Free care adds up
Hospitals’ uncompensated costs up 10%
Hospitals in 2009 provided $75.6 billion worth of care for which they were not fully compensated in 2009, a 10% increase from the $68.8 billion reported the year before, according to figures provided by the American Hospital Association.
Observers say the jump in free care is tied to changes in insurance coverage stemming from the severe economic downturn.
The unpaid care statistic is composed of four categories of costs: bad debt, charity care and reimbursement shortfalls in the Medicare and Medicaid programs. All figures are based on estimates of the actual cost of care, which are computed as a percentage of hospital gross charges.
The AHA lumped bad debt and charity care figures into one number: $39.1 billion in 2009, a 7% increase from the $36.4 billion in uncompensated care provided the year before. In 2008, uncompensated care costs rose 7%, and in 2007 the increase was 9%.
Uncompensated care costs in 2009 also consumed a larger share of total hospital costs, rising to 6% of every dollar spent by hospitals in 2009. In the two prior recession years, 2007 and 2009, uncompensated care represented 5.8% of hospital spending.
Caroline Steinberg, vice president of trends analysis for the AHA, said the rise in uncompensated care was not surprising “given what was going on in the economy,” including the rising unemployment and uninsurance rates and the increases in emergency room care.
Meanwhile, underpayments by government payers rose starkly in 2009, according to the AHA figures. The Medicare shortfall rose to $25 billion, an almost 15% increase from the prior year. In 2008, Medicare shortfalls increased just 2%.
Medicaid underpaid hospitals by $11.3 billion, a 9% increase from the year before. In 2008, Medicaid shortfalls were flat.
Keith Moore, president and CEO of McManis Consulting, said the Medicaid shortfall figures were in line with what he would expect, given the challenges faced by the state governments that help fund them. “The state budgets are in crisis. Meanwhile, their Medicaid rolls are growing,” Moore said. “So a lot of states are making adjustments in how they reimburse their Medicaid” providers.