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Uncompensated Care is a $31 Billion Problem Waiting to Be Solved

Ricardo Guggenheim, MD, for HealthLeaders News, September 26, 2008

The U.S. healthcare system is under tremendous pressure to bring cost increases under control. The Centers for Medicare & Medicaid Services and the Office of the Assistant Secretary for Planning and Evaluation estimated that the country will spend an astounding $2.5 trillion on healthcare in 2008.

Even with all this money moving through the healthcare system many Americans do not have healthcare coverage because their employers do not offer it, or they cannot afford to pay their portion of the premium. Forty-seven million Americans are permanently uninsured, and an additional 43 million spend much of their time without coverage. We have an uninsured crisis in our country that is creating great imbalances in the healthcare delivery system. A significant source of this imbalance is the result of the large number of uninsured patients that are turning to hospitals for medical care. Data shows that nearly two-thirds of all uncompensated care is delivered in hospitals. In 2006 alone, hospitals nationwide provided more than $31.2 billion of uncompensated care, an increase from the previous year of $28.8 billion, according to the April 2008 issue of AHA's Trendwatch.

As the number of uninsured rises, many health systems are not able to tolerate the load of uncompensated care and are starting to bleed financially. As this problem magnifies, some health systems are beginning to fear they will go out of business. Most have reflexively moved to collect more aggressively from the uninsured as a way of discouraging them from coming to the facility in the first place. Health systems also are stepping up collections efforts for those who have used the facility. However, this approach has only temporized matters somewhat. Some health systems have witnessed escalations in uncompensated admissions because patients have stopped going to the ED because of collections, but are eventually admitted because their illness has become too symptomatic and requires inpatient care.

Credit checks, scrubbing for eligibility for coverage and credit counseling are routine activities that health systems around the country engage in today for patients without insurance.

Sadly, the care that many uninsured receive from hospitals is just the wrong care. Patients with chronic diseases cannot keep their diseases in check using the emergency department. There are only so many times that symptoms can be controlled in this setting without medications or real follow-up care in the community. Eventually, patients deteriorate and need to be readmitted. Because chronic diseases need ongoing treatment—medications, primary care and diagnostics—they cannot be managed successfully with episodically administered rescue medications and other treatments in the emergency department.

For patients who are admitted, when they are finally discharged because their disease(s) is (are) better, it is only a matter of time before the cycle begins all over again if outpatient care is not available. We would have to work hard to find a more expensive way to take care for these patients.

As a physician, I know that outpatient primary care and medication compliance are the cornerstones for treating and controlling chronic diseases. There is no better way both medically and financially. As an executive, I would qualify judicious primary care with medication compliance as a "win-win" way to treat chronic diseases for both patients and the healthcare system. The problem is money. Who is going to pay for the outpatient care, the medications and the other medical treatments that these uninsured patients need to keep them healthy and out of the hospital?

As a society we need to figure out how we will provide coverage to the uninsured. In the meantime, I argue that it is in the best interest of health systems to pay for outpatient care for uninsured patients with chronic diseases that are already using the hospital for medical care on an ongoing basis.

Outpatient care and medicines are much better economic options than repeated ED visits and hospital admissions for the health systems incurring these costs. In addition, for many hospitals, uninsured occupancy impedes reimbursable care, so the financial implications are more than just the uninsured costs.

Sponsoring outpatient care and medicines for high-cost uninsured patients with chronic diseases who wind up in the hospital multiple times per year makes great economic sense for health systems. The net financial impact can be significant, and the medical and moral value is unquestionable. Granted, paying for outpatient medical care for uninsured patients is not a typical hospital mission, and it is certainly not a core business practice. However, when hospitals examine their spend on uncompensated costs they are likely to find that a relatively small number of patients drive much of the costs. These are the patients that the health system needs to consider helping.

Developing and deploying a care management program to manage the medical needs for chronically ill patients on an outpatient basis is not easy. But it is a doable task. At the highest levels, health systems will need to:

  • Understand their uncompensated utilization and costs for patients with chronic diseases.
  • Identify the specific patients to participate in the program
  • Engage the patients
  • Determine the medical needs for each patient
  • Find and assign medical homes to patients
  • Address barriers to care
  • Address resources to care--funding for medications, transportation, therapy, etc.
  • Monitor the progress of these patients

Through such care-management programs health systems will develop new competencies as care managers that can be applied to all patients in their service area, not just the uninsured. The business model for health systems stands to expand to that of managing the medical needs of patients in the community—not just when they are in the hospital. This is particularly applicable for the growing number of health systems that employ physicians. For them, physician practice revenue and care management fees represent a tangible and accessible business opportunity.

To get to this point, health systems may have to develop some new competencies—like data analytics—and fortify others i.e., case management. Some health systems may choose to partner with organizations that are experienced care managers or outsource certain functions—like analytics—to be successful.

There will be risks. These programs must target the right patients, and physicians must follow guidelines of care so that good medical care is also cost effective care. There is also the fear that health systems will become magnets for sick patients without insurance. The reality is that health systems are already magnets in most instances.

This approach is not meant to cover all the medical needs for the uninsured. Most uninsured patients will not be eligible for this kind of a program because their medical needs will not match those targeted by this type of service. Also, the care does not have to be gifted. Health systems can bill the uninsured patients for this care. Perhaps collections will be no better than they are today; but the program will deliver better quality of care, reduce utilization within the facility, and be less costly to the patients who actually pay and the health systems providing care.

Our society needs to find a real solution for the uninsured. In the meantime, a care management program may do a lot of good for some very ill, uninsured patients, and bring true financial relief for struggling health systems.


Ricardo Guggenheim, MD, is vice president of Care Management Strategy for McKesson Health Solutions.

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