Many hospitals are reexamining their charity care policies, and some
are realizing they need to be more generous in light of current
realities.
The economic recession and increasingly common high-deductible
insurance plans pack a double whammy for patients, and a growing number
are needing free or discounted care. Meanwhile, many not-for-profit
hospitals must report their community benefit expenditures in new detail
to the IRS, beginning this year.
In the following case studies, finance leaders at two hospitals share
their experiences with revising their financial assistance policies.
Case Study 1
Loma Linda University Medical Center
At first glance, creating a charity care policy might not seem to
require new staff members, a new computer database, and new signage, but
those are just a few of the elements of Loma Linda University Medical
Center’s revised charity care policy. In fact, the 939-bed medical
center in San Bernardino County, Calif., spent more than $1 million in
start-up costs to develop and introduce its revised charity policy.
Work started in 2004 as Loma Linda sought to adopt the California
Hospital Association’s Voluntary Principles and Guidelines for Assisting
Low-Income Uninsured Patients, which calls for charity care or
discounted care for individuals whose income is at 300 percent of the
federal poverty level (FPL) or below.
That effort gave Loma Linda a head start when California legislators
passed a bill regulating the way hospitals bill low-income and self-pay
patients. Preparing to comply with the new law, which went into effect
in 2007, required all leaders from the revenue cycle to rework their
policies and procedures, guided by a painstaking review of the law and
how Loma Linda could make it work.
“Our hospital attorney, who works on our billing matters, and I
probably spent 400 to 500 hours going over it line by line,” says
Cynthia Schmidt, vice president of revenue cycle.
Loma Linda’s policy is to provide charity care for patients with
income at or below 200 percent of the FPL, and discounted care for those
with income at or below 350 percent of the FPL. The policy is supported
by extensive communications to ensure that patients understand their
financial options, staff screen for available assistance programs, and
the hospital is complying with the law.
The result, Schmidt says, is higher patient satisfaction with the
medical center’s financial assistance programs and the way staff members
communicate with their patients.
“Patients actually thank us because of the time we spend with them to
explain their options. We hear, ‘Thank you for treating us with dignity
and not embarrassing us,’” says Schmidt. “All of these tools for our
staff have really helped the patient as well.”
Sometimes doing the right thing can be costly. The new policy has
increased the medical center’s charity care load considerably more than
expected. “Our charity care has increased 20 percent,” says Steven Mohr,
the medical center’s senior vice president of finance. “That is a very
significant dollar amount for a hospital as large as Loma Linda.” A
tertiary care hospital, Loma Linda is the only level-one regional trauma
center for a four-county area.
To get started with the policy revision, Loma Linda hired an outside
consultant to review the previous charity care procedures and draft a
new policy, application forms, and an implementation plan. Then Schmidt
and staff members from every unit of the revenue cycle worked on the
thousands of details required for smooth operation.
“When you roll out a policy for the public, patients, and staff, you
want to make sure that it’s very clear and that the registration staff
and the billing staff can understand the policy,” says Schmidt. “We
spent a great deal of time walking through scenarios. ‘What if a patient
came through the emergency department? What if the patient had an
X-ray? What if….?’”
Implementing the plan involved the following:
- A new computer database that determines charity care eligibility and
keeps statistics
- Signs, in English and Spanish, displayed in all 19 registration
areas across the hospital campus
- Sixteen new staff members to increase capacity for processing
applications and communicating with patients about their financial
options
- New technology that automates some procedures (for example, a
new program uses registration data to collect patient’s credit history,
quickly identifying patients who are likely to qualify for charity
care)
- Comprehensive training for all registration, billing, and
collection staff, as well as case management, social services, patient
relations, and home care workers.
Interviewed for this case study: Steven Mohr, senior vice
president of finance, Loma Linda University Medical Center, Loma Linda,
Calif. (smohr@llu.edu),
and Cynthia Schmidt, vice president of revenue cycle, Loma Linda
University Medical Center (cschmidt@llu.edu).
Case Study 2
Rush University Medical Center
Offering a 50 percent to 70 percent discount to uninsured and
underinsured patients seems quite generous. But the CFO of Rush
University Medical Center is not bragging. The Chicago hospital’s
policies, patterned after some other hospitals around the country,
reflect Rush’s particular circumstances, says Catherine A. Jacobson,
FHFMA, CPA, 2008-09 chairman-elect of HFMA.
“Each hospital needs to gauge where they are in their own community
and how they are serving the uninsured,” she says. A policy that is
appropriate for one hospital may not work for another in the same
market.
Rush is located next to Chicago’s Stroger (formerly Cook County)
Hospital, which is the tertiary hub for low-income patients throughout
the city and the surrounding county, as well as a level 1 trauma center.
Stroger Hospital’s emergency department (ED) serves many more self-pay
and low-income patients than Rush does with its smaller ED. Likewise,
some of the other large hospitals in Chicago have up to 50 percent more
ED visits than Rush sees, giving these hospitals a much greater burden
of uncompensated care in the ED.
“We are in a position where we don’t see the high volumes of
uncompensated care through the ED, so we chose to carry our charity
responsibilities through other policies,” Jacobson says.
Rush envelops its charity care policy in a tiered system of discounts
collectively referred to as financial assistance.
Uninsured patients. All uninsured patients receive at least
50 percent off charges—and low-income patients receive a higher discount
or free care.
- Self-pay patients, regardless of income: 50 percent off charges
- Self-pay patients with a household income <250 percent of
the poverty level: Free care
- Self-pay: 70 percent off charges
- Financial hardship patients whose medical bills exceed 70
percent of household income (regardless of income): 70 percent off
charges
Insured patients. Rush’s policy also assists patients with
insurance who may end up with large balances due to high deductibles and
coinsurance. In this case, the financial assistance policies are
applied on top of the insurance plan; a patient with household income
below $80,000 would be discounted at 70 percent off charges, including
any discount provided by the insurance company (if contracted). In all
cases involving insured patients, patients are reviewed for financial
status and whether they qualify under the financial assistance policies.
Rush set its 50 percent discount for self-pay patients in recognition
of the contracts in place with managed care plans. “People without
health insurance are not disadvantaged, in terms of what our charges
are, because they don’t have the advantage of the discounts given to
insurance companies,” says Jacobson.
The medical center moved to an across-the-board discount for self pay
in part because collecting full charges on hospital bills was
fruitless, leading to large write offs to bad debt. “It was this
ridiculous runaround to try and get people to pay 100 percent of
charges,” she says. “We actually collect more now because we’re trying
to collect a more reasonable amount.”
Since the more generous financial assistance policies were
implemented, Rush has seen its charity care increase—while its bad debt
level has decreased. Jacobson believes the policy more accurately
categorizes the uncompensated care the medical center delivers—and
allows Rush to present an accurate picture of its benefit to the
community. Still, the overall cost of providing the expanded financial
assistance policies has increased the cost to Rush.
“We are actually getting credit for giving people real help and it’s
showing up in the charity care line,” she says.
Interviewed for this case study: Catherine A. Jacobson,
FHFMA, CPA, senior vice president of strategic planning and finance,
CFO, and treasurer, Rush University Medical Center, Chicago (catherine_a_jacobson@rsh.net).