Report suggests charity care is underestimated

Classification process called ‘burdensome’

Approximately 92% of hospitals surveyed for a recent report by the consulting firm PricewaterhouseCoopers said at least part of their bad debt could be classified as charity care. Hospitals are absorbing higher levels of charity care and bad debt due to rising numbers of uninsured Americans and may be providing far more free care than the $25 billion they report annually, the report indicated. The report examined the changing landscape of hospital charity care based on interviews with health care leaders and a survey of 100 financial executives by the company’s Health Research Institute.

Billions in uncompensated care

Charity care numbers may be underestimated because of the “burdensome and expensive process that hospitals must go through to classify a patient as charity care,” the report concluded. It noted that uncompensated care, of which charity care is a component, increased by 20% from 1999 to 2003 — to $24.9 billion.

In another recent development, representatives of the American Hospital Association (AHA) and the Catholic Health Association (CHA) of the United States spoke in favor of continued tax exemption for hospitals in a statement submitted to the House Ways & Means Committee.

AHA cited the $25 billion a year in uncompensated care that hospitals provide — as well as emergency care, outreach programs, and health screenings — in contending that hospitals meet the current community benefit test for tax exemption.

Four Minnesota hospital systems, meanwhile, are among the latest health care providers to offer discounts to low- and middle-income uninsured patients under a voluntary agreement announced by the Minnesota Hospital Association and the state attorney general.

Allina Health System, North Memorial Health Care, Park Nicollet Health Services, and HealthEast Care System agreed they will not charge uninsured patients whose annual household income is less than $125,000 more than the rate negotiated by the health insurer from which the hospital earned the most revenue in the previous year. The health systems, which include 18 hospitals representing one-third of the state’s admissions, also agreed to follow certain debt collection standards, including a zero tolerance policy for abusive and harassing debt collectors.

Health care models proposed

In other news concerning the uninsured, health care economist Kenneth Thorpe has projected that four models proposed by the National Coalition on Health Care to expand health care coverage to all Americans would save more money than they would cost to implement.

In a report last year (available at, the group proposed four models for achieving universal health coverage: requiring employer-based coverage while providing subsidies for low-income Americans, expanding existing public health insurance programs, creating new public programs for the uninsured, and publicly financing universal coverage.

Thorpe projected each model would reduce health care spending by at least $320 billion over 10 years when combined with quality and safety improvement, administrative simplification, and cost-containment measures recommended in the 2004 report. The number of uninsured Americans is expected to grow to 54 million from 45 million within a decade, Thorpe said.

The report noted that the creation of an integrated national information technology infrastructure for health care — including electronic patient records, prescription ordering, and billing — would not only decrease administrative complexity and costs, but help reduce medical errors, protect the safety of patients, and improve outcomes. It pointed out that only 10% of health care providers use computerized medical records and ordering.

This technology infrastructure, the report continued, also should include standards to protect privacy and a process for updating protocols and standards to reflect experience and technological advances.

Under another proposal for a new national health insurance system, the federal government would negotiate with private insurers, set minimum benefit packages for several levels of care, and give every American an annual sum to contribute to the health plan of their choice.

That plan — outlined in a report by the Century Foundation ( — would be paid for through a payroll tax, dedicated corporate tax, general revenues, and revenue from eliminating the existing federal tax subsidy for employer-based insurance.