Colorado Hospitals Doling Out More for Charity Care
October 23, 2008
Friday, October 3, 2008
Colorado hospitals doling out more for charity care
Denver Business Journal - by Bob Mook
Higher health insurance deductibles and co-payments might be causing hospitals to record a significantly higher level of uncompensated care, according to data from the Colorado Hospital Association (CHA).
Uncompensated care jumped to $796 million in the first six months of 2008, compared with $671 million in the first half of last year, according to financial statements filed by Colorado hospitals.
The CHA found that charity care (free or reduced-price medical services offered to low-income patients) rose by 29.2 percent while “bad debt” (the portion of receivables that aren’t considered collectible) increased by 6 percent.
In total, uncompensated care (charity care and bad debt combined) increased by 18.7 percent, said Steven Summer, president and CEO of CHA.
Meanwhile, the number of patients checking into local hospitals increased by less than 1 percent — to roughly 161,000 from 160,000. That means the amount of uncompensated care rose dramatically, though the number of patients was virtually flat.
The increase in uncompensated care likely means hospitals would pass the costs on to insurers, who then would pass them back to consumers in the form of higher premiums. When member employers can’t afford the higher premiums, they raise the co-payments and deductibles in their plans, making it harder for patients with insurance to pay their hospital bills.
“What this tells me is that more people are coming in unable to pay co-pays or deductibles,” Summer said.
To continue offering health insurance benefits, many businesses have raised co-payments or deductibles in the plans to hold down the premium costs — which have risen by double-digit numbers annually in recent years in Colorado’s small-group market.
It’s the classic chicken-or-the-egg question: Are hospital bills so high because insurance costs too much or does insurance cost so much because hospital bills are so high?
Insurers argue the higher premiums reflect rising health care costs.
“Employers are modifying their plan designs to continue offering benefits in the face of steadily rising costs,” said Jim Hertel, publisher of the industry newsletter, Colorado Managed Care.
Hertel said the CHA’s numbers show that the rising costs are “starting to catch up with hospitals.”
He said there’s no relief in sight since policymakers have targeted most of their cost-containment efforts at health insurers instead of providers, such as hospitals.
“Clearly, the [state] Legislature took a number of steps last session that will have mixed results on the market and will contribute to increased administrative costs [in health insurance],” Hertel said, alluding to a law that prevents insurers for small businesses from setting discounts for healthy groups. That law goes into effect in January.
Another bill approved by the General Assembly dramatically increases fines for insurers who delay payment on claims. Yet another gives Colorado’s insurance commissioner the ability to deny premium hikes if the commissioner doesn’t think they’re justified.
Ned Borgstrom, vice president of finance and CFO for Exempla Healthcare, said while the nonprofit hospital systems are committed to serving those who can’t afford care, the rise in uncompensated care comes with a price.
“Like other hospitals in the community, we have seen a rise in the number of patients who are underinsured or self-pay,” Borgstrom said. “While we continue to provide care in these situations, it does have a cost — which is either passed on to insurance carriers or which results in less margin available to reinvest in equipment and technology.”
Christopher Cone, CEO of Echoserve Inc., a Golden-based company that fixes and maintains medical equipment, said hospitals seem to be cutting costs by fixing what they have rather than investing in new equipment.
Cone said company revenue increased to about $14 million in 2008 — a 70 percent increase from the previous year. That has enabled the company to consolidate its operations from seven suites in an office park to a single, 25,000-square-foot building in Golden Gate Canyon.
The rise in uncompensated care also may be a sign of the slowing economy.
Some economists believe that the economic slump — which became evident with the recent meltdown of the nation’s financial markets — began in August 2007.
A recent Wall Street Journal story said that consumers are spending less on health care, delaying things such as checkups or diagnostic tests, as the economy deteriorates.
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