May 7, 2012

State's hospitals double free care over five years

The economy is the primary cause of a trend that stresses hospital finances. But even with the jump, some say nonprofits don't do enough.

By Jessica Hall jhall@pressherald.com
Staff Writer

Maine hospitals have doubled the amount of free care they provide over the past five years as the weak economy pushed more people out of work and companies shifted an increasing amount of health care costs onto employees.

"The economy is having a significant impact," said Sue Hadiaris, vice president of planning and development at Southern Maine Medical Center in Biddeford. "As the economy continues to stay stagnant, companies are changing insurance. People are adjusting what insurance they carry, and other people have lost insurance."

More scrutiny has been placed on free care as health care has become big business and top hospital executives in Maine fetch six-figure salaries. Hospitals vary in the types and amounts of free services they provide, as well as how they disseminate charity care information to their patients, advocates said.

As more people apply for free care, hospitals must balance the legal requirement to provide charity services to the poor with the need to be prudent about collecting bills and investing in facility improvements in order to remain competitive.

Mercy Health System recently hired Accretive Health, which was sued in January by the Minnesota Attorney General’s Office amid claims it violated patient-privacy and debt collection laws by posting bill collectors in emergency rooms and at patient bedsides. Mercy has said no aggressive bill-collection tactics would be tolerated at its hospital, and noted that it provided more charity care than area hospitals.

A Portland Press Herald survey of the four largest hospitals in the Greater Portland area found that Mercy Health System provides more free care as a percentage of its gross revenues than its peers. Mercy, a Catholic hospital, last year spent about $12.8 million -- 3.3 percent of its gross revenues -- on providing free care. Its charity care costs have more than doubled in the past five years, and applications for free care have risen each month, said Chief Financial Officer Tony Marple.

"It's kind of hard to predict. We don't try to control the number of charity cases," Marple said. "It has a negative impact on profitability. ... It's a challenge."

Nancy Berlinger, a research scholar at The Hastings Center, an independent, nonprofit bioethics research institute in Garrison, N.Y., said hospitals have to clearly distinguish between the free care they must provide and the bad debts or bills they can't collect.

"Hospitals have to do their best to recoup fees they are legitimately owed," said John Gale, a research associate focused on hospitals, charity care and community benefits at the Muskie School of Public Service at the University of Southern Maine. "The question is how and when hospitals make it clear that charity care is available."

BAD DEBTS RISE WITH CHARITY CARE

Maine's 36 nonprofit hospitals are required by the state to provide medically necessary free care to patients with incomes at or below 150 percent of federal policy guidelines. For a family of four, the income level is $2,882 a month, or $34,584 a year, to qualify for free care, according to Consumers for Affordable Health Care.

Maine's median household income was $46,933 from 2006 to 2010, according to the U.S. Census Bureau.

"It's always been a challenge to manage charity care. We saw a real spike in 2009 and it's been going from there," said Mid Coast Hospital Chief Financial Officer Robert McCue. "It's very challenging. It's become a new cost just like any other cost. You do your best not to pass that cost on, but at some point it becomes so large that taxpayers and insurance companies end up paying for it."

Statewide, charity care totaled $190 million in 2011, double the amount offered five years ago, according to the Maine Hospital Association. Bad debts, or uncollected bills, at hospitals rose to $209 million, up 34 percent from 2007, the association said.

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