Hospital: Uncovered Care Costs Continue Climb

t(To see the list of the largest hospitals in Northwest Arkansas, click here. To see a list of Northwest Arkansas nursing homes ranked by profitabilty, click here.)

Searching the Internet for stories about the rising costs for hospitals related to unreimbursed care conjures up thoughts of “Back to the Future” or Yogi Berra.

It’s déjà vu all over again.

Articles plucked from the New York Times or published by academics read like they could have been written yesterday. The only things changing are the dollar figures.

“We’re seeing double-digit inflation in insurance premiums right now, and growth in total health-care expenditures is starting to approach that level,” said Mark V. Pauly, a professor of health care systems and economics at the Wharton School, to the New York Times.

Pauly’s quotes appeared in 1988.

“The shortfall in Medicare and Medicaid reimbursement of doctors and hospitals has led these health care providers to shift the unreimbursed costs of serving government to private sector payers,” wrote Jack A. Meyer and William R. Johnson. “The shift occurs when hospitals charge some patients more for the same service than others.

“People who pay hospital bills themselves, or are insured by either a commercial insurance company or by an employer directly, pay more for the same service than Medicare and Medicaid beneficiaries.”

This paper by Meyer and Johnson was published by the American Enterprise Institute — in 1984.

Not much is different in 2008 as the unreimbursed costs for hospitals continue to rise along with the number of uninsured Americans and the premiums for those who do have coverage.

One way or another, insured Americans end up paying the costs for the uninsured or underinsured through higher premiums, which have doubled between 2000 and 2008 at four times the pace of inflation and wage growth.

Providers are also seeing lower reimbursements as hospitals divert more of their negotiated payments from commercial insurance companies into bridging the gap between Medicare/Medicaid costs and the bad debt from unpaid hospital bills.

In 2007, Michigan hospitals provided an unprecedented $2.6 billion in unreimbursed care — an eye-popping amount that is less shocking given the state’s national high of 8.9 percent unemployment.

Locally, Mercy Health System of Northwest Arkansas announced Oct. 3 it was closing its outpatient therapy service operation and cutting 41 jobs.

The cause? An unexpected $3.8 million jump in unreimbursed care to $17.9 million from $14.1 million during fiscal year-ended June 30.

“We had budgeted for a click (up), not a click plus,” said Mercy chief financial officer Jon Vitiello.

Since fiscal year 2003 (ended June 30, 2004), Mercy has seen a 38.7 percent increase in its costs for unreimbursed care. Between 50 percent and 60 percent of those uncovered costs are in the emergency department, where the uninsured often turn up as their only option for care and another “big chunk,” was from unpaid inpatient care.

“We get paid last,” Vitiello said. “You’d be amazed at how difficult it is to get paid for what you do.”

Mercy’s mission is in its name, which means it does not turn away anyone needing care. Vitiello said that makes it a little different from some in the industry and he is wary of Mercy becoming a “safety net” facility.

More revenue from its move to an expanded facility should help offset some of the escalating costs, Vitiello said.

“We’re here to serve the community,” he said. “We have to make ends meet so we’re here for the long term. That’s our view on life.”