High prices raise questions about hospitals’ charity status

July 27--When it comes to financial losses, hospitals largely control their own fortunes. On paper, uncompensated care is the hallmark of a hospital's charitable nature.

It's the foundation of nonprofit hospitals' tax-exempt status and a badge of honor that hospitals, regardless of whether they belong to for-profit companies, tout as a measure of benevolence to the communities they serve.

But charity can also be the gateway to tangible financial benefits for hospitals.

Nationally, and in New Mexico, where analysis of hospital pricing data from the federal Centers for Medicare and Medicaid Services showed markups on health care sometimes exceeding 800 percent of the government-prescribed rates, pricing has a direct correlation to how charitable hospitals appear on paper.

What patients can't afford to pay, the hospitals chalk up as losses, and the higher their prices, the more charitable each forgiven bill appears.

"There must be a benefit to the institution, or else they wouldn't bother," said Dr. Neel Shah, assistant professor at Harvard Medical School and co-founder of the nonprofit Costs of Care, which advocates for more affordable health care and wants doctors and hospitals to lead the way. "There's a lot they don't collect, but they get what they can."

Hospitals and the professional associations that represent them emphasize that few of their patients actually pay the sticker price for their services. So much so, said New Mexico Hospital Association President Jeff Dye, that the prices reflected on hospital "chargemasters" -- internal lists of charges for assorted services -- are becoming less and less meaningful all the time.

"Many people in the industry feel that the chargemaster we've worked on for years is really pretty irrelevant," he said.

Patients with private insurance pay the rates their insurers have negotiated with hospitals, usually much less lucrative to a hospital than its sticker price. And patients with Medicare and Medicaid, which offer rates set by the federal government based on the estimated cost to provide a service, yield exponentially less revenue to hospitals than the full price tag for services, data show.

Virtually the only group that is billed the full cost for medical services is the uninsured, and they seldom pay the full amount, according to hospitals and the associations that represent them.

"Typically self-pay is no pay," said Bob Moon, chief financial officer at Christus St. Vincent Regional Medical Center in Santa Fe, a nonprofit hospital that charges below the state average for both inpatient and outpatient services. "That's where a significant amount of our uncompensated care comes from."

Universally, the New Mexico hospitals contacted by The New Mexican emphasized that they forgive plenty of medical debts in full or in part. In 2013, the for-profit Carlsbad Medical Center -- identified in an analysis of pricing data as one of the most expensive hospitals in the state -- provided $28 million in uncompensated care, according to a hospital spokeswoman.

"All hospitals, regardless of the nonprofit status, want to document and show their benefit to the community," the New Mexico Hospital Association's Dye said.

"From my perspective, it's a service to the community," St. Vincent's Moon said. "That's probably the advantage of it."

But for nonprofit hospitals, such as St. Vincent, uncompensated care has tangible benefits. It is the basis for the hospital's request for a property-tax exemption on one of the satellite surgery centers it has acquired.

SVH Support, a local nonprofit that has 50 percent ownership of the Santa Fe hospital and acts as its real estate arm, has a pending request before the Santa Fe County Assessor's Office for a 100 percent property-tax exemption on its Physicians Plaza property.

Already, SVH Support enjoys a 50 percent property tax exemption on the surgery center, which reduced its obligation to the county to $56,788 in 2013 from $112,402 in 2012. Taxes on the parking lot associated with the property dropped to $1,744.48 from $3,452.90 over the same span.

According to the Assessor's Office, the current exemption decreased Santa Fe Public Schools' share of the revenue generated by that property to about $23,000 from $46,000, and so that amount gets shifted to other property.

"When you take a property out of a taxable status, it shifts the burden to all of the other taxpayers," said Gary Perez, Santa Fe County's chief deputy assessor. "Right now, all taxpayers are having to pay because of the fact that the hospital is exempt."

Dave Delgado, president of SVH Support, defended the request for a tax break on the property.

"When we own the building and the tenant is this charitable entity, Christus St. Vincent, we have all rights to a tax exemption," Delgado said.

That's under review by the Assessor's Office.

"When you have physicians in a building and they're charging for their services, you have to prove that they're operating in a charitable manner," Perez said. "It's hard for us to consider them a fully charitable organization when they charge for services and bill insurance companies."

In its application for a property-tax exemption on file with the Assessor's Office, SVH Support reports more than $80 million in assets. It is not alone among New Mexico medical nonprofits with abundant holdings. Recently, the website Business Insider listed Presbyterian Health Systems as New Mexico's most profitable enterprise.

David Rigsby of Embudo was forgiven nearly $10,000 in charges by Presbyterian Medical Center in Albuquerque. The charges were for unsuccessful efforts to save his wife's life after a brain aneurysm in 2008.

He was forgiven $12,000 in charges from Presbyterian Española Hospital for a hernia operation and colonoscopy in 2005, but not before he'd paid more than $9,000 -- including more than $2,000 to the collection agency that chased him down to pay the debt -- for a procedure that the federal government estimates to cost $2,431 to perform.

While the discount was welcome, he scoffs at the notion that it was charitable.

"That was so nice of them," Rigsby said, "when their charges are five to 10 times the actual cost."

Contact Patrick Malone at 986-3017 or [email protected]. Follow him on Twitter @pmalonenm.

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