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Nonprofit Hospitals: Will Margin Change Mean Mission Change?

Philip Betbeze, for HealthLeaders Media, June 13, 2011
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He explains that federal and state governments that fund Medicaid are cash strapped already, and he further cautions that even large businesses, not to mention small ones, might decide it is more cost effective to stop offering insurance coverage to employees—instead paying the penalty required when they force employees into the state insurance exchanges laid out in the new law. 

“We’re seeing a lot of that right now,” he says. “If that happens, the amount of money in the system will go way down.”

Rudish’s clients in the hospital and health system C-suite say that they don’t make money on Medicaid so they won’t be able to make up any shortfalls on volume.

They probably will also face a growing problem: collecting the rapidly rising copays and deductibles that are now the responsibility of the commercially insured population.

“Let’s be honest: We found it very challenging to collect those,” says Ed Ladely, director of financial services with IMA Consulting and, until mid-February of this year, chief financial officer at 210-staffed-bed Montgomery Hospital in Norristown, PA.

“The fastest-growing component of bad debt at my hospital was related to deductibles and coinsurance,” he says. “Normally in the past an inpatient stay was completely covered. Now, the first day might be an estimated $3,000 out of pocket or a $400 to $800 copay.” Ladely stresses that his hospital was careful to provide patients with an up-front financial counselor who would talk to them about their responsibility for the care. “But what I found is that a lot of times, at those income levels, they just don’t have the money to pay that,” he says. “For people making $40,000 a year, $3,000 out of your pocket is almost impossible to pay.”

Still, he knows that perceptions by politicians and regulators often don’t match reality, and predicts large-scale cuts in services should any tax exemptions be withdrawn. He mentions sales taxes for equipment and property taxes that would run into the hundreds of thousands of dollars annually for an institution the size of the hospital he just left.

“What would we cut?” he asks. “A prime example for my hospital was OB, and it doesn’t make money anyway.”

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1 comments on "Nonprofit Hospitals: Will Margin Change Mean Mission Change?"


Jennifer James (6/24/2011 at 1:54 PM)
On behalf of UNC Health Care, I'd like to clarify some information. The article, as written, appears to imply that UNC Health Care recently purchased Rex Healthcare. In fact, UNC Health Care purchased Rex more than 10 years ago. Since then, UNC and Rex have built an important partnership that allows the two institutions to fulfill UNC Health Care's missions of providing excellent care to North Carolinians across the state, regardless of their ability to pay, conducting cutting-edge research and training the next generation of North Carolina's physicians. Also, to be clear, Rex is not a state institution and has never received any state taxpayer funding. Jennifer James, News Director, UNC Health Care