Uncompensated Care Costs for WI Hospitals Grow to $1.2 Billion in 2011

Friday, August 31, 2012 at 1:48 AM by

According to a new report by the Wisconsin Hospital Association, hospitals in our state provided $1.2 billion of uncompensated health care services to their patients in fiscal year 2011, either as charity care ($579.6 million) or as bad debt ($626.8 million). Total uncompensated health care increased by about $110 million, or 10.3%, compared to FY 2010.

Hospitals in Milwaukee County accounted for $357 million of the uncompensated care last year, or 29.6%.  However, it’s a significant issue for hospitals all over the state.   Among the 148 hospitals included in the report, 57 each delivered more than $5 million of uncompensated health care in FY 2011.

The large amount of uncompensated care helps illustrate the importance of improving access to quality insurance.  BadgerCare has slowed the increase in uncompensated care costs compared to what it otherwise would have been during the long and deep economic downturn. That was especially apparent in FY 2010 when the amount of uncompensated care decreased a little, even as the economy was tanking and tens of thousands of Wisconsinites were losing their employer-sponsored insurance.

Based on my analysis of the new data, the substantial increase in uncompensated care in FY 2011 was primarily the result of the general increase in the cost of hospital services. That conclusion is based on a couple parts of the data. First, the number of patients (or patient days) in FY 2011 actually decreased compared to 2010.   A less obvious indicator (but one that I think might be more important) is that even though there was an increase in the percentage of care that was uncompensated, the growth in that ratio only accounts for about a third of the 10% increase cited by the report.

In other words, the statistics indicate that general increases in costs (and charges) account for most of the growth in uncompensated care, but weren’t the only reason. There are a number of other factors that appear to have contributed to that growth in 2011, some of which are expected by hospital executives to yield almost as large an increase in FY 2012. The key factors include:

  • A continued decline in the number of people with employer-sponsored insurance;
  • Rising deductibles in private coverage; and
  • The moratorium on enrollment of childless adults in BadgerCare Core, which drove down average monthly participation by more than 21,000 from 2010 to 2011.

Uncompensated care can be measured in a lot of different ways, and the new report does a thorough job of detailing the alternative ways of slicing and dicing the numbers. One of the many alternatives is to measure uncompensated care as a percentage of total gross patient revenue (charges), which yields a figure of 3.4% in FY 2011, compared to 3.3% in 2010.  Those figures jump to 8.0% and 7.8%, respectively, if it’s calculated as a percentage of non-government patient revenue.

A significantly different way to look at uncompensated care is to measure it based on actual costs, rather than uncollected bills (and potential bills for charity care). From that perspective, uncompensated care totaled about $512 million in FY 2011 and averaged 3.1% of total costs.

Regardless of how you measure it, uncompensated care is a cost that often gets shifted onto other patients. Slowing and reversing its growth is a very important objective of health care reform.

Jon Peacock

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