Bad Debt, Charity Care Pressure Health Costs

It may be impossible to calculate exactly how many patients are uninsured and under-insured in Northwest Arkansas, but two things are clear: Not everyone can or is willing to pay their hospital bills, and health care costs keep climbing higher.

Hospitals in the area had a combined total of more than $49 million in bad debt in 2003 and net revenue of more than $360 million, administrators from the area’s three largest health care organizations said. They also collectively wrote off more than $40 million in charity care.

The Arkansas Center for Health Statistics estimates that there are more than 52,000 uninsured people in Northwest Arkansas. Regardless of the actual figure, the obligation hospitals bear to treat patients, regardless of their ability to pay, makes their business unlike any other.

“People talk about, ‘Oh the cost of health care is continuing to rise,'” said Dan Eckels, CFO of Washington Regional Medical Center in Fayetteville.

“Really, our rate of reimbursement, which turns into everyone else’s cost, is set by Medicare and insurance providers. A lot of that is very much out of the control of hospitals and physicians. The segment of health care cost that is really inflating rapidly is the pharmaceutical piece.”

About 50 percent of Washington Regional’s revenue, Eckels said, comes from Medicare.

Eckels said WRMC, the two-county area’s largest single hospital with 1,100 employees, is seeing its uninsured patient volume increase by 1 percent annually.

“If somebody says it is only growing by one percent that’s not a problem,” Eckels said. “But if we are sitting at 12 percent [of total patients] this year, then that means next year will be 13 percent.”

The Commonwealth Fund Biennial Health Insurance Survey released in March suggests that two out of every five adults have medical bill problems or accrued medical debt. The uninsured and low income are most at risk, the study said. But survey figures also show that income might not be that big of a factor.

About 57 percent of the uninsured with medical bill problems had incomes of $35,000 or more. That compares to 62 percent of the uninsured who make less than $35,000.

Tami Hutchison, senior vice president of development for Northwest Health System Inc. in Springdale, said her company’s hospitals see insured and uninsured patients who don’t pay their bills.

“There is not a sense of obligation in health care,” Hutchison said. “Many people don’t feel the sense of obligation to pay their health care bill as they do to the grocery store.”

Bad Debt vs. Charity

WRMC defines bad debt as unpaid bills and puts charity care — services provided to a patient without expectation of partial or full payment of services — in a separate category. In 2003, WRMC donated $8.5 million in charity care.

“There may be a patient in there that qualifies for charity care, but they don’t go through the proper channels to get it,” Eckels said.

WRMC’s bad debt from 2002 to 2003 increased by 50 percent while net revenue increased by 15.7 percent during the same period.

Administrators at Mercy Health System of Northwest Arkansas Inc. in Rogers — the parent of St. Mary’s Hospital — would not disclose that company’s bad debt amount. But they did say the hospital provided charity care of $10.6 million in 2003, up 17.8 percent from 2002.

Hutchison said Northwest considers charity care and bad debt as the same number, therefore any unpaid bills or services, whether voluntarily donated or not, are considered in their 2003 charity care number of $25 million.

Northwest is the largest local health system and the parent of hospitals Northwest Medical Center of Benton County in Bentonville, Northwest Medical Center of Washington County in Springdale, Willow Creek Women’s Hospital in Johnson and 18 additional area clinics. Its bad debt grew 28 percent from 2002 to 2003 while its net revenue increased by 7.2 percent during the same span.

Efficiency

Eckels said WRMC spent about $75,000 to add four part-time emergency room positions in late 2003 that are devoted to up-front collection. The process, Eckels said, is very similar to what would be seen at a family doctor’s office.

Eckels said WRMC sees about 50,000 emergency room visitors annually, about 13,000 for in-patient care and 25,000 for outpatient care.

Northwest, Hutchison said, sees an average of 300,000 patients in its network per year.

“We’ve put a lot of systems in place in working with patients, not with just the ER, but elsewhere to try to find programs to help patients and help them find resources that may be available to them,” Hutchison said.

Northwest has a loan program available to patients who do not qualify for public resources. The system encourages patients to preregister by phone before arriving for care.

“We have counselors on the phone with them to [help them] understand their financial responsibility,” Hutchison said. “We don’t want them to get here and be surprised.”

Northwest’s charity services come in the form of un-billed care or monetary and supply donations to local clinics and nonprofit organizations.

Tapped Resources

In addition to the ADH figures, anecdotal evidence indicates that local resources for the uninsured are maxed out.

David Engle is director of Poplar House Clinic in Rogers, a health care clinic for the uninsured that provides family medical and women’s health services. Engle said for the first time in its 12-year history, Poplar House has temporarily stopped taking new patients.

“If you were going to place a call to any of the clinics around,” Engle said. “Say if you had head cold, you will be told, ‘Oh gosh, we don’t have have a spot today.’ I’ve been told the wait is four to six weeks at other clinics.”

Engle said the wait at Poplar House is at least that long.

The clinic’s total patient encounters from 2002 to 2003 increased by 145 percent from 22,000 to 54,000. That number includes phone calls to the clinic and the different services a patient might receive during one visit. Poplar House sees only the uninsured and is supported by St. Mary’s Hospital, The United Way and other organizations.

The Community Clinic at St. Francis House in Springdale has been giving medical care since 1994. Its budget quadrupled from $300,000 in 1998 to $1.2 million last year.

The clinic had 38.7 percent more patients in 2003 than in 2002, up from 6,000 to 8,320. Its patient visits increased 20 percent from 10,000 to 12,000.

Poplar House and St. Francis House are the two largest of the five uninsured clinic resources in the two-county area.

“What is happening as health care costs increase is that more and more companies are dropping [insurance] or requiring their employees to pay more of a share of the health care costs,” said Kathy Grisham, director of St. Francis House. “Although they work full time, the working poor have no access to health care”

Both Grisham and Engle agree that a community health center could alleviate some of the problem because it would place a physician in a position to see more patients.

“Something else is going have to happen to address the growing number,” Engle said. “We are not meeting the needs of everyone. We are turning people away.”

Grisham said her clinic sees less than 10 percent of the uninsured population.

“Our clinic could see more patients if we had more providers,” Grisham said.

Ten community health center networks in Arkansas served 99,642 patients in 2003. About 56.8 percent of those statewide patients seen were uninsured.

St. Francis House, along with other community groups, applied for a Human Resource Services Administration grant in 2003 and plans to submit a grant proposal again this year.

Sam’s Club Unveils Group Insurance Plans

Small business owners in “The Natural State” get another insurance option in May. For the first time, Sam’s Club, through national insurance brokerage Answer Financial, will offer its members group health coverage.

“We wanted to make sure we didn’t give them a cookie-cutter, one-size-fits-all plan,” said Rita Seckington, benefits manager at Sam’s Club. “We wanted them to be able to tailor the plan based on their financial needs or abilities.”

Answer Financial represents more than 200 “A” rated carriers. The group insurance plan offered at Sam’s is a unique product created specifically for the Bentonville-based retailer.

Sam’s Club, via Answer Financial, has offered individual health, auto, homeowners’, renters’, life, annuities and pet insurance policies for almost two years. In November 2003, it added commercial products.

By midsummer, Seckington said, Sam’s Club should have the group health insurance plan rolled out in half of the 48 states where the Wal-Mart Stores Inc. division has locations. Since March, group plans have been available in Indiana, California, Georgia, Illinois, Iowa, Missouri, North Carolina, Ohio, Tennessee and Wisconsin.

Steve Crowell, senior vice president of marketing for Answer Financial, said that since its unveiling, the Sam’s group insurance plan has gotten several hundred inquiries. He sees the potential market for this product being more than several hundred thousand nationwide.

Sam’s Club members can purchase insurance through the Sam’s Club Web site at www.samsclub.com. The group insurance, Seckington said, is just another service Sam’s Club can offer to small business owners, giving them the buying power of big corporations.

“We did our due diligence trying to get to the exact offering that we wanted to deliver to the members,” Seckington said. “When you have a small group plan, your risk gets greater and a lot of insurance companies do not offer a small group plan.

“Your risk is spread out versus when you have less people in your program, then your risk is higher.”