The effect of changing state health policy on hospital uncompensated care

This paper examines the effect of changing state policy, such as Medicaid eligibility, payment generosity, and HMO enrollment on provision of hospital uncompensated care. Using national data from the American Hospital Association for the period 1990 through 1995, we find that not-for-profit and public hospitals' uncompensated care levels respond positively to Medicaid payment generosity, although the magnitude of the effect is small. Not-for-profit hospitals respond negatively to Medicaid HMO penetration. Public and for-profit hospitals respond negatively to increases in Medicaid eligibility. Results suggest that public insurance payment generosity is an effective but inefficient policy instrument for influencing uncompensated care among not-for-profit hospitals. Further, in localities with high HMO penetration or high penetration of for-profit hospitals, it may be necessary to establish explicit payments for care of the uninsured.

The Medicare Cost Report and the limits of hospital accountability: improving financial accounting data

Health policy makers, legislators, providers, payers, and a broad range of other players in the health care market routinely seek information on hospital financial performance. Yet the data at their disposal are limited, especially since hospitals' audited financial statements--the "gold standard" in hospital financial reporting--are not publicly available in many states. As a result, the Medicare Cost Report (MCR), filed annually by most U.S. hospitals in order to receive payment for treating Medicare patients, has become the primary public source of hospital financial information. However, financial accounting elements in the MCR are unreliable, poorly defined, and lacking in critical detail. Comparative analyses of MCRs and matched, audited financial statements reveal long-standing problems with the MCR's data, including major differences in reported profits; variations in the reporting of both revenues and expenses; an absence of relevant details, such as charity care, bad debt, operating versus nonoperating income, and affiliate transactions; an inconsistent classification of changes in net assets; and a failure to provide cash flow statements. Because of these problems, MCR financial data give only a limited and often inaccurate picture of the financial position of hospitals. Audited financial statements provide a more complete perspective, enabling analysts to address important questions left unanswered by the MCR data. Regulatory action is needed to create a national database of financial information based upon audited statements.

Beyond pharmaceutical manufacturer assistance: broadening the scope of an indigent drug program

A medication assistance program at a university medical center is described. The program was implemented in July 1999 by the ambulatory care pharmacy at the University of Illinois at Chicago Medical Center (UICMC). A full-time pharmacist and a full-time social worker run the program, along with support from technicians and a student extern. The program functions like a clinic, with both scheduled appointments and drop-ins. Patients are referred by UICMC providers or may self-refer. Sources of assistance include Medicaid, Medicare Part B, several state programs, manufacturers' programs, drug samples, private insurance plans and HMOs, and the patients themselves in the form of small payments. Patients receive medications at UICMC's expense only as a last resort. The medication assistance program helped 231 patients in the six months from July to December 1999. Program costs totaled $110,537, but $237,985 was saved. Only 13% of the savings came from pharmaceutical companies; 63% came from Medicaid. Experience with the program suggests that medication assistance initiatives should be structured to tap the full spectrum of resources for indigent patients, that programs be staffed by personnel with relevant experience, that program staff be prepared to work closely with patients and to follow up, and that the institution's charitable goods and services be restricted to patients for whom there are no other resources. A highly proactive medication assistance program at a university medical center improves the access of indigent patients to medications and is cost-effective.

Community benefits: how do for-profit and nonprofit hospitals measure up?

The rise of the for-profit hospital industry has opened a debate about the level of community benefits provided by non-profit hospitals. Do nonprofits provide enough community benefits to justify the community's commitment of resources to them, and the tax-exempt status they receive? If nonprofit hospitals convert to for-profit entities, would community benefits be lost in the transaction? This debate has highlighted the need to define and measure community benefits more clearly. In this Issue Brief, the authors develop a new method of identifying activities that qualify as community benefits, and propose a benchmark for the amount of benefit a nonprofit hospital should provide.

Association between medication supplies and healthcare costs in older adults from an urban healthcare system

OBJECTIVES

The amount of medication dispensed to older adults for the treatment of chronic disease must be balanced carefully. Insufficient medication supplies lead to inadequate treatment of chronic disease, whereas excessive supplies represent wasted resources and the potential for toxicity. We used an electronic medical record system to determine the distribution of medications supplied to older urban adults and to examine the correlations of these distributions with healthcare costs and use.

DESIGN

A cross-sectional study using data acquired over 3 years (1994-1996).

SETTING

A tax-supported urban public healthcare system consisting of a 300-bed hospital, an emergency department, and a network of community-based ambulatory care centers.

PATIENTS

Patients were >60 years of age and had at least one prescription refill and at least two ambulatory visits or one hospitalization during the 3-year period.

MEASUREMENTS

Focusing on 12 major categories of drugs used to treat chronic diseases, we determined the amounts and direct costs of these medications dispensed to older adult patients. Amounts of medications that were needed by patients to medicate themselves adequately were compared with the medication supply actually dispensed considering all sources of care (primary, emergency, and inpatient). We calculated the excess drug costs attributable to oversupply of medication (>120% of the amount needed) and the drug cost reduction caused by undersupply of medication (<80% of the amount needed). We also compared total healthcare use and costs for patients who had an oversupply, an undersupply, or an appropriate supply of their medications.

RESULTS

The cohort comprised 4164 patients with a mean age of 71 +/- 7 (SD) who received a mean of 3 +/- 2 (SD) drugs for chronic conditions. There were 668 patients (16%) who received <80% of the supply needed, 1556 patients (37%) who received between 80 and 120% of the supply needed, and 1940 patients (47%) who received >120% of the supply needed. The total direct cost of targeted medications for 3 years was $1.96 million or, on average, $654,000 annually. During the 3-year period, patients receiving >120% of their needed medications had excess direct medication costs of $279,084 or $144 per patient, whereas patients receiving <80% of drugs needed had reduced medication costs of $423,438 or $634 per patient. Multivariable analyses revealed that both under- and over-supplies of medication were associated with a greater likelihood of emergency department visits and hospital admissions.

CONCLUSIONS

More than one-half of the older adults in our study have under- or over-supplies of medications for the treatment of their chronic diseases. Such inappropriate supplies of medications are associated with healthcare utilization and costs.

[Sustainability and the relevance of poverty: an unresolvable contradiction? The example of the Evangelical Lutheran Church in Tanzania]

Public Health systems in developing countries are in a field of tension between two poles: sustainability and accessibility. A several months check on hospitals run by the Lutheran Church in Tanzania led us to conclude, however, that the great majority of these institutions have neither a survival chance nor have they made any substantial contribution to the status of public health care for the poor. Basing on the results of this check we discuss a few measures to transform church-run public health systems in developing countries in accordance with the goals of sustainability and accessibility. It is, however, evident that it will not be enough just to increase the technical efficiency of existing hospitals. What is needed--and this seems indeed to be the only feasible way--is to effect a complete reorganisation in the sense of Primary Health Care. It is only then that church-run Public Health Care may survive in these countries and that provision of adequate health care can be ensured for many patients.

Medicaid and indigent care issue brief: Medicaid: provider reimbursement

Medicaid provider reimbursement rates have been a hot topic for the last several years. States including California, Hawaii, Indiana, Maryland and Mississippi addressed the issue in the 1999 legislative session and 37 states have identified Medicaid provider reimbursement as a legislative priority for 2000.

Association between prepayment systems and emergency medical services use among patients with acute chest discomfort syndrome. For the Rapid Early Action for Coronary Treatment (REACT) Study

STUDY OBJECTIVE

Cost concerns may inhibit emergency medical services (EMS) use. Novel tax-based and subscription prepayment programs indemnify patients against the cost of EMS treatment and transport. We determine whether the presence of (or enrollment in) prepayment plans increase EMS use among patients with acute chest discomfort, particularly those residing in low-income areas, those lacking private insurance, or both.

METHODS

This study uses a subset of baseline data from the REACT trial, a multicenter, randomized controlled community trial designed, in part, to increase EMS use. The sample includes 860 consecutive noninstitutionalized patients (>30 years old) presenting with nontraumatic chest discomfort to hospital emergency departments in 4 Oregon/Washington communities. The association between prepayment systems and EMS use was analyzed using multivariable logistic regression.

RESULTS

Overall EMS use was 52% (n=445). Among EMS users, 338 (75%) were subsequently admitted to the hospital and 110 (25%) were released from the ED. Prepayment was not associated with increased EMS use in the overall patient sample. However, patients residing in low-income census block groups (median annual income <$30,000) were 2.6 times (95% confidence interval [CI] 1.4 to 4.8) more likely to use EMS when a prepayment system was available than when no system was present. No association was noted among higher-income block group residents. Among low-income block group residents lacking private insurance, prepayment systems were associated with 3.8 times (95% CI 1.2 to 13.4) greater EMS usage.

CONCLUSION

Economic considerations may affect EMS system utilization among underinsured and low-income patients experiencing a cardiac event. Prepayment systems may increase EMS utilization among these groups.

Fewer people are on welfare rolls: does that mean that more children will receive dental care?

The number of welfare cases has been halved during this latest period of financial improvement. Can children who are "no longer poor" get dental care? A review of the complex interplay between welfare, Medicaid and dental services is provided.

The impact of long-term acute-care facilities on the outcome and cost of care for patients undergoing prolonged mechanical ventilation

OBJECTIVES

To compare the 6-month mortality rate of chronically ventilated patients treated either exclusively in a traditional acute-care hospital or transferred during hospitalization to a long-term acute-care facility. To analyze the hospital cost of care and estimate the amount of uncompensated care incurred by acute-care hospitals under the Medicare prospective payment diagnostic related groups system.

DESIGN

Retrospective chart review and questionnaire.

SETTING

Fifty-four acute-care referral hospitals and 26 longterm acute-care institutions.

PATIENTS

A total of 432 ventilated patients selected from 3,266 patients referred but not transferred to a study long-term acute-care facility and 1,702 ventilated patients from 4,174 patients referred and then subsequently transferred to the long-term acute-care facility. Six-month outcomes were determined for the subgroup of patients > or =65 yrs old (279 and 1,340 patients, respectively). Hospital charges were available for 192 of the 279 nontransferred patients who were > or =65 yrs old and 1,332 of the 1,340 transferred patients.

INTERVENTIONS

None.

MEASUREMENTS AND MAIN RESULTS

The 6-month mortality rate was 67.4% for the 279 nontransferred patients and 67.2% for the 1,340 transferred patients. On multiple regression analysis, variables associated with the 6-month mortality rate included initial admitting diagnosis, age, the acute physiology score, and presence of decubitus ulcer. After controlling for these variables, there was no significant difference in 6-month mortality rate, but admission to the long-term acute-care facility was associated with a longer mean survival time. Average total hospital costs for the 192 nontransferred patients was $78,474, and estimated Medicare reimbursement was $62,472, resulting in an average of $16,002 of uncompensated care per patient. Estimated costs for the long-term acute-care facility admissions were $56,825.

CONCLUSIONS

Patients undergoing prolonged ventilation have high hospital and 6-month mortality rates, and 6-month outcomes are not significantly different for those transferred to long-term acute-care facilities. These patients generate high costs, and acute-care hospitals are significantly underreimbursed by Medicare for these costs. Acute-care hospitals can reduce the amount of uncompensated care by earlier transfer of appropriate patients to a long-term acute-care facility.

Impact of an indigent care program on use of resources: experiences at one hospital

Thirty-six indigent patients hospitalized within 6 months of study initiation and who met criteria were enrolled in a 6-month assistance program to determine if provision of both medical care and prescription drugs at no cost would be associated with a change in overall health care charges secondary to a change in therapy adherence. A historical control group was identified. Charges for drugs and medical care, and the number of hospitalizations and emergency room visits were evaluated for comparison with the pretreatment period. Adherence to drug regimens was measured using the Med-Out indicator. Inpatient admissions decreased by 39.5% (from 43 to 26) and outpatient visits decreased by 64.4% (from 194 to 69). This amounted to a cost avoidance to the hospital of $378,183. The cost of drugs during the study was $27,588. Patients who adhered to therapeutic regimens provided an even greater cost avoidance.

Public insurance substituting for private insurance: new evidence regarding public hospitals, uncompensated care funds, and Medicaid

This paper examines the impact of public health insurance programs, whether structured as subsidies to health care providers (public hospitals and uncompensated care reimbursement funds) or as direct insurance (Medicaid), on the purchase of private health insurance. The presence of a public hospital is associated with a lower likelihood of private insurance for those with incomes between 100-200% and 200-400% of the poverty level. Uncompensated care reimbursement funds were associated with less purchase of private health insurance and a higher likelihood of being uninsured across all income groups. More generous Medicaid programs showed both safety-net and crowd out effects.

Charity care programs: part of the solution or part of the problem?

Images

Considering the alternatives

Health care providers frequently talk about values and community care, and their mission statements often espouse a commitment to cooperative relationships with their patients. Good intentions aside, the reality is that some health care providers may be unable to accommodate patients who are unable to pay for services. Distrust is guaranteed when an industry's words and deeds don't match, but several caregivers are thinking outside the lines to find solutions to their patients' payment problems.

Why not Medicaid dentistry?

Charitable dental services and Medicaid dentistry are two components of services provided to patients with limited financial resources. An approach to making the case for improvements in Medicaid dentistry may best be made by increasing the public's awareness of the charitable services provided by individual dentists.

Population characteristics of markets of safety-net and non-safety-net hospitals

RESEARCH OBJECTIVES

To compare and contrast the markets of urban safety-net (USN) hospitals with the markets of other urban hospitals.

STUDY DESIGN

To develop profiles of the actual inpatient markets of hospitals, we linked 1994 patient-level information from hospital discharge abstracts from nine states with 1990 data at the ZIP code level from the US Census Bureau. Each hospital's market was characterized by its racial and ethnic composition, median household income, poverty rate, and educational attainment. Measures of hospital competition were also calculated for each hospital. The analysis compared the market profiles of USN hospitals to those of other urban hospitals. We also compared the level of hospital competition and financial status of USN and other urban hospitals.

PRINCIPAL FINDINGS

The markets of USN hospitals had higher proportions of racial and ethnic minorities and non-English-speaking residents. Adults residing in markets of USN hospitals were less educated. Families living in markets of USN hospitals had lower incomes and were more likely to be living at or below the federal poverty level. USN hospitals and other urban hospitals faced similar levels of competition and had similar margins. However, USN hospitals were more dependent on Medicare disproportionate share payments and on state and local government subsidies to remain solvent.

CONCLUSION

USN hospitals disproportionately serve vulnerable minority and low-income communities that otherwise face financial and cultural barriers to health care. USN hospitals are dependent on the public subsidies they receive from federal, state, and local governments. Public policies and market pressures that affect the viability of USN hospitals place the access to care by vulnerable populations at risk. Public policy that jeopardizes public subsidies places in peril the financial health of these institutions. As Medicare and Medicaid managed care grow, USN hospitals may lose these patient revenues and public subsidies based on their Medicaid and Medicare patient volumes. The loss of these funds would hinder the ability of USN hospitals to finance uncompensated care for uninsured and underinsured patients.

Urban trauma care is threatened by inadequate reimbursement

BACKGROUND

Hospitals struggle to support trauma care. Recent installation of cost accounting systems now provides information on actual costs for different categories of patients. This paper examines the cost of trauma care in an urban teaching hospital.

METHODS

All patients entered into the hospital trauma registry for the period July 1, 1996, through June 30, 1997, were abstracted from the registry. These data were merged with a database of all admitted patients with an injury-compatible ICD-9 diagnostic code for the same time period that included cost and estimated revenue from the cost accounting system. Complete data were available for 667 patients and the remaining 96 were uninsured patients with missing cost data.

RESULTS

The calculated cost of care for the 667 patients was $10,342,130; total expected revenue was $10,396,456; estimated net revenue for insured patients was $54,326. The estimated cost of care for the 96 uncompensated patients was $1,619,989. The hospital had positive net revenue for patients with length of stay of 7 days or less, but was unable to recoup costs for patients with a longer stay. Reimbursement exceeded hospital cost for blunt injuries, primarily motor vehicle crash victims, and for other injuries covered by fee-for-service insurers. Managed care plans and government-funded insurance did not reimburse sufficiently to cover hospital costs.

CONCLUSIONS

These data confirm that earlier literature, based on charges and estimated costs, were correct in documenting a serious threat to the continuation of centers providing high volumes of trauma care.

Tax exemption. Challenge and opportunity for not-for-profit hospitals

As healthcare reform is debated over the next several years, not-for-profit hospitals will see increased challenges to their tax-exempt status. Over the past forty years, the requirements for maintaining a tax-exempt status have undergone numerous changes. In the last several years, several states have challenged the right of hospitals to maintain this desired status. As we move toward the mid-1990s, it will be critical for not-for-profit hospitals to demonstrate and communicate their commitment to charitable endeavors.

What do we want and what do we get from not-for-profit hospitals?

The tax exemption for not-for-profit hospitals has been subject to many recent challenges, in part related to concerns over whether these hospitals provide sufficient levels of community benefits to merit tax exemption. Computing the value of community benefits for California hospitals as the sum of uncompensated care, education and research, net income, money-losing services, and price discounts from for-profit hospitals reveals that 20 to 80 percent of hospitals would have met various recommended community benefits standards. There is a clear need for hospitals and their communities to establish dialogues on what levels of community benefits are appropriate.

Determinants of hospital bad debt: multivariate statistical analysis

Although the issue of uncompensated care (bad debt plus charity care) has been actively debated in the public arena, there has been little discussion of the bad debt issue alone. This issue is important since issues of bad debt, charity care and uncompensated care are significantly different from each other. Based on 1992 State of Missouri data, the results of our study indicate that more efficient hospitals (measured by occupancy rate), hospitals with more patients covered by prospective payment systems (measured by Medicare discharges), and for-profit hospitals incurred significantly less bad debt cost than other hospitals. However, the difference in bad debt between for-profit hospitals and not-for-profit hospitals is dissipated when using a multivariate statistical model. In addition, this study also reveals that hospitals which provide more charity care have the lowest bad debt costs. Policy implications are also discussed.

Intensive care

America's teaching hospitals are world-renowned for their medical know-how. But they're being thrown for a loop by cost-conscious managed care plans and leaner federal budgets.