Hospitals Alter Billing and Collection Practices for Uninsured Patients

Little Impact to Date on Hospital Bottom Lines as Bad Debts Shift to Charity Care Write-offs

News Release
Oct. 12, 2005

FURTHER INFORMATION, CONTACT:
Alwyn Cassil (202) 264-3484 or acassil@hschange.org

WASHINGTON, DC—Many hospitals have adopted more generous charity-care guidelines for uninsured patients after a barrage of publicity about aggressive hospital billing and collection practices and a spate of lawsuits alleging hospitals overcharged uninsured patients, according to a study released today by the Center for Studying Health System Change (HSC).

Hospitals in more than 50 health systems across the country were named as defendants in class-action lawsuits alleging that not-for-profit hospitals charged uninsured patients full billed charges for care, when other payers, including private insurers, Medicare and Medicaid, receive large discounts from billed charges. Virtually all of the suits against hospitals filed in federal court have been dismissed without merit, but state court action is still possible.

Nonetheless, many hospitals have modified billing and collection practices for low-income, uninsured patients, following a campaign by hospital associations to encourage hospitals to create formal policies for billing uninsured patients, the study found.

"Many uninsured patients are poor and unable to afford care, while others may have the resources to pay for their care, leaving hospitals the task of determining who is financially needy," said Paul B. Ginsburg, Ph.D., president of HSC, a nonpartisan policy research organization funded principally by The Robert Wood Johnson Foundation. "What we found is that hospitals generally have adopted guidelines to help make those calls in a more organized and structured way."

The study’s findings are detailed in a new HSC Issue Brief—Balancing Margin and Mission: Hospitals Alter Billing and Collection Practices for Uninsured Patients—available online here. The study is based on HSC’s 2005 site visits to 12 nationally representative communities: Boston; Cleveland; Greenville, S.C.; Indianapolis; Lansing, Mich.; Little Rock, Ark.; Miami; northern New Jersey; Orange County, Calif.; Phoenix; Seattle; and Syracuse, N.Y.

"In every HSC community, most hospitals have either recently changed their pricing, billing and collection policies or tried to improve the clarity of the information provided to patients," said HSC Research Analyst Andrea B. Staiti, coauthor of the study with HSC Senior Consulting Researcher Robert E. Hurley, Ph.D., of Virginia Commonwealth University, and HSC Senior Researcher Peter J. Cunningham, Ph.D.

Other key findings of the study include:

• It is now common for hospitals in the 12 communities to provide charity care to uninsured persons with incomes under 200 percent of the federal poverty level, or $38,700 for a family of four in 2005, and offer sliding-scale discounts beyond this income threshold, in some cases up to 400 percent or 500 percent of the poverty.
• The impact of more generous pricing or discounting policies on access to care for the uninsured remains unclear. Market observers in some communities believed that charity care is now easier to obtain and that hospitals’ efforts to better identify people upfront who are eligible for charity care has helped patients and spared them the aggressive collection practices some hospitals used.
• Hospitals in some cases, however, have adopted more generous pricing policies but also have engaged in other activities to manage their payer mix that inhibits access to care for some uninsured. For example, some public hospitals now limit nonemergency care for uninsured out-of-county residents and are working to attract more insured patients.
• Most changes in billing and collection policies have had negligible impact on hospital finances to date. Uncompensated care is comprised of both bad debt and charity care. Almost all of the hospitals interviewed that had adopted more generous charitable policies indicated expenses previously classified as bad debt have shifted to charity care write-offs, with little impact on hospital bottom lines.

The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded principally by The Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research, Inc.