How Inflated Are Hospital Charity Care Numbers?

Inflated numbers?
Inflated numbers?

Bart Hinkle, an editorial writer at the Richmond Times-Dispatch, has long crusaded against “baroque and opaque” pricing in the hospital industry, a fundamental flaw in the health care system that makes it difficult for patients to exercise consumer choice.

Now Hinkle is taking aim at the accounting conventions by which hospitals calculate how much charity care they provide. In a Sunday column, he notes that there is no common standard for determining a number. When hospitals report how much they cover in uncompensated care for indigent patients, Peter Boswell, who oversees hospital licensing in Virginia, told Hinkle, “Nobody is checking behind them. We take their word for it.”

And as William Hazel, Virginia’s Secretary of Health and Human Resources said, how hospitals arrive at charity care figures is “mystical to me.”

Some hospitals tally up the cost they incur in treating indigent patients, writes Hinkle. Others report “gross revenue foregone,” a number that reflects not how much a procedure cost but how much the hospital would have charged — an inflated number before insurance discounts. In other words, it’s a fictitious figure.

Why does this matter? Because Virginia hospitals cite the large burden of uncompensated care as reason for expanding the Medicaid system in Virginia under the provisions of the Affordable Care Act. Before the act, the federal government provided a partial offset — some $163 million in 2015 — to Virginia hospitals that treated a disproportionate number of charity cases. The feds are cutting back that payment now on the assumption that state health insurance exchanges and expanded Medicaid coverage would provide coverage for formerly indigent patients. Virginia has a health insurance exchange, but not the expanded Medicaid.

Bacon’s bottom line: With the exception of a few rural hospitals, Virginia hospitals are highly profitable — adn that includes the not-for-profits. Before we can take industry claims seriously about the debilitating impact of charity care, we should have some faith in their numbers. At a minimum citizens should demand (a) a common definition that applies to all hospitals, (b) a number that reflects actual costs, not inflated gross revenues, and (c) a transparent reporting of those numbers. Only then we can start to have an intelligent discussion.


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11 responses to “How Inflated Are Hospital Charity Care Numbers?”

  1. LarrytheG Avatar

    I think the Feds and the State collect a ton of data on soup-to-nuts as a result of money they provide for reimbursement of services.

    Are we really so sure that data is not available or not created to start with?

    how would, for instance, the Feds decide how much money to give to a given hospital …they’d just fork over whatever the hospital wanted?

    by the way – I’m sure you have seen this and have a blog post ready – right?

    Byron: A Free-Market Health Care Reform We Need Now

    ” For the last 40 years, Virginia’s health care system has operated under a Certificate of Public Need (COPN) law. In theory, the law was intended to reduce healthcare costs and increase access to care. In practice, neither of these goals has been realized. The result is an overly burdensome and costly regulatory structure for Virginia’s healthcare market. Moreover, the law undermines the one proven method of controlling rising costs: free market competition.”

    1. Interesting link, LarryG., Ms Byron makes this point: “Enacted in the 1970s in response to a federal mandate, COPN has become an anachronism . . .. The federal mandate was repealed a few years after it was enacted . . . [but] although the federal government abandoned such efforts four decades ago, Virginia remains one of the 36 states with a COPN law still on the books.” I completely agree, the COPN law should go; Virginia kept it anyway because it keeps a lot of regulators and regulatees employed. But also, those COPN laws contribute mightily to the hospital numbers inflation that Jim is writing about! That is to say, the intended audience is not only the feds but State officials (and insurance companies).

  2. Larry G,

    You need a better education on the how markets really work and what people who say they know really know. See Lewis, Michael; The Big Short, and Flash Boys.

    The Feds actually know very little. Your faith in government is what leads you to error. Never assume the other guy knows what he’s doing.

    1. LarrytheG Avatar

      Crazy – Why doesn’t Va vote right now to totally dismantle COPN?

      If they have had decades to do it – and Conservatives believe it is a real obstacle to better and cheaper healthcare – where is the action?

      My frustration with the right on these issues is that even in States where THEY ACTUALLY CAN take these actions – and conclusively demonstrate we don’t need no stinking Federal “help” for hospitals – they do not it . Why?

      where is the spine of the Conservatives?

  3. TooManyTaxes Avatar

    Somehow I think actual costs and billing may fall to the wayside in favor of whatever lobbyists can persuade government decision-makers to pay.

    What is material is not what a hospital, clinic or doctor will bill, but what the actual reimbursements are. If most doctors bill $250 for a procedure or test, but insurance reimburses an average of $75, the value of the free care is $75.

    1. The problem is, that $75 you postulate as the actual reimbursement is usually based on what Medicare will allow, which is a number fixed by the government!

  4. ROFL re: the rotund animal graphics

  5. LarrytheG Avatar

    they do not have to follow Medicare from private insurance reimbursements though.

    why not get rid of COPN AND Federal/State payments to hospitals for charity care – and see if what is predicted by the govt-funding-lovers actually does happen?

    we could start with places with high numbers of Charity care. Just cut off their funding and let them adjust their prices without being coerced by the govt.

    we’ve got all these Conservative types running around with their hair on fire about the Feds and Medicare , MedicAid and what have you.

    None of that stuff is mandatory – it’s voluntary. Virginia (and other states) are FREE to declare that they are going to do this the way that economic theory calls for. If they got the votes to do it – why don’t they do it?

    Ms. Byron has the right idea. If you are an elected representative who really believes in the free-market sector – get on with it.

    there may well be some downstream required “tweaks” but certainly no worse than Obamacare – right?

    lead, follow , get out of the way -get on the pot and do it when you have the votes – or get out of the game.

  6. LarrytheG Avatar

    re: ” At a minimum citizens should demand (a) a common definition that applies to all hospitals, (b) a number that reflects actual costs, not inflated gross revenues, and (c) a transparent reporting of those numbers. Only then we can start to have an intelligent discussion”

    If we have elected GOP in Richmond why aren’t these things implemented in Legislation – like yesterday?

    If the GOP is serious about their beliefs about how to do health care – why do they spend their time on everything else under the Sun and not actually put together a legislative blueprint to put in place a framework for transitioning to a free-market health care system – instead of spending all their time blaming the Dems for their failed policies like the Medicaid Expansion?

    there’s a crap load of hypocrisy here…

  7. LarrytheG Avatar

    If you are the GOP saying that States should be able to sell insurance across State Lines – why not pass legislation to that effect?

    Virginia could invite companies in West Va, Md and NC to sell insurance in Virginia and vice-versa.

    if that runs afoul of Federal law – then have a court case and challenge it.

    Good Lord – between 50 repeal votes of Obamacare and multiple lawsuits against it –

    WHERE are the AFFIRMATIVE remedies legislatively that the GOP critters say they DO believe in?

    Each State has a enormous amount of autonomy on these issues. States like Vermont and Massachusetts have set up their own approaches to health care – independent of the Feds.

    If Virginia does not want the MedicAid Expansion – what do they want to do instead – and actually exploit opportunities to make Virginia make free market oriented?

    this is the hypocrisy of the GOP. They’re opposed to those nasty top-down govt goodies approach and there is no shortage of words, editorials and “studies” to PROVE that the free market is a better approach but where in the world are the actual GOP legislative initiatives to move this forward – in states like Va?

    Why do we have GOP delegates writing commentaries about COPN instead of the GOP voting to get rid of it all together – and force McAuliffe to veto it then override? Where were all these folks when we had a GOP Governor?

    It seems like what we have is a bunch of whiners who lack a spine to do what they say they believe in.

  8. I would love to have posted the letter I sent Sentara. They’ve never answered it. It asks about where “charity care” starts, lobbying efforts, etc.

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