Charity care on the rise at hospital trio

By Nate Legue

BusinessRockford.com

The three local hospitals gave away a third more in total charity care last year than they did in 2006, according to financial reports filed with the state.

Charity care is way up at Rockford Health System, which wrote off nearly 45 percent more in medical service costs to the poor than it did the previous year, thanks to a broadening of its program’s income qualifications.

But the rise in charity care is “also a reflection of our community” as the ranks of uninsured and underinsured patients grow, said Henry Seybold, chief financial officer for the health system, the corporate parent of Rockford Memorial Hospital.

Charitable offerings increased at other hospitals too, even without rule changes. OSF Saint Anthony Medical Center saw its pure giveaways grow by $1 million, or 35 percent, between fiscal 2006 and 2007. SwedishAmerican Hospital gave away $604,073 more in charity care, a nearly 20 percent increase.

“Our charity care program is very robust,” said David Stenerson, chief financial officer at OSF Saint Anthony. “We take that very, very seriously.”

Hospitals in Illinois must report their charitable efforts to the state attorney general within six months of their fiscal year end. The last hospital to do so for its 2007 is Rockford Memorial, whose report is due this month.

By definition, charity care is when hospitals forgive all or part of a patient’s bills based on their income level. Hospitals account for government programs, like Medicaid, separately.

The attorney general requires hospitals to account for charity care based on its actual cost, not on the full price that hospitals would charge, because accounting for medical services based on charges inflates the dollars significantly. For instance, it cost SwedishAmerican $3.6 million to provide charity care in 2007, but the hospital said full charges for the same services would have been $10.2 million, according to its financial statements.

Hospital charges are like the sticker prices on a new cars — nobody but an unsavvy buyer pays them. Instead, insurance companies negotiate lower prices, and the federal government sets its reimbursement rates below charges too.

Hospitals are moving away from reckoning their charity statements based on charges and instead reporting actual costs of service, said Don Haring, chief financial officer for SwedishAmerican.

“Everybody’s gross charge can be all over the place,” Haring said. “That’s really not a fair and consistent way to report on uncompensated care.”

The hospitals also report a variety of other write-downs to the state, including bad debts. For SwedishAmerican, the amount of uncollectible accounts grew by 20 percent to $20.4 million in written-off charges in 2007.

Hospital executives say Medicaid and Medicare reimbursements don’t cover the cost of providing services for patients, so the charitable report includes those shortfalls too. But because they still account for the difference between the charges and the reimbursement, the numbers are staggering.

SwedishAmerican Hospital and Rockford Health System recorded shortfalls of $44.8 million and $47.6 million, respectively, between their prices and the actual reimbursement of government-sponsored care. OSF Saint Anthony said it lost nearly $26 million in 2007 because of that shortfall.

Staff writer Nate Legue may be reached at 815-987-1346 or nlegue@rrstar.com.