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Should hospitals reconsider charity care in light of the ACA?

By Jennifer Bresnick

When it comes to lower income patients or those who lack health insurance, hospitals often find themselves stuck between a rock and a hard place.  While no clinician wants to make their treatment decisions based on who can or cannot pay for a specific procedure, the reality is that healthcare organizations must pay close attention to the bottom line.  The Affordable Care Act (ACA) has complicated this balancing act by injecting new variables into the equation.  From patients who opt out of ACA insurance coverage to states that refused to expand Medicaid, decisions about who receives charity care and who gets a bill in the mail are not as straightforward as they used to be.

The ACA has brought formally unaffordable health insurance to 9.5 million patients during the initial open enrollment periods, and has made a particularly big impact on the young adult population.  Almost seven million of those patients have saved $1.7 billion in premium payments after switching to exchange plans, and 60% of ACA patients have sought primary care services after receiving coverage.  In the 26 states that have chosen to expand Medicaid eligibility, the number of uninsured patients dropped a whopping 38 percent, reports the Robert Wood Johnson Foundation.  In the states that have refused, the uninsured rate declined by just 9 percent.

Hospitals are assured of reimbursement for their services when patients are covered under health insurance, which makes the Civil War-era political wrangling over state’s rights a very pressing financial issue.  Healthcare organizations that operate in Medicaid expansion states are seeing fewer self-pay visits, which require the hospital to gamble on whether or not the patient will actually pay their bills, fewer emergency room visits, and less of a necessity to provide uncompensated care.

Willamette Valley Medical Center in Oregon, for example, experienced 65% fewer self-pay emergency department visits in 2014 compared to the previous year, and provided 50% less uncompensated care.  In Tennessee, where Medicaid was not extended, a comparable hospital saw uncompensated care rise by 1.8 percent, Crain’s Detroit reports.  Tenant Healthcare Corporation CEO Trevor Fetter recently said that patients who purchased ACA coverage accounted for 2,700 admissions and more than 24,000 outpatient visits during the second quarter of 2014 at the large hospital chain, aiding a 40% year-over-year growth in revenue.  Fetter added that in states that have chosen to expand Medicaid, uninsured and charity admissions declined by 54.3 percent and Medicaid admissions increased by 22.9 percent.

Regardless of a state’s decision on Medicaid, these statistics pose a difficult question for hospital financial officers.  If patients are eligible for ACA coverage but choose not to enroll for whatever reason, should they still be able to receive charitable care that simply saps money from the hospital’s coffers?  After all, why should they pay for health insurance when they can slip into the ED and get their bumps and bruises patched up for free?  How can a hospital reasonably determine whether or not a patient is trying to get something for nothing, or if the new trend towards high deductible health plans, even though the state and federal exchanges, is keeping necessary care out of reach?

“That’s something hospitals have struggled with for decades: Is the patient unwilling to pay or unable to pay?” mused Katherine Arbuckle, senior vice president and chief financial officer at Ascension Health, Kaiser Health News says. “How do you treat those who decline?  Do they get free services when others have paid?”

Few hospitals are making significant changes to their charity care thresholds at the moment, but the changing financial landscape is putting significant pressure on healthcare organizations to sift through their options.  Organizations may simply start by educating their patient populations on the availability of health insurance plans, or help them navigate the confusing maze of signing up for coverage on the appropriate exchange site.  Some hospitals are even going so far as to help low-income patients pay their premiums and keep their coverage, reasoning that they will still come out ahead in the long term.

While the health insurance landscape is dramatically different in each state, depending on patient populations, incomes, and political sentiments, hospitals across the nation are being faced with hard choices that must balance revenue concerns with the altruism of patient care. The ACA has been touted as a revolution in the way consumers interact with the healthcare system, but individual organizations must weigh the pros and cons of fully embracing the principles of affordable care while keeping their doors open to their most vulnerable patients.

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