Calif. Private Hospitals Low in Charity Services

California’s private hospitals provide less charity care than similar institutions studied in four other states, according to a report released today

The study, which examined 1984 and 1985 figures, found that such “uncompensated care” accounts for about 3% of expenses among California’s private hospitals, contrasted with up to 10% of hospital budgets in other states.

“In California, there is just not a lot of charity care going on in the private sector,” said Timothy J. Eckles of Lewin & Associates, the Washington-based health care consulting firm that prepared the study. An even greater problem is that this burden is unfairly shouldered by a few hospitals, including those in poor sections of Los Angeles, he said.

In recent months, California Medical Center and other nonprofit Los Angeles County hospitals have said the skyrocketing costs of charity and bad debt cases have forced them to drastically curtail services to trauma and other emergency patients. These cutbacks have focused increased attention statewide on the financing of health care for growing numbers of poor people and others without health insurance.

The new report defined uncompensated care as the combined costs of charity care, where the patient is not billed, and bad debt, the amount of the bill left unpaid by government and private insurers as well as by paying patients.

The study acknowledges that California, unlike the other four states, has more public hospitals to provide charity care to indigents, leaving “relatively little charity care to be provided by the private institutions.”

Nevertheless, California hospital officials believe that the state’s public hospitals are falling far short of providing adequate health care to poor people. “Over the past several years a crisis situation has developed,” according to a March report by the California Assn. of Hospitals and Health Systems.

In another key finding, the report concludes that nonprofit private hospitals in Florida, North Carolina, Tennessee and Virginia provide 50% to 120% more uncompensated care than for-profit institutions. In California the difference is much smaller--about 15%.

A summary of the study is being published in today’s New England Journal of Medicine, along with an editorial by the journal’s editor exhorting nonprofit hospitals to pay greater attention to their community service activities.

“ ‘Skimming’ of insured patients, ‘dumping’ of emergency patients who cannot afford to pay, and promoting profitable lines of service to the exclusion of those that are unprofitable are simply not appropriate practices for our voluntary hospitals and will surely lead to changes in the way they are treated by governmental taxing authorities,” Dr. Arnold S. Relman wrote.

For-profit hospitals pay taxes. Nonprofit hospitals are tax-exempt. As a justification for their preferential tax-exempt status, nonprofit hospitals often cite their high burden of charity and bad-debt cases.

But in recent years, many nonprofit hospitals have adopted cost-cutting management techniques and shunned medical services without financial rewards. As a result, they have been under increasing pressure to prove that they are still charitable institutions.

To address such concerns, the Volunteer Trustees of Not-for-Profit Hospitals, a Washington-based coalition of nonprofit hospitals, commissioned the Lewin study.

The five states selected each had substantial numbers of for-profit hospitals as well as state agencies that could provide reliable and accurate cost data, the report said. The Lewin researchers also used statistical techniques to increase the accuracy of their uncompensated care estimates.

According to their report, California’s public hospitals accounted for 20% of all hospital expenses in 1984 but 55% of uncompensated care costs. This was out of proportion to the percentage of uncompensated care costs borne by public hospitals in the other four states.

By comparison, California’s not-for-profit private hospitals accounted for 63% of total hospital expenses but only 37% of uncompensated care costs. In the other states these two percentages were roughly comparable.

About one-third of California’s private hospitals--both nonprofit and for profit--spent less than 2% of their budgets on uncompensated care.

In an unexpected finding, the report found that one in 10 of the state’s for-profit hospitals spent more than 6% of their budgets on uncompensated care.

“These particular hospitals are almost exclusively from Los Angeles, where several investor-owned facilities have long been located in mixed-income neighborhoods and have traditionally carried unusually high levels of uncompensated care,” the report said. The study did not name the institutions.

In addition to Eckels, the authors of the study were Lawrence S. Lewin and Dale Roenigk.

UNCOMPENSATED HOSPITAL CARE

Uncompensated hospital care includes both charity care and bad debt, bills left unpaid by insurers and patients who are expected to pay. These are percentages of uncompensated care provided by nonprofit hospitals, investor-owned for-profit hospitals and public facilities in California and four other states.

Nonprofit For Profit Public California 1984 37% 8% 55% Florida 1985 48% 18% 34% North Carolina 1984 77% 4% 19% Tennessee 1985 62% 8% 30% Virginia 1985 74% 8% 18%

Source: Lewin & Associates

In California, a small number of hospitals provide a disproportionate share of uncompensated care. In 1983, these 25 hospitals--about 5% of the acute care hospitals in the state--provided 50% of the uncompensated care, according to data compiled by the California Assn. of Hospitals and Health Systems.

Hospital Type 1. LA County-USC Medical Center County 2. LA County-Martin Luther King, Jr. Med. Center County 3. Harbor-UCLA Medical Center County 4. San Francisco General Hospital County 5. Contra Costa County Health Services, Martinez County 6. Santa Clara Valley Medical Center, San Jose County 7. Childrens Hospital of Los Angeles Nonprofit 8. Stanford University Hospital, Palo Alto Nonprofit 9. UCLA Medical Center, Westwood Nonprofit 10. LA County-Oliveview Medical Center, Van Nuys County 11. Cedars-Sinai Medical Center, Los Angeles Nonprofit 12. UC Irvine Medical Center, Orange Nonprofit 13. Loma Linda University Medical Center Nonprofit 14. San Bernardino County Medical Center County 15. Childrens Hospital Med. Center, Oakland Nonprofit 16. White Memorial Med. Center, Los Angeles Nonprofit 17. Kern Medical Center, Bakersfield County 18. Valley Medical Center of Fresno County 19. Memorial Medical Center of Long Beach Nonprofit 20. UC Medical Center, San Francisco Nonprofit 21. Alta Bates Hospital, Berkeley Nonprofit 22. UC San Diego Medical Center, La Jolla Nonprofit 23. St. Francis Medical Center, Lynwood Nonprofit 24. St. Mary Medical Center, Long Beach Nonprofit 25. Huntington Memorial Hospital, Pasadena Nonprofit

% of Total Uncompensated Care 1. 13.53% 2. 6.23% 3. 3.34% 4. 3.30% 5. 1.87% 6. 1.84% 7. 1.72% 8. 1.67% 9. 1.64% 10. 1.59% 11. 1.51% 12. 1.49% 13. 1.11% 14. 1.07% 15. .91% 16. .88% 17. .88% 18. .87% 19. .83% 20. .80% 21. .72% 22. .67% 23. .66% 24. .64% 25. .63%