Hospital Uncompensated Care Issues

1
Hospital Uncompensated Care Issues

• Jack Ashby, M.H.A.
• Hospital Research Director
• Medicare Payment Advisory Commission

2
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

3
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.

4
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

5
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.
6
Trend in uncompensated care costs and losses
Proportion of uncompensated care


covered by
Uncompensated care as a percent of total costs
government subsidies
Losses
Costs
Year
23.3 22.4
18.9
4.6 4.8 4.9
6.0 6.2 6.0
1984 1988 1992
17.3 12.1
5.1 5.3
6.1 6.1
1996 2000
Source AHA Annual Survey.
7
How does uncompensated care vary by type of
hospital?
Uncompensated care as a percent of total
costs Type of hospital Costs
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 Vol
untary 4.7 4.4 Proprietary 4.7 4.0 Urban
government 15.7 10.6 Rural government
6.4 4.9
8
How concentrated is the provision of
uncompensated care?
Uncompensated care costs Share of as a
percent of total costs hospitals 0 to lt
2 13.4 2 to lt 5 43.0 5 to lt 10
35.3 10 to lt 20 6.8 20 to lt 30 0.7 30
to lt 40 0.4 40 to lt 60 0.2 60 and
above 0.2
Source AHA Annual Survey.
9
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.
10
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.
11
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 lt 2
4.0 2 to lt 5 4.6 5 to lt 10 4.4 10 to lt
20 4.2 20 to lt 30 3.8 30 to lt 40 3.1 40
to lt 60 3.2 60 an above -0.4
Source AHA Annual Survey.
12
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

13
States with highest and lowestuncompensated care
costs
Highest Lowest

• 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

Source AHA Annual Survey.