Charity care is down, but hospital debt is up

Here's the good news: Documented charity care in the state has significantly decreased now that more people are insured or receiving coverage through the Medicaid expansion that was a key component of the Affordable Care Act.

And those decreases in documentation have resulted in a reduction in the state budget for allocated funding.

The money part of the equation, however, isn't completely adding up for providers.

Health system and hospital officials say all of this has led to an increased burden on some hospitals, where so-called bad debt is piling up.

"Safety net hospitals are experiencing increased bad debt since the onset of the ACA," New Jersey Hospital Alliance CEO and President Suzanne lanni said. "While the law thankfully provided access to health insurance for many, the downside is that some of the new plans include high deductibles that many patients cannot afford."

That had led to bad debt, a term describing costs for treatment that go unpaid by patients, lanni, who represents the safety net hospitals in the state, said the hospitals trying to do the most for those who previously did not have insurance are getting crushed.

"This has become an unintended consequence of the ACA and provides an additional hardship to safety net hospitals," she said.

Barnabas Health CEO Barry Ostrowsky said the ACA was not a wellrounded plan.

"The Affordable Care Act was an attempt to give everyone an insurance card. It was not an attempt to give everybody real access to health care services," he said. "Those are very different things."

In essence, many say, there hasn't been cost savings as much as cost shifting.

Sean Hopkins, senior vice president of health care economics with the New Jersey Hospital Association, said the ACA has not necessarily changed the health care habits of many. He said hospital emergency visits are up 7 percent in 2015 compared with the year before, which means newly insured individuals are falling into old habits of using the emergency room as a primary care visit, rather than seeking primary care physicians.

One of the many changes in health care has been a push toward primary care and keeping individuals out of hospitals for long periods of time.

"Behavioral change is just as important as insurance coverage," Hopkins said. The announcement from Gov. Chris Christie of a proposed $150 million cut in charity care spending for the 2017 fiscal year was initially greeted with apprehension from hospital interest groups, but the decrease in documented charity care supports the move.

"Our health care system is fundamentally transforming, driven in large part by Medicaid expansion and payment changes that emphasize value, reduced cost and wellness," acting Health Commissioner Cathleen Bennett said. "The results include more New Jerseyans covered by Medicaid, less need for hospitals to provide charity care and increased need for outpatient services and wellness initiatives."

Many charity care patients are typically undocumented immigrants who do not qualify for insurance or Medicaid coverage.

Access has increased for preventative and primary care for those who qualify for subsidized insurance, but a costly hospital visit still is unaffordable.

Many low-cost plans come with high deductibles, and charity care and subsidized insurance income qualifications are roughly the same.

The question becomes, even if an individual has insurance, can they still qualify for charity care?

Probably not, said New Jersey Policy Perspective's Ray Castro. He feels there is no regulation that offers a clear response, and says the hospital associations don't have an answer, either.

"It raises the issue, if it's not clear, what are the hospitals doing? It's scary," Castro said, adding he posed the same question to hospital groups after the first cuts to charity care last year.

Ianni said that, while there are both positives and negatives to the announcement, the focus of the charity care dollars on safety nets is a plus.

Another change to charity care this year has been to the redistribution formula - the removal of capped increases to allocations to hospitals. That change has benefited some hospitals, such as Hackensack University Medical Center.

Richard Pitman, executive director of the Fair Share Hospitals Collaborative, said hospitals like Hackensack, which saw an increase of $9 million in charity care dollars, have long been overdue on such significant increases.

Hackensack has been the fifth-largest provider of charity care, and has been absorbing losses of that magnitude every year, Pitman said.

A report from the state Department of Health revealed that Barnabas Health re- ported the highest amount of charity care in 2014: $78.8 million, which equaled 14 percent of the total charity care dollars in the state.

But Barnabas also reported the largest decrease by a health system, $73 million in 2014, compared with $152 million the prior year.

"Fifteen hospitals each reported above $10 million in documented charity care in 2014, compared to 32 in 2013. These 15 hospitals accounted for 60 percent of all charity care statewide, compared to 32 hospitals accounting for 79 percent in 2013," the report stated. "St. Joseph's Regional Medical Center reported the highest dollar amount of charity care in 2014, a total of $48 million, or about 8.5 percent of the state total, compared to $83.4 million in 2013."

"We want our patients to have adequate and affordable coverage and our hospitals to be financially stable," Ianni said.

Hopkins said nonprofit hospitals should have at least 4 to 6 percent profit margins in order to reinvest in their facilities, but one of three nonprofit hospitals is operating at less than that, with most operating at about 2 percent.

Ianni said that, while the documented charity care numbers warranted the cut in the state budget, the federal government is also slated to cut as much as 24 percent of Medicaid's Disproportionate Share Hospital payments for New Jersey.

"The thing our state policymakers must remember is that charity care is funded with Medicaid Disproportionate Share Hospital payments from the federal government. ... These funds will be cut starting in Federal Year 2018 (Oct. 1, 2017), and those cuts will be targeted towards states that do a poor job of targeting their DSH funds to safety net hospitals," Ianni said.

Which means an even smaller pool of federal dollars for hospitals who are piling on bad debt.

"It all comes down to payer mix," Ianni said. "While suburban hospitals may provide care to Medicaid and uninsured patients, it is a very small percentage of their overall business. If a hospital's patient population has as many as three out of every five patients that are Medicaid or uninsured, the Charity Care subsidies are critical to their survival."