Safety net providers defend their niche in Medicaid market, enroll members in own health plans

Safety net providers don't have to be cut out of managed Medicaid due to their high costs of caring for the poor and uninsured. See how Boston Medical Center and Cambridge Hospital got involved in the Massachusetts Medicaid waiver program and negotiated special rates and provisions.

Family caregiving: who provides the care, and at what cost?

Today, there are an estimated 1.6 million people over 65 years of age who require assistance with two or more daily activities. This number is projected to rise to 2.1 million by 2001, with fewer family caregivers expected to be available to provide this informal care. Seventy-two percent of unpaid family caregivers are women, the majority of whom are mid-life daughters or daughters in law. Uncompensated care to the frail elderly requires an average of 28 to 39.9 hours per week of custodial care. The financial impact on informal caregivers includes: 9% of family caregivers who leave the labor force to provide care, 29.4% who adjust their work schedules, and 18.1% who take time off without pay. The estimated annual value of uncompensated kin care in 1990 was $18 billion. Thirty-two percent of all family caregivers are categorized as poor or near-poor at incomes that are less than 125% of the federal poverty level.

Altruism or moral hazard: the impact of hospital uncompensated care pools

Empirical evidence from New Jersey supports theories of hospitals altruism. From 1987 to 1992, New Jersey reimbursed hospitals for uncompensated care through the Uncompensated Care Trust Fund. The Trust Fund reduced the shadow price of charity care, inducing hospitals to increase their provision of uncompensated care. Hospitals increased inpatient uncompensated care by an average of 14.8% and statewide uncompensated care increased by $360 million during 1987-1990. Empirical evidence suggests that the state effectively addressed the moral hazard problem created by the Trust Fund by auditing uncompensated care and regulating hospital collection procedures.

Financing graduate medical education: the search for new sources of support

Rapid and profound changes in the public and private markets for health care services are posing multiple challenges to the complex and inter-dependent system for financing medical education. In this paper, we examine a wide range of potential sources of financial support for medical education, provide data on the revenue yield under different assumptions, and assess each option against the criteria of equity, adequacy, collectibility, and effects/ consequences. We also describe and analyze recent legislative proposals designed to reform the financing system for medical education and provide an overall assessment of the policy environment confronting such proposals.

Private hospital care for profit? A reappraisal

For-profit, investor-owned health care corporations have become much more active in hospital markets previously dominated by the private not-for-profit sector. An in-depth examination of the many issues underlying this controversy is provided, including a review of the role played by charity care and community benefits, access to capital, the relationship between profit and the tax status of health care organizations, the role of government oversight and regulation, and the quality and availability of health care.

The evolution of support for safety-net hospitals

The federal government, mostly through the Medicare and Medicaid programs, has created and maintained a set of structural mechanisms to support uncompensated care and clinical education: disproportionate-share hospital payments and direct and indirect graduate medical education payments. This paper provides a history of how these traditional supports have evolved. We note that the need to reduce federal and state spending threatens the level of these payments, while changes in the health care delivery system highlight a range of design and technical inadequacies in the current support mechanisms.

Academic medical centers and the care of underserved populations

As the number of Americans at risk of being underserved continues to rise, a better understanding of safety-net providers of health care is needed to help ensure continuing care for the underserved. In this article, the authors have begun the process of defining the role of academic medical centers (AMCs) as a group in the care of those persons most at risk of being underserved--the medically indigent and members of minority and poor populations--by quantifying the amount of inpatient care that AMCs provide to these individuals. The study went beyond previous work by using nationally representative sources of data (from 1989 to 1994) and by examining more than one underserved population rather than only the medically indigent. The study focused on AMCs and other hospitals in urban areas and excluded hospitals in rural areas. The detailed findings confirm previous observations that urban AMCs of all types provide a large and disproportionate share of care for the medically indigent and the underserved members of minority and poor populations and that members of these populations constituted the majority of patients cared for in many AMCs in recent years. The findings show that the proportion of patients from underserved groups admitted to all urban hospitals is rising and that this growth is faster among AMCs than other hospitals. The authors comment that AMCs, because of their prominent and historical role in caring for the underserved, have the opportunity to lead efforts to continue such service through innovative approaches to health care and the prevention of illness. Whether AMCs can seize this opportunity when confronted by price competition and government policies that reduce AMCs' capacity to care for the underserved remains to be seen.

Provision of free and discounted dental services to selected populations: a survey of attitudes and practices of dentists attending the 1996 Dallas Midwinter Meeting

An attitudes and practices survey of dentists attending the Dallas Midwinter Meeting in January 1996 in Dallas was conducted as a collaborative effort between the Dallas County Dental Society and the Baylor College of Dentistry. The survey was developed to help determine participating dentists' attitudes and practices in the area of provision of dental services on a discounted or free basis to disadvantaged patient groups. A total of 225 dentists responded to the survey. Of these surveyed dentists, 213 (94.6%) were in private practice and 199 (88.4%) described themselves as general dentists. A considerable amount of charitable dental services, discounted and free, was reported to be provided by the group of respondent dentists. A total of 152 (67.6%) of the dentists surveyed reported providing discounted or free care to elderly patients with low income, 125 (55.6%) provided such care to low-income patients without age restriction, and 137 (60.9%) cared for patients of record with temporary financial hardship. In other patient categories, 79 (35.1%) of the dentists provided free/discounted services to handicapped persons and 47 (20.9%) provided care to homebound patients. These findings concerning charitable practices by dentists were similar to those found in a comparable survey conducted by the American Dental Association in 1994. Dentists were fairly evenly split as to their preference where to volunteer services. Of the total respondents, 84 (40.6%) preferred providing services in their own office and 91 (44.0%) preferred to do so at a community health clinic that hosted volunteers.

Payment source and the cost of hospital care: evidence from a multiproduct cost function with multiple payers

This study investigates the capacity of hospitals to vary the intensity of their services based on patients' expected sources of payment. While the concept of price discrimination by hospitals based on payer generosity ("cost-shifting") has been discussed extensively, the notion that hospitals can adjust payer-specific marginal costs to reflect differences in reimbursement policies has not been studied in depth. To examine this issue. this analysis employs a multiproduct cost function with hospital outputs defined as admissions by payment source, controlling for the distribution and severity of illness ("casemix") for each payer. Marginal costs of casemix-adjusted discharges are obtained and compared for Medicare, Medicaid, Private Payers, and a residual category that includes uncompensated care. We find that indeed, payer-specific marginal costs generally reflect payer generosity.

Medical facility construction and modernization; requirements for provision of services to persons unable to pay--PHS. Final rule

This document revises the rules currently governing how certain health care facilities, assisted under Titles VI and XVI of the Public Health Service Act, fulfill the assurance, given in their applications for assistance, that they would provide a reasonable volume of services to persons unable to pay. Public comment on the current rules and operational experience with them indicated the need to revise the current requirements with respect to nursing homes, many of which are unable under current requirements to meet their obligation to provide such services. The rules below should permit qualified facilities to satisfy their uncompensated services assurance.

Medicaid disproportionate share and other special financing programs

Medicaid disproportionate share hospital (DSH) and related programs, such as provider-specific taxes or intergovernmental transfers (IGTs), help support uncompensated care and effectively reduce State Medicaid expenditures by increasing Federal matching funds. We analyze the uses of these funds, based on a survey completed by 39 States and case studies of 6 States. We find that only a small share of these funds were available to cover the costs of uncompensated care. One method to ensure that funds are used for health care would be to reprogram funds into health insurance subsidies. An alternative to improve equity of funding across the Nation would be to create a substitute Federal grant program to directly support uncompensated care.

The effect of competitive pressure on charity: hospital responses to price shopping in California

Since higher charges to private patients are a major source of financing for hospital care to the uninsured, increased price shopping by private payers may mean that hospitals are less able to provide such care. I study the effect of increased price shopping on California hospital markets over the 1984-1988 period. I find that there was a large fall in net private revenues and net income in the least concentrated hospital markets in the state after the advent of price shopping. Perhaps as a result, care to the uninsured fell dramatically in these markets as well, relative to more concentrated markets.

Factors affecting charity care and bad debt charges in Washington hospitals

Uncompensated care has become a major issue in hospital finance as the number of uninsured persons has increased and hospital revenues have declined. Uncompensated care charges have two components--charity care and bad debt--that are distinct conceptually but often are commingled in hospital accounting practice. Data on charges assigned to charity care and bad debt in 1987 for 82 short-stay hospitals in Washington were merged with data from the 1987 Medicare Cost Report and AHA Annual Survey. The regression analyses performed indicate that the determinants of the percent of charges for charity care, bad debt, and total uncompensated care differ and suggest that bad debt should be isolated from charity care when estimating a hospital's level of effort in providing care to indigent patients.

Assessing bad debt in New Hampshire and Vermont office-based practices

OBJECTIVE

Bad debt is one measure of the cost of medical indigence on health care institutions. This two-part study identifies a methodology for and presents findings from measuring bad debt in a collection of office-based practices.

METHODS

In Part I of the study, data were gathered on site from 26 practices in Sullivan County, New Hampshire, after first conducting a survey of bad debt losses at these offices. Survey findings were compared to on-site findings and it was determined that only the practices with computerized record-keeping systems were able to supply accurate data by survey alone. In Part II, 71 randomly chosen computerized practices in New Hampshire and Vermont (identified in a screen of 275 practices) were surveyed on bad debt.

RESULTS

The practices from Part II wrote off an average of $23,115 per physician in 1990 from bad debt in a region in which primary care physician income averages approximately $70,000.

CONCLUSIONS

The author calculates that bad debt losses are greater than either Medicare or Medicaid losses. Uninsured patients account for 21.6% of office visits but 45% of practice write-offs. Bad debt accounts for a 16% loss from total earnings from regular office visits. Office-based practices in this study are shouldering a significant portion of the cost of care of their uninsured and underinsured patients.

Have procompetitive changes altered hospital provision of indigent care?

In the past decade alone there have been numerous changes in the financial and competitive environment of hospitals in the United States. Some examples include the advent of Medicare's Prospective Payment System, growth in managed care options, relaxation of states' Certificate of Need (CON) regulations, and court cases questioning the tax-exempt status of nonprofit hospitals. In this paper we attempt to reveal how hospitals alter their provision of care to the poor in a more cost conscious and competitive environment. Using hospital data from the State of California for the fiscal years ending in 1983 and 1987, estimates explaining uncompensated care commitments are presented. In particular, this study illustrates how hospitals under different ownership control varied their provision of uncompensated care over the period studied on average and by profitability level. Other factors, such as hospital location, teaching status, medicare patient load, and contractual adjustments, are also included in the analysis. A number of interesting trends are detected. Moreover, the results are found to be compatible with a quid pro quo hypothesis which states that hospital regulators reward large uncompensated care providers with profitable CON licenses.

Hospital pricing: cost shifting and competition

The issue of cost shifting has taken on enormous policy implications. It is estimated that unsponsored and undercompensated hospital costs--one measure of cost shifting--has totaled $21.5 billion in 1991. The health services research literature indicates that hospitals set different prices for different payers. However, the empirical evidence on hospitals' ability to raise prices to one payer to make up for unsponsored care or lower payments by other payers is mixed at best. No study has concluded that hospitals have raised prices to fully adjust for such actions. The extent of cost shifting is limited by the market. When a hospital has market power, it is able to set prices above marginal costs. However, when a buyer has enough patient/subscribers and a willingness to direct them to particular providers based on price considerations, hospitals have less flexibility in raising prices above costs. Thus, the extent of cost shifting is limited by the market. Cost shifting is not as easy as it may have been in the past because the nature of hospital and insurer competition has changed radically in the last decade. While hospital quality, services, and amenities still matter, some buyers are increasingly concerned about the price they pay. Evidence from studies of PPO and HMO negotiations with hospitals suggests that hospitals' market power is eroding, at least in some areas. In areas with relatively few hospital competitors and little PPO or HMO activity, Medicaid and Medicare price reductions and uncompensated care burdens will be partially absorbed by higher prices paid by private payers. In more price sensitive markets and in markets in which prices to private payers have risen to those commensurate with the market power of local hospitals, such cost shifting will not occur. A market-based approach in hospital pricing requires an explicit policy for the uninsured. In a competitive market, a hospital that traditionally cared for the uninsured by spending some of its profits on them will be unable to do so, at least to the same extent as it did in the past. Increased competition in health care without consideration of the uninsured will decrease the uninsured's access to care.

A cross-sectional analysis of hospital profitability

This study used logit regression to discriminate between profitable and non-profitable hospitals. The specified model worked best for voluntary hospitals, and the classification results were consistently higher for profitable hospitals than for non-profitable hospitals. Only one financial variable, the operating margin, was consistently significant in each regression equation. The results challenged the "general consensus" that operating efficiency is uniform across control categories. Teaching status was found to have a significant and positive effect, but only for voluntary hospitals. Lastly, the results indicate that uncompensated care is a major concern for voluntary hospitals. These findings raise the question of whether reimbursement rates under PPS should incorporate local factors. They also indicate that hospital management style does not and will not model business operations. As such, hospital managers may be unable to dramatically change a hospital's level of profitability.