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Hospital Uncompensated Care Issues. Jack Ashby, M.H.A. Hospital Research Director Medicare Payment Advisory Commission. What is uncompensated care?. Definition: Care provided by hospitals or other providers that is not paid for directly by patients or insurers
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Hospital Uncompensated Care Issues Jack Ashby, M.H.A. Hospital Research Director Medicare Payment Advisory Commission
What is uncompensated care? • Definition: Care provided by hospitals or other providers that is not paid for directly by patients or insurers • Includes charity care (furnished without expectation of payment) and bad debts (provider has unsuccessfully attempted to collect) • Includes entire or partial bills from the uninsured as well as unpaid copayments and deductibles Jack Ashby
What is uncompensated care? (continued) Uncompensated care does not include: • The contractual allowances of government and private insurers • Lack of Medicaid payment for days beyond a length of stay limit • Courtesy discounts for employees, students, members of religious orders, etc. Jack Ashby
How is uncompensated care measured? • Hospitals measure their uncompensated care at charges (revenue foregone) • Policymakers prefer a measure of costs • Useful computed variables: • Uncompensated care costs as a percent of total costs • Share of uncompensated care costs covered by government subsidies • Uncompensated care losses as a percent of total costs Jack Ashby
How much uncompensated care do hospitals provide? • Uncompensated care costs: $21.6 billion and 6.1 percent of total costs • Uncompensated care losses: $19.0 billion and 5.3 percent of total costs Source: AHA Annual Survey, 2000. Jack Ashby
Trend in uncompensated care costs and losses Uncompensated care as a percent of total costs Proportion of uncompensated care covered by Year Costs Losses government subsidies 1984 1988 1992 6.0% 6.2 6.0 4.6% 4.8 4.9 23.3% 22.4 18.9 1996 2000 6.1 6.1 5.1 5.3 17.3 12.1 Source: AHA Annual Survey. Jack Ashby
How does uncompensated care vary by type of hospital? Uncompensated care as a percent of total costs Type of hospitalCosts Losses Urban 6.4% 5.3% Rural 5.3 4.7 Major teaching 10.0 7.4 Other teaching 4.9 4.5 Non-teaching 4.9 4.4 Voluntary 4.7 4.4 Proprietary 4.7 4.0 Urban government 15.7 10.6 Rural government 6.4 4.9 Jack Ashby
How concentrated is the provision of uncompensated care? Uncompensated care costs Share of as a percent of total costs hospitals 0 to < 2 13.4% 2 to < 5 43.0 5 to < 10 35.3 10 to < 20 6.8 20 to < 30 0.7 30 to < 40 0.4 40 to < 60 0.2 60 and above 0.2 Source: AHA Annual Survey. Jack Ashby
How concentrated is the provision of uncompensated care? (continued) Measure 1992 2000 Share of all uncompensated 45% 46% care costs furnished by the top 250 providers Of the amount furnished by 61% 53% the top 250 providers, share provided by government hospitals Source: AHA Annual Survey. Jack Ashby
Is there a relationship between uncompensated care and overall financial performance? Uncompensated care costs as a Average Type of hospital percent of total costs total margin Major teaching 10.0% 1.5% All other 4.9 5.4 Private 4.7 5.3 Urban government 15.7 -1.3 Rural government 6.4 3.4 Source: AHA Annual Survey. Jack Ashby
Is there a relationship between uncompensated care and overall financial performance? (continued) Uncompensated care costs Average as a percent of total costs total margin 0 to < 2 4.0% 2 to < 5 4.6 5 to < 10 4.4 10 to < 20 4.2 20 to < 30 3.8 30 to < 40 3.1 40 to < 60 3.2 60 an above -0.4 Source: AHA Annual Survey. Jack Ashby
What revenue sources do hospital use to cover their uncompensated care costs? • Payments from private insurers (cost shifting) • Government subsidies • Operating subsidies • Dedicated taxes • Charity care pools • Medicaid disproportionate share payments • Medicare disproportionate share and indirect medical education payments • Revenue from non-patient sources Jack Ashby
Louisiana 13.1% New Mexico 12.8 Texas 10.3 Mississippi 8.7 Nevada 8.1 Oklahoma 7.9 Arkansas 7.6 Florida 7.5 California 7.4 Alabama 7.3 Nebraska 2.0% Minnesota 2.0 North Dakota 2.4 Wisconsin 2.6 Oregon 2.9 Washington 3.1 Michigan 3.2 Missouri 3.3 Rhode Island 3.4 Iowa 3.9 States with highest and lowestuncompensated care costs Highest Lowest Source: AHA Annual Survey. Jack Ashby
