Washington hospitals provided nearly $154 million less in charity care in the first half of this year than in the first half of 2013, in many cases boosting the hospitals’ bottom lines.
Hospitals attributed the plunge in charity care — about 30 percent — to the Affordable Care Act’s focus on reducing the number of uninsured patients.
This year, for the first time, low-income and uninsured patients whose care was previously covered under hospitals’ charity-care programs were able under the ACA to qualify for Medicaid coverage or subsidized private insurance.
About 600,000 Washington residents signed up for health insurance through Medicaid under expanded eligibility guidelines or through private plans.
Together, hospitals reported a 66 percent gain in total margin — the figure nonprofit hospitals report instead of profit — over the first half of 2013. For the first half of 2014, the aggregate margin for all hospitals reporting was nearly $720 million, compared with $435 million for the same period in 2013.
The unaudited charity-care numbers, provided by the Washington State Hospital Association and publicly available at the state Department of Health, show wide variation, and not all hospitals have provided second-quarter figures for 2014. In addition, the numbers are likely to be adjusted later as hospitals reconcile their books after collecting on charges — or not — from patients and insurers.
While the majority of the state’s hospitals experienced a drop in charity care in both the first and second quarters of this year, some saw increases, particularly in the first quarter, and a few hospitals saw increases in both quarters. First-quarter figures likely included care given before plans purchased on Washington’s online marketplace, Healthplanfinder, took effect.
Hospitals that typically see a large percentage of low-income patients, such as Harborview Medical Center, saw the largest decline in charity-care outlays as more patients qualified for Medicaid.
Harborview’s charity-care decline was the largest in sheer numbers, according to preliminary figures provided by UW Medicine, which manages Harborview. The difference in charity care from 2013 to 2014 was about $58 million.
Net savings, however, were considerably less but still substantial, totaling about $10 million, said Harborview’s Lori Mitchell, chief financial officer for UW Medicine. The amount of savings was limited, she said, by decreases in reimbursements from Medicare and Medicaid, and some costs of providing care have continued to climb.
“The charges associated with providing charity care from one year to the next have gone down,” Mitchell said, “but charges associated with providing those very same services to the Medicaid population have gone up.”
Charity-care guidelines vary by hospital, but most are on a sliding scale.
For example, at Harborview, the program would cover 100 percent of the bill for a patient whose income is at 200 percent or less of federal poverty level (about $23,000 for one person). The coverage percentage scales up to 300 percent of poverty.
Bad debt, on the other hand, includes unpaid bills submitted to insurers or to patients who don’t qualify for charity care.
While the number of charity cases are declining, Harborview and most other hospitals continue to see about the same number of patients each year, as measured by the number of discharges. That number for the first six months of this year was at the same level as in the first half of 2013.
“It’s really important that people get the message that we are continuing to serve everybody,” Mitchell said. “We have every bit as many people at Harborview as we did a year ago; it’s just that some of them have Medicaid.”
Not all hospitals benefited similarly from the broad expansion of Medicaid, which counted about 400,000 more enrollees at the half-year mark in 2014 compared with 2013.
And accounting in 2014 was even more difficult than usual for hospitals, with insurance for some patients caught in Healthplanfinder’s software snafus.
In addition, recent acquisitions and affiliations have made it more difficult to sort out precise numbers for some hospitals.
But many hospitals say it’s no mystery why their charity-care numbers have improved.
A random sample of hospitals did not find any that had changed or tightened their charity-care eligibility standards, for example, to exclude patients at higher-income levels.
“It’s not because of any type of restriction of eligibility or reduction in spending,” said Swedish Medical Center spokesman Clay Holtzman. “We purely attribute the drop to the increase in the number of Medicaid patients in our system.”
For some hospitals, it’s a chance to brag about what a good job they did at signing up uninsured patients during the ACA’s open-enrollment period.
“I’m quite proud of what we did, but I have to say it takes a village,” said UW’s Marshall, who noted the UW helped more than 8,000 sign up for Medicaid.
At Swedish, Holtzman said, “we had full-time people at all our hospitals last year to connect with charity-care patients.” In addition, Swedish sent letters to all patients who had received charity care in the past, notifying them of expanded Medicaid options, he said.
At most of Swedish’s hospitals, and at most hospitals overall, bad debt was also down compared with 2013. Overall, it dropped by 49 percent.
So are hospitals now reaping a windfall?
Nationally and locally, nonprofit hospitals’ tax exemptions have come under increasing scrutiny. To maintain their nonprofit status, hospitals have to provide community benefit, but there has been no uniform standard.
Some lawmakers have questioned executive compensation at nonprofit hospitals, and whether declines in charity care should obligate the hospitals to demonstrate that they are helping their communities in other ways, such as economic development.
A few years ago, a state tax-exemption review group recommended setting a clear community-benefit standard to retain the tax break.
“If they’re getting tax breaks, they have to prove a community benefit,” said Rep. Eileen Cody, D-Seattle, chairwoman of the House Health Care & Wellness committee and co-chairwoman of the Joint Select Committee on Health Care Oversight, which will look at trends in uncompensated care at its Sept. 18 meeting.
Chelene Whiteaker, an ACA policy expert from the Washington State Hospital Association, says hospitals nationally will be absorbing $155 billion in cuts in federal reimbursements to fund the ACA’s coverage expansion over a 10-year period.
In Washington, that translates into a $4 billion cut over 10 years, she said in an email. Most cuts are to Medicare and Medicaid payments, and will be fully phased in by 2017, so WSHA didn’t expect to see evidence of the cuts yet.
“There is still a lot of uncertainty about to what degree the payment cuts will balance with the expansions in Medicaid and the exchange in the long run,” Whiteaker said.
“Because Medicaid and Medicare do not cover the actual cost of providing the services, it’s key that we also see increases in enrollment in qualified health plans in the exchange. We are off to a good start in our state, but there continue to be unknowns on how this all will balance for hospitals.”
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