For-Profit Enterprise in Health Care (1986) / Chapter Skim
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5 Access to Care and Investor-Owned Providers
5 Access to Care and Investor-Owned Providers
Pages 97-126
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From page 97... ...
many underinsured people is now largely dependent on the ability and willingness of health care institutions ant} individual physicians to provide uncompensated care. Although this chapter is primarily concerned with questions of access in economically unrewarding circumstances, it should be recognized at the outset that the overall impact of for-profit providers on access to 97 care includes their effect on access to care for people who can pay.
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From page 98... ...
Although there are wide variations among hospitals, uncompensated care (the sum of charity care and bad debts) amounted to 5.4 percent of the gross revenues of the average U
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From page 99... ...
Sources of nonpatient revenues include governmental appropriations; charitable contributions; interest; and income Tom gift shops, parking facilities, and other subsidiary organizations. As Table 5.2 shows, the magnitude of nonpatient revenues vanes across hospital types, comprising 15 percent of the total revenues of public hospitals in 1983, 5 percent of the total revenues of notfor-profit hospitals, and less than 2 percent of the total revenues of for-profit hospitals.
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From page 100... ...
SOURCE: Peter Kralovec, Hospital Data Center, American Hospital Association, unpublished data, 1985. relative to their gross patient revenues.
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From page 101... ...
AHA Data The American Hospital Association's annual survey of hospitals includes information on bad debt and charity care as a percentage of hospital charges (i.e., the amount hospitals charge for the services provided over TABLE 5.4 Hospitals with a High or Low Volume of Uninsured Admissions, by Type of Ownership, United States, 1981 Hospitals with Less Hospitals with More Than 5 Percent Than 25 Percent Number of Uninsured Uninsured Type of Hospital Hospitals Admissions (%) Admissions (%)
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From page 102... ...
Although conceptually distinct and reported separately by hospitals, it is recognized that bact debt and charity care are neither generally nor consistently distinguished from each other for hospital accounting purposes. The distinction is probably made mostly by hospitals that have a positive reason to do so for example, to demonstrate that they are meeting Elill-Burton "free care" obligations or to maximize reimbursement from those Blue Cross plans that include charity care (but not bad debt)
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From page 103... ...
, these state data do not control for size, rural-urban differences, or teaching status. The data also do not indicate the presence or absence of nearby public providers-another factor that can influence the provision of uncompensated care in private hospitals.5 Table 5.6 shows bad debt and charity care as a percent of gross revenues in these five states.
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From page 104... ...
Other actions taken by forprofit, not-for-profit, or public hospitals in just these three cities include ~ locating in neighborhoods with well-insured populations (for-profit and not-forprofit) ; O having an emergency room that is not equipped for trauma, so that such cases (which produce disproportionate numbers of bad debts)
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From page 105... ...
Because most acquired hospitals were previously for-profit, the changes observed cannot be attributed to a change from not-for-profit to for-profit ownership but, rather, to changes in goals and strategies.8 At hospitals purchased by investor-owned corporations in Florida, the percentage of total patient revenues for charity care and bad debt declined between 14 and 35 percent in three years, while hospitals that had not changed ownership showed an average 5 percent increase in the same measure of uncompensated care (Brown and Klosterman, 19861. In California, hospitals acquired by for-profit chains reportedly reduced bad debt from 2.7 percent to 0.2 percent of charges within four years of acquisition (Pattison, 19861.
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From page 106... ...
. number of cases and a problematic measure (bad debt and charity care as a percentage of gross patient revenues)
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From page 107... ...
, obstetrical services and emergency departments can contribute to an institution's bottom line. For example, analyses of hospital operating statements suggest that public hospitals and large not-for-profit teaching hospitals in major metropolitan areas suffer large outpatient clinic Tosses and often admit unfinanced patients for essential inpatient services.
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From page 108... ...
erv~ces At the committee's request the American Hospital Association's Hospital Data Center provided 1983 data showing how the facilities and services reported on the AHAs annual survey were distributed in hospitals of different size and ownership types. The validity of such data are often questioned, because hospitals may exaggerate their services and because a report that a hospital has a given service reveals nothing about how often it is used.
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From page 109... ...
109 Closing of Hospitals Still another access-related concern about the growth of investor-owned hospital companies is whether they may be less willing than not-for-profit organizations to sustain a money-Iosing hospital or one that fails to attain economic goals. Although the closure of a hospital in a region with substantial excess capacity is not necessarily a tragedy, the closure of hospitals on which large numbers of uninsured patients depend or which are the only source of care in a given locale could jeopardize access to care.
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From page 110... ...
FOR-PROFIT ENTERPRISE IN HEALTH CARE ACCESS TO NURSING HOMES Whereas the major concerns regarding hospital care pertain to uninsured patients, a major access concern of nursing homes involves Tow-income patients covered by the federal/state Medicaid program. Between people who are Medicaid-eligible when they enter a nursing home and "private-pay" patients who cleplete their resources until they become eligible for Medicaid, the Medicaid program has become the largest source of payment for nursing home care.
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From page 111... ...
ISSUES AND RECOMMENDATIONS The Measurement of Care to Patients Unable to Pay "Uncompensated care" (deductions from gross revenues for bad debt and charity care) is a seriously flawed measure of either institutional performance or the extent to which the needs of those who are unable to pay are being met.
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From page 112... ...
State health planning agencies, and the 141 local health planning agencies that still exist, can play an important role in obtaining and publicizing information about problems of access to health care.28 The Obligations of Health Care Institutions What are the social, moral, or legal obligations of hospitals and other health care organizations to serve people who need care, but who lack the ability to pay? From whence might such an obligation derive, ant!
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From page 113... ...
However, these institutions also had access to nonpatient revenues governmental grants and appropriations, charitable contributions, and the like. The availability of these crucially important sources of revenue has dramatically diminished in proportion to need,~9 and institutions have long had to subsidize the care of some patients with revenues derived from charge-paying patients.
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From page 114... ...
Intermountain Health Care, Inc., 1985~. The more health care institutions behave as a commercial enterprise might be expecter} to behave for example, in not obtaining or dispensing charity carethe more problematic is the justification for property tax exemptions.
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From page 115... ...
Although the conflicting positions just discussed cannot be Filly reconciled, the committee holds that all health care institutions have social obligations that flow from the needs of the communities that they serve and the ethical traditions of health care. However, taxing authorities that grant tax exemptions are entitled to expect not-forprofit organizations to continue, within reasonable limits, to provide some form of service in exchange for the tax exemptions, whether that service be providing uncompensated care, offering unprofitable services, sponsoring educational or research activities, or offering care at reduced prices.
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From page 116... ...
Finally, the committee concluded that He problem of access for uninsured patients cannot be dealt with adequately by health care institutions, and that the expectation that Hey will do so is a major public policy failure. A variety of options are available to address this problem, but as our health care system becomes more competitive and price sensitive, the resulting impact on uninsured patients is a major problem that should no longer be ignored.
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From page 117... ...
Deductions from revenue for bad debt and charity care exaggerate the cost to institutions of providina uncompensated care, because such cost is measured in terms of charges for services rather than the marginal cost of providing the services. sFor example, the Hospital Corporation of America (HCA)
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From page 118... ...
A recent American Hospital Association (unpublished data, 1983) survey of sources of working capital found that only 42 percent of responding hospitals reportedly received philanthropic support and that the median amount of support for these hospitals was $43,700.
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From page 119... ...
Given that the average hospital's total net revenues in 1983 were in excess of $21 million (American Hospital Association, 1984) and the hospitals that had formal fund-raising activities were presumably larger than the average-charitable contributions for general operating purposes averaged less than 1 percent of hospital operating revenues.
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From page 120... ...
:2~37. Texas Hospital Association (1985)
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From page 121... ...
APPENDIX TO CHAPTER 5 Data on Hospice Services and Facilities TABLE S.A.1 Percent of Hospitals with Various Services and Facilities, by Type of Ownership and Selected Bed Size Categories, 1983 Investor-Owned Not-for-profit Not-for-profit State and Local Chain Proprietary Chain Independent Government (N = 440)
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From page 122... ...
99.5 98.9 93.6 Outpatient department 25- 49 12.9 24.6 28.8 39.1 24.9 50- 99 29.7 29.7 36.5 36.9 27.4 100-199 36.4 33.3 47.6 45.5 36.3 200-299 48.5 50.0 57.4 62.4 55.6 300499 64.0 * 76.0 72.5 69.1 Home care program 25- 49 6.5 7.0 15.2 8.4 8.2 50- 99 7.8 2.7 11.7 9.6 8.2 100-199 11.4 5.6 19.8 13.6 13.3 20~299 13.2 11.
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From page 123... ...
(N = 1,540) Family planning services 25- 49 3.2 3.5 3.0 5.9 1.9 50- 99 3.1 2.7 5.6 3.9 2.0 100-199 1.6 8.3 7.9 5.6 3.6 200-299 0.0 0.0 14.8 15.6 12.1 300-~499 0.0 *
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From page 124... ...
40.0 33.2 48.9 Psychiatric emergency services 25- 49 0.0 8.8 7.6 8.4 8.9 50- 99 7.8 10.8 9.6 14.2 11.7 100-199 15.2 22.2 36.1 31.7 21.2 200-299 23.5 22.2 50.0 50.6 53.5 300-499 40.0 * 61.0 59.8 70.2 Psychiatric foster andlor home care program 25- 49 0.0 0.0 0.0 0.0 0.0 50- 99 0.0 0.0 0.0 0.2 0.2 100-199 0.5 0.0 0.0 1.4 0.4 200-299 0.0 0.0 2.8 1.2 0.0 300~99 0.0 *
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From page 125... ...
ACCESS TO CARE TABLE 5.A.1 Continued 125 Investor-Owned Not-for-profit Not-for-profit State and Local Chain Proprietary Chain Independent Government Bed Size (N = 440)
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From page 126... ...
Too few cases reporting to determine percentages. SOURCE: Compiled from data provided by Hospital Data Center, American Hospital Association, Chicago, Illinois, 1985.
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