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What Happened to the Spike in Uncompensated Care?

Michelle Pointe, for HealthLeaders Media, July 6, 2009

Uncompensated care costs are up. Drastically in some cases. I know this because it's what I hear in conversations I have with most hospital leaders these days. I also see it in American Hospital Association data, with one recent report showing that uncompensated care as a percent of gross net revenues has "significantly increased" for 27% of nearly 1,100 community hospitals. Another 43% saw moderate increases.

Yet, a recent Moody's Investors Service report, flies in the face of this and is showing that, at least for investor-owned hospitals, uninsured and uncompensated care numbers have been relatively flat during the past year.

"What prompted us to do the report is there was a disconnect between what we have seen vs. what everybody's expectation has been," says Dean Diaz, vice president and senior credit officer at Moody's. Most of the data comes from company filings.

Moody's analysts reviewed data from several for-profit hospital companies, including Community Health Systems, IASIS Healthcare, Health Management Associates, HCA, Tenet Healthcare, Vanguard Health Systems, LifePoint Hospitals, and Universal Health Services, finding that while bad debt has increased, numbers have not spiked as expected. For example, data from four of the for-profit hospital operators shows that the combination of bad debt, charity care and self-pay discounts as a percentage of net revenue plus charity care and self-pay discounts increased no more than 2% year over year as of March 2009.

The report also finds that growth in uninsured volumes is below historical growth rates. Between March 2008 and March 2009 six of the for-profit operators fluctuated month to month between -15% and roughly 15% growth in self-pay admissions, with most hovering at 0.0% or below during that time period. "Overall, the data do not yet seem to support expectations of a surge of uninsured individuals being treated at hospitals operated by the rated investor-owned hospital companies," say the report's authors.

There are a couple of theories behind the flat numbers. The spike in uncompensated care may be somewhat delayed due to stimulus funding, which extended COBRA benefits to Americans who lost their jobs. Also, hospitals are doing a better job at front-end collections and patients may be deferring care.

"It's hard to tell," says Diaz. "I think it shows that people have been out in front of the issue." It also may be an indication that there is even more of a lag than was expected between the end of 2008, when the economy started to go south, through the first quarter of 2009, he adds.

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