Central Valley

Northern San Joaquin Valley hospitals footing more of the bill

Across California, hospitals have seen a surge in the amount of care they provide for free, known in the health care industry as charity care.

Last year, hospitals across California wrote off nearly $1.2 billion in bad debts and provided $973.4 million in charity care, an 89 percent increase from four years earlier.

In Stanislaus County, where unemployment has risen to 16.6 percent, hospitals are particularly vulnerable to the effects of the recession.

Memorial Medical Center in Modesto reported more than $39 million in bad debts in 2008, up from $31.5 million in the previous year, according to data filed with the state. Charity care at Doctors Medical Center in Modesto climbed from $61 million in 2006 to $81.5 million last year, state statistics show.

What's even more startling is the shift of people from private insurance to government health coverage, said John Sigsbury, chief executive officer of Emanuel Medical Center in Turlock, which had $11.1 million in charity care last year.

People who lose employee health benefits resort to government programs such as Medi-Cal, and the reimbursements are not close to covering the costs when they come to the hospital. Because Medi-Cal patients have less access to physicians, some are quite ill by the time they seek hospital care and they require expensive treatment.

Emanuel attributed $24 million in losses to the Medi-Cal and Medicare shortfalls in the past year, a 41 percent increase over the previous year, Sigsbury said.

"That is part of the reason why hospitals in the state are in trouble, why at best we are breaking even," he said.

Doctors Medical Center, owned by a publicly traded company, declined to comment, citing Securities and Exchange Commission rules. Its parent company, Tenet Healthcare Corp., is scheduled to release quarterly earnings Tuesday.

The company, which has 51 hospitals in 12 states, has told investors its 2009 outlook is difficult to project because of several factors, including patient volumes, the mix of insured and un- insured patients served, and bad debt expenses.

Memorial Medical Center officials were unavailable for comment. The state does not have data on uncompensated care for the Kaiser Permanente hospitals in Modesto and Manteca.

Many in valley uninsured

Scott Seamons, a regional vice president of the Hospital Council of Northern and Central California, said the San Joaquin Valley normally has large numbers of uninsured patients. But even those with private insurance may have coverage that pays a small part of hospital bills.

Hospitals are legally required to open their emergency departments to patients regardless of their ability to pay. So even the members-only hospitals of Kaiser Permanente will receive patients who are unable to pay.

"As that frequency escalates at Kaiser hospitals, they will incur bad debt and charity expenses as well," Seamons said.

The growing number of patients who can't pay has had a "devastating effect" on hospitals, said Jan Emerson, spokeswoman for the California Hospitals Association.

"It's a significant burden on us, and it's getting bigger as the days go by," she said.

Nonprofit hospitals such as University of California at Davis Medical Center are required by the Internal Revenue Service to benefit the community in exchange for billions of dollars in tax breaks.

Hospitals typically comply by providing health screenings, smoking cessation programs and free medical care to those who cannot pay.

As Congress plunges into the health care debate, the role that nonprofit hospitals play in caring for the poor and medically underserved is part of the broad and contentious discussion in Washington to revamp the country's health care system.

The Obama administration has made health care a top priority, arguing that systemic changes are needed to bring down costs and widen access to health care to the country's 46 million uninsured. Nearly 7 million Californians do not have medical coverage.

If Washington succeeds in passing comprehensive health care legislation, there may be no need for charity care, according to Reatha Clark, a health industries partner for PricewaterhouseCoopers.

If there is universal health coverage, she said, "who would be left for charity care?" Universal health care is one of the goals for overhauling the country's health care system, but the question of how truly universal the current proposals would be is still open, said Marian Mulkey, a senior program officer with the California Healthcare Foundation.

Few of those watching the health care debate unfold believe that a universal insurance company would provide coverage to every person in the United States.

Some people may decline to participate. And coverage is unlikely to be extended to undocumented immigrants, who account for about 10 percent of uncompensated care, according to the state hospital association.

Critics: Hospitals fall short

Not everyone involved in the health care debate is sympathetic to the hospitals' plight. Some critics say hospitals aren't doing enough to provide free care.

Key federal legislators want to reduce the tax breaks that nonprofit hospitals enjoy and set minimum amounts they must spend on free community care. The critics include Iowa Sen. Chuck Grassley, the ranking Republican on the Senate Finance Committee.

A state hospital group official took issue with this criticism. Hospitals have done more than their share to help those in need, particularly in times of financial distress, said Seamons of the Hospital Council of Northern and Central California.

"We don't want to be an industry that's always crying about money, but without money, we can't continue to serve the community in the way we do," Seamons said.

Financial strain widespread

As the debate continues in Washington, the ranks of the uninsured keep growing. For every percentage point rise in the unemployment rate, 1.1 million more people go without health insurance, according to the Kaiser Family Foundation.

This year alone, more than 330,000 people are expected to lose coverage in California, according to Families USA. The Washington, D.C.-based health care advocacy group predicts that by 2010, nearly 1 million Californians, more people than in any other state, will have lost their health insurance during a three-year period. As employers struggle, growing numbers are eliminating health insurance programs.

Others expect their em- ployees to carry more of the burden for rising premiums. From 1999 to 2008, the average cost of health insurance premiums more than doubled, from $5,791 to $12,680, according to the Kaiser Family Foundation.

Even those with health insurance are struggling to pay for higher premiums and deductibles.

Unaffordable medical bills were partly blamed for 62 percent of all personal bankruptcies in 2007, according to a study released this year by researchers at Harvard and Ohio universities.

Three-fourths of those debtors had health insurance, according to a recent study in the American Journal of Medicine.

The study notes that more people are mortgaging their homes in a failed attempt to pay their medical bills.

Paying customers affected

Charity care isn't necessarily free, and unpaid bills don't necessarily vanish into thin air. They are partly recouped and collected when hospitals shift costs to their paying customers.

Bills for health services rise, and so do insurance premiums. The de facto subsidy is what is known within the industry as cost shifting.

To make up the difference, some hospitals have attempted to negotiate more favorable contracts with insurers, with mixed results, and are trying to extract deeper discounts from suppliers. Hospitals also have slowed hiring, cut services, delayed construction projects and put off big-ticket purchases.

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