Charity care dips at most Indianapolis’ private hospitals

Indianapolis-area hospitals saw their amounts of uncompensated care fall last year after steep rises in 2008.

The four major, private systems are hoping the recession lifts before jobless benefits expire and leave more patients unable to pay their bills.

Clarian Health’s combination of free care for the poor and unpaid bills dipped ever so slightly to $167.4 million last year, compared with $168.1 million the year before.

St. Vincent Health, a 17-hospital system, recorded charity care and bed debts of $128.5 million last year, down more than 7 percent from the previous year’s total of $138.4 million.

At Sisters of St. Francis Health System Inc., charity care and bad debts totaled $92.1 million, down more than 12 percent from prior year’s $104.8 million. Three of the 12 hospitals operated by the Mishawaka, Ind.-based chain are in the Indianapolis area.

Only Community Health Network saw its charity care and bad debt rise last year. The four-hospital chain recorded $79.1 million in those categories last year, up 2 percent from the previous year’s total of $77.5 million.

All four hospital systems saw charity and bad debt spike in 2008 as the recession set in and unemployment rose. The increases ranged from 13 percent at St. Francis to 25 percent at Clarian.

Most hospitals waive the bills of patients making less than twice the federal poverty limit. For those with incomes above that threshold, unpaid bills are classified as bad debt.
“There’s some pretty big dollars you have to make up somehow,” said Joel Hoff, senior vice president of administration at Sisters of St. Francis. He added, “What it ends up being is a tax on people who have commercial insurance and who get sick.”

Indeed, President Obama argued a year ago for his health care reform bill by saying that Americans without health insurance were forcing hospitals to shift costs from them to patients with private insurance.

“Those of us with health insurance are also paying a hidden and growing tax for those without it — about $1,000 per year that pays for somebody else's emergency room and charitable care,” he said during a September speech to a joint session of Congress.

Hospitals have worked harder in recent years to make sure none of their bad debts were from poorer patients that would have qualified for charity care. That’s because some members of Congress have asked the Internal Revenue Service to scrutinize whether hospitals are giving enough charity care and other community benefits to merit their exemptions from corporate income and other taxes.

All hospital executives were shocked in 2003 when the Illinois Attorney General revoked the tax exemption of Provena Covenant Medical Center in Urbana, Ill., for failing to give charity care valued at least at 8 percent of its revenue. The Illinois Supreme Court recently upheld that decision.

Hospitals say the real burden is coming from the government itself. Reimbursement rates of Medicare, Medicaid and other publicly funded programs have not kept pace since the 1990s with what it costs to provide care, hospitals say.

And hospitals make sure to document the value of those shortfalls.

For Clarian Health, public programs underpaid it by $648.1 million last year, an increase of nearly 12 percent from the year before.

Clarian’s 2009 numbers include 11 of its statewide hospitals but do not include its facilities in Bloomington, Hartford City, Muncie, Paoli and Tipton, which were not included in its finances before 2009.

At St. Francis, the shortfall from Medicare, Medicaid and other public programs totaled $270.1 million last year, up by 4 percent from 2008.

But Community Health and St. Vincent enjoyed shrinking in 2009. At Community, public programs paid at $172.5 million below costs, a dip of 2.1 percent from the previous year. At St. Vincent, the drop was even larger—6.3 percent—for a total government shortfall of $185.1 million.

All hospitals calculate their government shortfalls by subtracting payments from what they say it costs them to provide care. Some critics say hospitals manipulate those cost calculations to their advantage, but there’s little controversy that federal reimbursement has failed to keep up with the cost of delivering care.

“If the government went out to Boeing and said we want you to build some planes, and they’re going to cost $400 million to build, and we’re not going to pay you that much, Boeing wouldn’t do that,” Hoff said. “Yet that’s what they’re doing to hospitals.”

Hospitals provide other donations and community health programs, which they quantify in their annual “Community Benefit Reports,” but those numbers are not included in this analysis.