Charity care dilemmas send CFOs in search of solutions
Two out of every three hospitals in Illinois lose money on core patient services, while one out of three hospitals loses money on its operating margin and only 2.1 percent have an average operating margin.
Under these conditions, it’s no wonder charity care/tax-exempt status is a top five issue among hospitals’ C-level executives, said Danny Chun, assistant vice president of communications for the Illinois Hospital Association, which represents 200 hospitals.
“This situation is symptomatic of how the whole healthcare system is broken and how we finance our healthcare,” he said.
Illinois passed a law in 2003 requiring hospitals with more than 100 beds to file a community benefits report with the Attorney General’s Office. Chun said the state created an appropriate standard for measuring the 10 identified community benefits, which includes charity care.
What’s happening in Illinois reflects an ongoing national debate about whether hospitals are serving their communities and justifying their tax-exempt status.
The American Hospital Association (AHA) issued a new framework in mid-November on what categories are to be reported under community benefits, such as bad debt, charity care and Medicare underpayment at cost.
With stricter regulations now in place, hospitals are looking for automated charity care tools to help them with their reporting. The solutions on the market today are designed to screen for categorical eligibility and automate the process of completing eligibility paperwork for Medicare or charity care.
“Hospital CFOs are looking for best business practices,” said Dennis Brebner, CEO and president of R&B Solutions, which has been in the market for almost two decades. “They want risk management and mitigation for their not-for-profit organization.”
David Hammer, vice president of revenue cycle solutions, business performance group, at McKesson Provider Technologies, said rising self-pay receivables is a top-two concern for McKesson’s hospital clients. “The financial risk to hospitals is going up,” he said. “Rising self-pay receivables are the most costly to collect and the least liquid.”
The ability for hospitals to identify, track and consistently apply charity care policies to the appropriate patients is growing in popularity, Hammer said.
While there are only a handful of vendors in the market, Brebner pointed out that many states, including Pennsylvania, Massachusetts, Florida and California, have either completed or are developing a solution that automates the Medicaid application process once the system determines that a patient qualifies.
Meridian Health, provider of health services, facilities and programs with 70 locations in New Jersey, is using its existing health information system to determine what qualifying patients are eligible for. A combination of health IT and business strategy has resulted in new compassionate billing policies, in which Meridian Health is now collecting as much money as it did when it charged full rates, according to Marilyn Koczan, MPA, FHFMA, vice president of patient financial services.
Meridian’s compassionate care program has boosted fundraising efforts, streamlined operations and improved hospital credit ratings as a result of less bad debt. Patient and hospital staff morale is high.
IHA’s Chun pointed out that while federal and state entities are scrutinizing hospitals with greater intensity, hospitals now have the opportunity to educate and create awareness among policy makers, the public and the media about the plight of hospitals today and good they provide to the community to serve the disadvantaged.
“These community benefit reports provide the context for debate and discussion on how to fix the healthcare system,” said Chun. “We want to be part of the solution.”
