America's Hospitals: In Danger or Bouncing Back?

Slide Presentation by Jack Ashby, M.H.A.

On November 20, 2002, Jack Ashby, M.H.A., made a presentation in a Web-assisted teleconference at Event 2, which was entitled "Hospital Uncompensated Care Issues."

This is the text version of Mr. Ashby's slide presentation. Select to access the PowerPoint® slides (187 KB).

Hospital Uncompensated Care Issues

Jack Ashby, M.H.A.
Hospital Research Director
Medicare Payment Advisory Commission

Slide 1

What is uncompensated care?

• Definition: Care provided by hospitals or other providers that is not paid for directly by patients or insurers.
• Includes charity care (furnished without expectation of payment) and bad debts (provider has unsuccessfully attempted to collect).
• Includes entire or partial bills from the uninsured as well as unpaid copayments and deductibles.

Slide 2

What is uncompensated care? (continued)

Uncompensated care does not include:

• The contractual allowances of government and private insurers.
• Lack of Medicaid payment for days beyond a length of stay limit.
• Courtesy discounts for employees, students, members of religious orders, etc.

Slide 3

How is uncompensated care measured?

• Hospitals measure their uncompensated care at charges (revenue forgone).
• Policymakers prefer a measure of costs.
• Useful computed variables:
  • Uncompensated care costs as a percent of total costs.
  • Share of uncompensated care costs covered by government subsidies.
  • Uncompensated care losses as a percent of total costs.

Slide 4

How much uncompensated care do hospitals provide?

• Uncompensated care costs: $21.6 billion and 6.1 percent of total costs.
• Uncompensated care losses: $19.0 billion and 5.3 percent of total costs.

Source: AHA Annual Survey, 2000.

Slide 5

Trend in Uncompensated Care Costs and Losses

This chart contains information on uncompensated care (UC) costs and losses as a percent of hospital costs for the time period 1984-2000. The years and their corresponding value of UC costs and UC losses as a percent of total hospitals costs, respectively, are as follows: 1984: 6.0%, 4.6%; 1988: 6.2%, 4.8%; 1992: 6.0%, 4.9%; 1996: 6.1%, 5.1%; 2000: 6.1%, 5.3%.

Also on this chart is a column that shows the proportion of uncompensated care covered by government subsidies between 1984 and 2000. Those proportions were the following: 1984: 23.3%; 1988: 22.4%; 1992: 18.9%; 1996: 17.3%; and 2000: 12.1%.

Source: AHA Annual Survey.

Slide 6

How does uncompensated care vary by type of hospital?

This chart contains information on uncompensated care (UC) costs and losses as a percent of total hospital costs for nine types of hospitals. The hospital type and corresponding value of UC costs and losses as a percent of total hospital costs, respectively, are as follows: Urban: 6.4%, 5.3%; Rural, 5.3%, 4.7%; Major Teaching, 10.0%, 7.4%; Other teaching: 4.9%, 4.5%; Non-teaching: 4.9%, 4.4%; Voluntary: 4.7%, 4.4%; Proprietary: 4.7%, 4.0%; Urban government: 15.7%, 10.6%; Rural government: 6.4%, 4.9%.

Slide 7

How concentrated is the provision of uncompensated care?

This slide provides information on the share of hospitals (as a percent of total hospitals) that are providing certain levels of uncompensated care. The levels are categorized by looking at a hospitals' uncompensated care costs as a percent of total hospital costs. The levels of uncompensated care and the share of hospitals providing at that level are as follows: 0-<2%: 13.4%; 2-<5%: 43.0%; 5-<10%: 35.3%; 10-<20%: 6.8%; 20-<30%: 0.7%; 30-<40%: 0.4%; 40-<60%: 0.2%; 60% and above: 0.2%.

Slide 8

How concentrated is the provision of uncompensated care? (continued)

• Share of all uncompensated care costs furnished by the top 250 providers:
  • 1992: 45%.
  • 2000: 46%.
• Of the amount furnished by the top 250 providers, share provided by government hospitals:
  • 1992: 61%.
  • 2000: 53%.

Source: AHA Annual Survey.

Slide 9

Is there a relationship between uncompensated care and overall financial performance?

This chart looks at uncompensated care costs as a percent of total hospital costs and average margins for five types of hospitals. The hospital type, UC costs as a percent of total costs, and that hospital's average margin are listed as follows: Major teaching: 10%, 1.5%; Private: 4.7%, 5.3%; Urban government: 15.7%, -1.3%; Rural government: 6.4%, 3.4%; All Other: 4.9%, 5.4%.

Source: AHA Annual Survey.

Slide 10

Is there a relationship between uncompensated care and overall financial performance? (continued)

This slide provides average total margins for hospitals providing UC at a certain amount of UC costs as a percent of total costs. The percent of total costs that UC costs account for and the corresponding average margin for a hospital providing at that level are as follows: 0-<2%: 4.0%; 2-<5%: 4.6%; 5-<10%: 4.4%; 10-<20%: 4.2%; 20-<30%: 3.8%; 30-<40%: 3.1%; 40-<60%: 3.2%; 60% and above: -0.4%.

Source: AHA Annual Survey.

Slide 11

What revenue sources do hospitals use to cover their uncompensated care costs?

• Payments from private insurers (cost shifting).
• Government subsidies.
  • Operating subsidies.
  • Dedicated taxes.
  • Charity care pools.
• Medicaid disproportionate share payments.
• Medicare disproportionate share and indirect medical education payments.
• Revenue from non-patient sources.

Slide 12

States with highest and lowest uncompensated care costs

This slide provides information on which states incur the highest and lowest uncompensated care costs.

The highest costs are incurred in: Louisiana (13.1%); New Mexico (12.8%); Texas (10.3%); Mississippi (8.7%); Nevada (8.1%); Oklahoma (7.9%); Arkansas (7.6%); Florida (7.5%); California (7.4%); and Alabama (7.3%)

The lowest costs are incurred in: Nebraska (2.0%); Minnesota (2.0%); North Dakota (2.4%); Wisconsin (2.6%); Oregon (2.9%); Washington (3.1%); Missouri (3.3%); Rhode Island (3.4%); and Iowa (3.9%).

Source: AHA Annual Survey.

Current as of June 2003

Internet Citation:

Hospital Uncompensated Care Issues. Slide Presentation by Jack Ashby, at Web-Assisted Teleconference, "America's Hospitals: In Danger or Bouncing Back?" Agency for Healthcare Research and Quality, Rockville, MD. http://www.ahrq.gov/news/ulp/hospital/ashbytxt.htm

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