Kentucky hospitals say they gave back $1.67 billion to their communities in 2010, mostly by absorbing losses and bad debts

By Tara Kaprowy
Kentucky Health News

With the downturn in the economy part of the reason, Kentucky's hospitals say they gave back a whopping $1.67 billion to their communities in 2010, mainly by providing care for which they were never paid.

That's 13 percent more than the hospitals reported last year, and just one of many figures in the latest annual report from the Kentucky Hospital Association, which runs a little over a year behind because it takes a long time to compile the data from more than 100 hospitals.

KHA's 2010 Community Benefits Report shows hospitals absorbed $435.5 million in bad debt in 2010, which accrued when patients came to the hospital and were treated but did not pay their bills.

Shortfalls in Medicare and Medicaid payments cost even more — $456.2 million — because the federal government reimburses Kentucky hospitals for about 85 percent of the cost of Medicaid patients and 95 percent for those on Medicare. That's big, because 71 percent of patient days in Kentucky are covered by one of these programs, said Pam Mullaney, KHA's director of membership services. Hospitals also gave $274 million to charity-care programs that are set up to include free or discounted care to people who are unable to pay. Those three categories of losses increased by more than $158 million over 2009. KHAcalls them community benefits because "you're not getting any type of margin," Mullaney said.

A 2009 Thomson Reuters study showed the average U.S hospital reported an operating profit margin of 3.7 percent. The average operating margin at Kentucky hospitals was 2.44 percent in 2009. Forty percent of hospitals lost revenue from patient services that year, Mullaney said. Still, reported community benefits increased by 13 percent, a total of $190 million.

This is the third year of the report, which was based on a voluntary survey to which 104 of 123 hospitals responded (Eight hospitals were not surveyed because they treat limited types of patients, such as veterans, children or psychiatric cases.) Mullaney said the number of hospitals turning in figures "has grown a little bit each year, but it’s not consequential."

Hospitals are asked to describe and put a value on the programs and activities they provide at or below cost that help their community. Though community benefits are "the greatest single affirmation of not-for-profit hospitals' tax-exempt status," Mullaney said data show Kentucky's 26 for-profit hospitals "do every bit as much as the not-for profits."

In the past two years, Pikeville Medical Center has absorbed $70 million in charitable care and bad debt. The Murray-Calloway County Hospital is in the ninth healthiest county in Kentucky, but has felt the crunch too. From 2010 to 2011, bad debt increased from $7 million to $7.8 million and charity care increased from $5.1 million to $6.2 million.

T.J. Samson Community Hospital in Glasgow has also seen bad debt increase and business decrease when the economy crashed and then stagnated. "Our elective procedure volumes have come down. Patients often wait until they're sicker before they come in," said Laura Belcher, director of planning, marketing and development. The hospital has responded by cutting costs, adopting the "lean philosophy" of eliminating waste and streamlining processes.

Interestingly, the hospital is also pushing for more preventive care since the economy went south. "People ask us, 'Aren't you putting yourself out of business?' But we really want people to be proactive about their health. We've done a lot more health fairs, more screenings," Belcher said.

Indeed, the report shows Kentucky hospitals spent $500 million in 2010 to actively help their communities, through such activities as health screenings, support groups, research, training of nurses and doctors, addiction recovery and neonatal intensive care, or simply donating money to community functions. Many of these programs "are provided at no cost or at a financial loss and would not be provided if the decision was based on monetary decisions," Mullaney said.

Realizing there was a need in the area for children with special needs, the Glasgow hospital set up C.A.M.P. T.J. Kids, a weeklong day camp in the summer for children with special needs. "These children often receive services through school and during school," Belcher said. "But we found many of the families could not afford or handle the transportation to get here during the summer. This is almost like a summer booster."

The camp falls under the umbrella of the Discovery Academy, funded by the hospital and money raised by volunteers. The academy also hosts an annual overnight camp for children with autism. While the children swim in the hotel pool or interact with each other, parents are "in a conference setting to learn about ways they can learn to be better parents" to kids with autism, Belcher said. "In the evening, while children are being supervised, the parents get to go for a quiet, romantic dinner."

When tornadoes struck Kentucky March 2, Pikeville Medical Center kicked into high gear and co-hosted a radio-a-thon that raised $200,000. "We allowed our employees to donate their vacation time, which we converted to actual dollars based on their rate of pay, and we offered employees the ability to do payroll deductions to contribute to the cause," said Cindy Johnson, director of public relations and the Medical Leader, the hospital's community newspaper.

The Murray hospital has increased its community outreach efforts and adopted a mission to provide the local school system with athletic trainers, whose salaries are paid entirely by the hospital, as well as school nurses, which are partly hospital funded. The goal is to promote health and wellness, said marketing director Melony Bray.

The KHA's Mullaney said the annual report reminds people what their hospital does. "A lot of times people think of their hospital as a place to go when they need emergency help," she said. "They don't think of the hospital as one of the big providers in the community for health fairs, health professional education, types of efforts in the community to help improvements like playgrounds and common spaces. Those are things that hospitals often get overlooked for but they do that because they are part of the community."

Kentucky Health News is a service of the Institute for Rural Journalism and Community Issues, based in the School of Journalism and Telecommunications at the University of Kentucky, with support from the Foundation for a Healthy Kentucky.

Cost of an MRI in America? $1,080. France? $280. Why? providers 'largely charge what they can get away with'

Why does getting an MRI in the United States cost $1,080 when it only costs $280 in France? The answer comes down to how the prices are set, reports Ezra Klein for The Washington Post.

"That may sound obvious," he writes. "But it is, in fact, key to understanding one of the most pressing problems facing our economy. In 2009, Americans spent $7,960 per person on health care. Our neighbors in Canada spent $4,808. The Germans spent $4,218. The French, $3,978."

The difference in expenditures isn't linked to the idea that Americans just use more health-care services (the opposite is actually true) or that we are sicker. A 2003 study on international heath-care costs and a survey released Friday by the International Federal of Health Plans both concluded it comes down to pricing. The latest survey showed that in 22 of 23 medical services, whether that was a routine doctor visit or coronary bypass surgery, Americans paid more than other developed countries.

The difference is based on the way the pricing is set. "Other countries negotiate very aggressively with the providers and set rates that are much lower than we do," said Gerard Anderson, who was involved in the 2003 study. In Canada and Britain, prices are set by the government. In Germany and Japan, the prices are "set by providers and insurers sitting in a room and coming to an agreement, with the government stepping in to set prices if they fail," Klein reports.

Outside of Medicare and Medicaid, which are cheaper than the commercial average, "it's a free-for-all" in the U.S., Klein wriotes. "Providers largely charge what they can get away with, often offering different prices to different insurers, and an even higher price to the uninsured."

Because the customer often doesn't have choice in whether or not he or she will purchase health care — one could be unconscious or very ill — "sellers of health-care services in America have considerable power to set prices, and so they set them quite high," Klein reports.

Fixing the problem is fraught with complication, Klein writes, because "centralized bargaining cuts across the grain of America's skepticism of government solutions." The prices are also set by very powerful industries. The federal health care reform law is not expected to fix the issue, Klein writes, though might spread awareness since there are provisions to expand transparency; hospitals will have to publish their prices, for example. "But this is, for the most part, a fight the bill ducked, which is part of the reason that even its most committed defenders don't think we'll be paying anything like what they're paying in other countries anytime soon," Klein write. (Read more)

A look at the history of U.S. health care and health insurance

Health insurance in the U.S. has some of its roots in the World War II shipyards of Henry J. Kaiser, who built 747 vessels for the Navy. The war made workers scarce, so Kaiser needed a way to attract them and, once there, keep them healthy. He couldn't pay them more because wages were frozen, so he offered them health care, which was provided by doctors at company clinics and hospitals. In turn, he asked employees to kick in 50 cents a week for the benefit. (Photo: Kaiser Shipyards in Richmond, Calif., courtesy of SanPedro.com/Permanente Metals Corporation)

"The war ended, the workers quit the shipyards, leaving behind hospitals and doctors but no patients," Bob Rosenblatt reports for the Los Angeles Times. "So the company decided to open the system to the public — and that's how generations of Californians who never heard of Kaiser shipyards have since gotten medical care."

Kaiser's story is just one example of how America's health insurance system developed, Rosenblatt writes. As at the shipyards, most people still get coverage through their jobs and, unlike the rest of the industrialized world, not from the government.

In fact, there has long been a fight against having the government in charge of providing care, Rosenblatt contends. In 1918, when California proposed a constitutional amendment that would have organized a state-run program, doctors said "compulsory social health insurance" was "a dangerous device invented in Germany." The amendment lost, but many presidents pursued the issue. Franklin D. Roosevelt "flirted with the idea but never threw political muscle behind it," Rosenblatt reports. Harry S. Truman asked Congress to provide national health insurance, but could not bring it to a vote.

It was the model exemplified in the shipyards that was adopted, and "health insurance became a standard feature in labor contracts," Rosenblatt writes.

Things changed in 1965, when President Lyndon B. Johnson pushed through a heavily Democratic Congress what Rosenblatt calls "a legislative three-layer cake:" Medicare Part A, Medicare Part B, and the federal-state Medicaid program. The legislation was controversial, with fears that doctors would refuse to see Medicare patients and hospitals would refuse to dismantle segregated wards. "The doctors didn't strike," Rosenblatt writes. "And the hospitals were immediately integrated without protest."

In 1993, President Bill Clinton wanted to extend national health insurance to everyone, but Rosenblatt says "Congress felt excluded and insulted, and the plan never came to a floor vote in the House or Senate."

President Obama did the opposite and relied on the congressional process. "Key to the plan was a mandate that everyone buy into the system; it was the best way to spread out the costs of illness," Rosenblatt writes. It's that mandate up for debate in the Supreme Court next month, but even if the Affordable Care Act is subsequently thrown out, "people already enjoy some benefits and won't want to give them up," Rosenblatt writes.

"It seems a safe bet that some provisions in the Affordable Care Act will stay on the law books," Rosenblatt concludes. "This places a few more patches on the national healthcare quilt. That's the American way." (Read more)

Home births increase, mostly in rural areas

Home birth is making a resurgence in the U.S., reports Shari Roan of the Los Angeles Times. It used to be commonplace in rural areas where doctors were few and transportation wasn't easy. As those factors faded, mothers chose hospitals over bedrooms, and the rate of home birth fell to less than 1 percent of all births by 1969. It's still not as common, but the rate has risen 29 percent from 2004 to 2009, according to the U.S. Centers for Disease Control and Prevention.

The trend is strongest in northwestern states, including Oregon at 2 percent and Montana at 2.6 percent, probably because of "sheer lack of transportation in rural areas," Roan reports. Cost may also be a factor because home births are about one-third the cost of hospital births. About 62 percent of home births in 2009 were attended by midwives, and the trend is increasing most among white women. (Read more)