing financial pressures on their practice. This trend is likely to make it increasingly hard for people without insurance to find the care they need. "Already, there are signs that uninsured Americans are having more problems getting care, and if the decline in physician charity care continues, those problems are probably going to get worse," says HSC senior researcher Peter J. Cunningham, PhD, who coauthored the study.

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Apr 23, 2024 at 10:42 am by kbarrettalley

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