Springs hospitals wrestle with rising unpaid bills

Increasing numbers of patients who can’t pay their hospital bills, coupled with low reimbursements from the federal government, are creating unhealthy balance sheets for Colorado Springs’ two main hospital systems. Hospital officials say the rising cost of providing health care services that aren’t reimbursed is eroding profits and leading to a search for answers.

“There are no funds out there to offset uncompensated care. We write those off as direct expenses born by the facility,” said Michael Scialdone, chief financial officer for Penrose-St. Francis Health Services, which operates Penrose and Penrose Community hospitals.

“It’s one of the largest growing expenses for a hospital, and it’s having an impact on the bottom line,” Scialdone said. “When it comes to putting funds into salary increases or new equipment, it has a huge effect.”

Providing services that aren’t paid for makes it harder for hospitals to manage operations and make money, officials say.

At city-owned Memorial Health System, which includes Memorial Hospital Central and Memorial Hospital North, the escalating amount of uncompensated care was blamed for last year’s net operating loss of $4.68 million, compared with the $11.47 million gain the hospital projected.

City Council members were concerned enough to recommend an advisory committee be appointed to study the issue.

Councilwoman Jan Martin will serve on the committee, which has been suspended until a new chief executive officer is named for the health system.

“It’s a big issue for our community and a problem nationally, so we’ll be looking at indigent care and sustainability and financing for the hospital,” Martin said. “We’ll be looking at ways to partner with other groups in the community to serve that population.”

Just hitting home in Springs

Hospitals in larger cities and more economically depressed areas have been dealing with climbing uncompensated care for several years, Scialdone said.

“Colorado Springs is just starting to feel the effects of what other parts of the country have been dealing with because we have better overall demographics with our payer mix and employment,” he said.

Local hospitals are absorbing twice the amount of uncompensated care they were a few years ago. In 2003, charity care was about $24 million at Memorial. Last year, the figure was $41 million, said Gary Flansburg, chief financial officer.

That amount includes the difference between what government programs such as Medicaid and the Colorado Indigent Care Program reimburse and what the hospital says it costs to provide services to those patients.

The figure also includes an in-house charity account for people who don’t qualify for government programs.

Add another $25 million for Memorial’s bad debt from patient bills last year, and uncompensated care totaled $66 million. Flansburg projects $69 million for total uncompensated care this year.

Penrose-St. Francis’ statistics are similar. Scialdone said his hospital system’s charity care more than doubled from 2003 to about $29.2 million last fiscal year. The amount also includes the unpaid portion of government programs and a charity fund of Centura Health, the management company for the hospital system.

Bad debt ran nearly $40 million last year, for a total of $69 million not paid for services rendered.

That represents a $10 million increase over the previous fiscal year. Scialdone projects $80 million in uncompensated care for this fiscal year, which ends June 30. He declined to give profit numbers for Penrose-St. Francis.

Below actual cost at times

Part of the problem, Memorial’s Flansburg said, is that government reimbursement for patients who qualify for federal programs runs below hospital billings, and sometimes, below actual cost.

For example, Medicare pays 27 percent of what it’s billed, which Flansburg said represents 80 percent of the cost of treating Medicare patients.

Medicaid pays 20 percent of hospital charges, while the Colorado Indigent Care Program pays 16 percent of charges.

To make up for the government payers, hospitals charge more to patients who have health care insurance.

“We bill charges with the hopes of recovering a certain percentage back,” Flansburg said. “The government payers dictate through regulations what we’re paid. Insurance companies negotiate with us for rates.”

But, a hospital can charge insurance companies only so much to remain competitive, he added.

On average, Memorial collects about 34 percent of what it bills in gross charges, Flansburg said.

Of every dollar Penrose-St. Francis bills, Scialdone said the return is 30 cents; without accounting for charity care and bad debt, it’s 45 cents on the dollar.

Uninsured at record high

Several factors are causing unreimbursed costs to rise, which Richard Haugh, spokesman for the Colorado Hospital Association, calls “an endemic problem.”

A main reason, Haugh said, is that the number of uninsured nationally is at a record high, 47 million in 2006, the sixth consecutive year the number increased, according to the U.S. Census Bureau.

In El Paso County, about 20 percent of residents are uninsured, compared with the state average of 17 percent, or 792,000 residents, according to the Blue Ribbon Commission for Health Care Reform, established by the Colorado Legislature during the 2006 session.

Although hospitals do not ask the citizenship status of patients, the number of undocumented and uninsured people living in Colorado is estimated at about 150,500, the commission says.

Many of the uninsured have jobs, said Bonnie Angotti, a registered nurse and vice president of ambulatory services for Memorial Health System. Some employers don’t offer health insurance coverage, while about 30 percent of workers offered coverage decline because they can’t afford it or don’t want it, she said.

Not having enough insurance is another emerging concern, Flansburg said.

“A lot of people are buying huge deductible plans without realizing the $5,000 or $10,000 deductible is something they’re responsible for,” he said.

Officials from both local hospital systems say they go beyond a federal law that requires hospitals to provide a medical screening, treatment and stabilization of any patient who walks into the emergency department, further pushing up unpaid reimbursements.

A City Council directive requires Memorial to provide services to anyone, regardless of ability to pay, Flansburg said.

Penrose-St. Francis follows the same principle of treating anyone who needs care, Scialdone said, based on its mission as part of the Catholic hospital system.

Some people seek the most expensive care — the emergency department — when they don’t have emergency medical situations, Scialdone said. He estimates about 40 percent of emergency room visits at Penrose Community and 20 percent at Penrose are nonemergency situations.

Local emergency departments are among the state’s busiest. Memorial had 113,000 emergency visits last year, up from 102,000 in 2006, Angotti said. Penrose’s emergency departments last year handled 87,842 patients, Scialdone said.

Dr. Larry McEvoy, interim CEO at Memorial and an emergency room physician since 1995, said problems in the health care system are most evident in the emergency department, which he describes as “a safety net and catch all” for any kind of illness.

“Many folks don’t access the system in other ways — when they’re concerned about their health they think where can I go now, versus getting the most appropriate level of care,” McEvoy said. “Therein lies the complex nature of this dilemma: We have to provide care and can’t ask about financial status. Then we have to find out how we can get that money reimbursed. We have to be economically sound and fiscally good stewards.”

Officials say one of the key solutions for hospitals is in working with local churches, nonprofits and social service agencies that run free and lowcost clinics for low-income and uninsured residents.

The challenge, McEvoy said, is figuring out how to get “the right care for the right person at the right time.”

Local hospitals refer patients to Peak Vista Community Health Centers, S.E.T. Family Medical Clinics, Mission Medical Clinic, Pikes Peak Mental Health, Open Bible Medical Clinic, the county health department and others.

They also donate used equipment and services, such as lab work, plus many local doctors and nurses volunteer their time to work in the clinics.

Other solutions include legislative lobbying for health care coverage for more residents and giving self-pay patients discounts similar to those hospitals give managed care companies, Scialdone said.

Both Memorial and Penrose also operate urgent care clinics to divert some patients from using the emergency department.

The Colorado Hospital Association’s Haugh sees the best long-term answer as health care reform.

He cites the proposal submitted by the Blue Ribbon Commission and the Building Blocks for Health Care Reform Gov. Bill Ritter announced this month. It advocates containing costs and expanding the availability of care.