Charity care tests hospitals

Sept. 03--Vancouver's two hospitals are spending about $10 million less each year on medical care for those who can't pay -- a result of the Affordable Care Act provisions that required everyone to have health insurance and expanded the Medicaid program.

In 2013, before those two pieces of the ACA went into effect, Legacy Salmon Creek Medical Center and PeaceHealth Southwest Medical Center spent $19.1 million on charity care. In the most recent years of available data provided by the hospitals -- 2016 for Legacy Salmon Creek and 2017 unaudited numbers for PeaceHealth Southwest -- those costs were down to $9.1 million.

But while charity care costs have been cut by $10 million, hospital officials say their costs for providing care to people with Medicaid have more than doubled, wiping away any ACA-related charity care savings.

"What we found, when you parse those two things out, really, our financial impact is roughly the same," said Sean Gregory, chief executive for PeaceHealth's Columbia Network, which includes PeaceHealth Southwest.

Medicaid reimburses about 75 to 80 cents on the dollar for services provided. The balance is considered unreimbursed Medicaid costs for the hospitals.

And since the local Medicaid population soared after the ACA expansion -- from about 80,000 to more than 115,000 people -- so too did the hospitals' unreimbursed Medicaid costs, jumping by nearly $26 million per year.

In 2013, the local hospitals had $25.7 million in unreimbursed Medicaid costs. In the post-Medicaid-expansion years, that number climbed to $51.6 million.

Despite the growing number of Medicaid-insured people coming through hospital doors, and rising unreimbursed Medicaid costs, officials at both local hospitals say the medical centers are continuing to operate just as they were.

"This hasn't changed anything in terms of hospital operations," said Brian Terrett, Legacy Health's director of public and community relations. "We continue to provide care for anybody who comes through the doors."

More patients insured

When those who come through the doors are uninsured and have no ability to pay for care, the hospital writes those costs off as charity care.

"For many years, that number went up and up and up," Terrett said.

But after the Medicaid expansion and insurance coverage mandate went into effect in 2014, those numbers dropped.

In the 2013 fiscal year, Legacy Salmon Creek had $8.7 million in charity care costs. That dropped to $4.2 million in 2016. At PeaceHealth Southwest, charity care costs totaled $10.3 million in 2013 and dropped to $4.8 million in the 2017 fiscal year, which ended June 30.

"It was good to see the charity care go down," Terrett said. "It's better to get at least some of the costs covered than none of the costs covered."

The decline in charity care isn't unique to Clark County.

A February 2017 report by the state Department of Health found that from 2013 to 2015, charity care billed charges decreased nearly 63 percent -- the first two consecutive years of decline since the department began collecting the data in 1989. Billed charges are the amount a hospital bills insurance companies.

During the 2015 fiscal year, Washington hospitals reported $532 million in charity care charges, equal to about $186 million in actual costs, according to the report. In 2013, charity care charges topped $1.4 billion, according to state data.

In the 2015 fiscal year, Legacy Salmon Creek had $13 million in billed charity care charges, down from $23.8 million in the 2013 fiscal year. At PeaceHealth Southwest, billed charity care charges totaled $15.5 million in the 2015 fiscal year. In the 2013 fiscal year, the hospital had $39.1 million in charity care charges, according to state data.

The statewide charity care decline, however, didn't translate to big revenue boosts for hospitals, said Mary Kay Clunies-Ross, Washington State Hospital Association vice president of membership and communications. In many instances, unreimbursed Medicaid costs climbed. And for some hospitals, such as those in communities with higher numbers of nonresidents who aren't eligible for Medicaid, charity care costs didn't decline at all, she said.

"That said, it's still better for people to be insured than uninsured," Clunies-Ross said.

Even if that insurance is Medicaid, with its lower reimbursement rates.

"We think Medicaid is going to be here in one shape or another, and we're advocating for expansion to remain," PeaceHealth's Gregory said during a meeting with The Columbian Editorial Board last month. "We think it's the right thing."

Unreimbursed expenses

In the 2013 fiscal year, PeaceHealth Southwest had $15.6 million in unreimbursed Medicaid costs. According to unaudited 2017 data, those costs climbed to $29.3 million in the 2017 fiscal year.

The picture is similar at Legacy Salmon Creek. In the 2013 fiscal year, the hospital had $10.1 million in unreimbursed Medicaid costs. In the 2016 fiscal year, unreimbursed Medicaid services cost the hospital $22.2 million.

Since the hospitals can't control the Medicaid reimbursement rates, they're focusing on what they can control: reducing costs to deliver services, said Clunies-Ross. To do that, she said, hospitals have to shift their efforts to ensuring patients are receiving the care they need at the appropriate setting. For example, getting people appointments with primary care providers who can manage chronic conditions can prevent costly hospital admissions that result from uncontrolled health issues, Clunies-Ross said.

"A hospital is not just a hospital anymore," she said. Instead, they must "help people get the right care, at the right place, at the right time."

In communities like Clark County, where the Medicaid population has grown by more than 30,000, that has meant an additional strain on primary care and specialty care providers, said Gregory of PeaceHealth's Columbia Network.

"We've been feeling the pain," Gregory said. "It's been a challenge, but you can't see it when you look at the charity care."

Still, officials at both hospitals say their doors will remain open to those who need care -- regardless of their ability to pay.

"We're going to continue to care for people, one way or another," Terrett said.

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