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Hospital Uncompensated Care Issues
Jack Ashby, M.H.A.Hospital Research Director
Medicare Payment Advisory Commission
Jack Ashby
What is uncompensated care?
Definition: Care provided by hospitals or other providers that is not paid for directly by patients or insurers
Includes charity care (furnished without expectation of payment) and bad debts (provider has unsuccessfully attempted to collect)
Includes entire or partial bills from the uninsured as well as unpaid copayments and deductibles
Jack Ashby
What is uncompensated care? (continued)
Uncompensated care does not include:
• The contractual allowances of government and private insurers
• Lack of Medicaid payment for days beyond a length of stay limit
• Courtesy discounts for employees, students, members of religious orders, etc.
Jack Ashby
How is uncompensated care measured?
Hospitals measure their uncompensated care at charges (revenue foregone)
Policymakers prefer a measure of costs
Useful computed variables:
- Uncompensated care costs as a percent of total costs
- Share of uncompensated care costs covered by government subsidies
- Uncompensated care losses as a percent of total costs
Jack Ashby
How much uncompensated care do hospitals provide?
Uncompensated care costs: $21.6 billion and 6.1 percent of total costs
Uncompensated care losses: $19.0 billion and 5.3 percent of total costs
Source: AHA Annual Survey, 2000.
Jack Ashby
Trend in uncompensated care costs and losses
17.3
12.1
5.1
5.3
6.1
6.1
1996
2000
23.3%
22.4
18.9
4.6%
4.8
4.9
6.0%
6.2
6.0
1984
1988
1992
government subsidiesLossesCostsYear
Proportion of uncompensated care
covered by
Uncompensated care asa percent of total costs
Source: AHA Annual Survey.
Jack Ashby
How does uncompensated care vary by type of hospital?
Uncompensated care as a percent of total costs
Type of hospital Costs Losses
Urban 6.4% 5.3%Rural 5.3 4.7
Major teaching 10.0 7.4Other teaching 4.9 4.5Non-teaching 4.9 4.4
Voluntary 4.7 4.4Proprietary 4.7 4.0Urban government 15.7 10.6Rural government 6.4 4.9
Jack Ashby
How concentrated is the provision of uncompensated care?
Uncompensated care costs Share of as a percent of total costs hospitals
0 to < 2 13.4%2 to < 5 43.05 to < 10 35.310 to < 20 6.820 to < 30 0.730 to < 40 0.440 to < 60 0.260 and above 0.2
Source: AHA Annual Survey.
Jack Ashby
How concentrated is the provision of uncompensated care? (continued)
Measure 1992 2000
Share of all uncompensated 45% 46%care costs furnished by thetop 250 providers
Of the amount furnished by 61% 53%the top 250 providers,share provided bygovernment hospitals
Source: AHA Annual Survey.
Jack Ashby
Is there a relationship between uncompensated care and overall financial
performance?
Uncompensated care costs as a AverageType of hospital percent of total costs total margin
Major teaching 10.0% 1.5%
All other 4.9 5.4
Private 4.7 5.3
Urban government 15.7 -1.3
Rural government 6.4 3.4Source: AHA Annual Survey.
Jack Ashby
Is there a relationship between uncompensated care and overall financial
performance? (continued)
Uncompensated care costs Averageas a percent of total costs total margin
0 to < 2 4.0%2 to < 5 4.6 5 to < 10 4.4 10 to < 20 4.2 20 to < 30 3.8 30 to < 40 3.1 40 to < 60 3.2 60 an above -0.4
Source: AHA Annual Survey.
Jack Ashby
What revenue sources do hospital use to cover their uncompensated care costs?
Payments from private insurers (cost shifting) Government subsidies
- Operating subsidies
- Dedicated taxes
- Charity care pools Medicaid disproportionate share payments Medicare disproportionate share and indirect
medical education payments Revenue from non-patient sources
Jack Ashby
States with highest and lowestuncompensated care costs
Louisiana 13.1%
New Mexico 12.8Texas 10.3Mississippi 8.7Nevada 8.1Oklahoma 7.9Arkansas 7.6Florida 7.5California 7.4Alabama 7.3
Nebraska 2.0%
Minnesota 2.0North Dakota 2.4Wisconsin 2.6Oregon 2.9Washington 3.1Michigan 3.2Missouri 3.3Rhode Island 3.4Iowa 3.9
Highest Lowest
Source: AHA Annual Survey.
