1999 Charity Care Report

The 1989 Legislature enacted RCW 70.170.060, which prohibits any Washington hospital from denying access to emergency care based on inability to pay, or adopting admission policies which significantly reduce charity care. The same legislation directs each hospital to develop a charity care policy. The Department of Health (DOH) is responsible for rule-making and monitoring related to charity care, and is required to report to the Legislature and Governor on an annual basis. This report presents data submitted by Washington hospitals in their fiscal year (FY) 1999 Hospital Year-end Report and 2000 Annual Budget Submittals.

This report :

• Provides a source of data to assess the impact of uncompensated health care on hospital charges and continued access to health care in a community

• Is a resource document for persons wishing to conduct research or seek information on uncompensated health care.

Executive Summary

This report contains data regarding charity care provided by all licensed hospitals in Washington. Charity care is reported as a percentage of total revenue and adjusted revenue.

RCW 70.170 defines charity care as “necessary inpatient and outpatient hospital health care rendered to indigent persons...” A person is considered indigent if family income is at or below 200% of the federal poverty level. Past hospital accounting practice did not consistently separate bad debt (often stemming from non-payment of bills by low income patients) from charity care. As a result of recent improvements in charity care accounting required by law, this report utilizes only charity care rather than a combination of charity care and bad debts as in reports prior to 1995.

Washington hospitals provided $113 million in charity care for 1999, which is an increase of 3.9% above 1998 and a 10.4% increase above the 1997 levels. Charity care for 1999 was 1.19% of total hospital revenue and 2.19% of “adjusted revenue” (with Medicare and Medical Assistance Program payments deleted for comparisons focused on each hospital’s base of primarily private payments). From 1989 until 1993, charity care steadily increased in total dollars and as a percent of revenue, while from 1994 through 1997, charity care steadily declined in both categories. Total charity care for 1998 increased for the first time in five years. This trend continued in 1999 with an increase above the 1998 level.

Nineteen hospitals each provided more than $2 million of charity care in FY 1999, which accounted for 76% of the statewide charity care. Regionally, King County clearly provides the largest dollar amount of charity care, with Harborview Medical Center alone providing in excess of 23 percent of the statewide total. Rural hospitals report less charity care, in proportion to their total adjusted revenue, than do urban hospitals. Rural hospitals also have a higher proportion of revenue from Medicare and Medical Assistance (including Medicaid), resulting in a smaller base of private sector payers to which charity care costs could be shifted.

Charity Care Policy For Washington Hospitals

Since 1991 Washington hospitals have been required to maintain a charity care policy on file with the Department of Health, Center for Health Statistics. Each policy includes the following information:

• A set of definitions describing terms the hospital uses in its charity care policy;

• The procedures the hospital uses to determine a patient’s ability to pay for health care services and to verify financial information submitted by the patient;

• A sliding fee schedule for individuals whose annual family income is between 100% and 200% of the federal poverty standard, adjusted for family size;

• Procedures used to inform the public about charity care available at that hospital.

In addition to the charity care policy, each hospital annually reports actual total charges for charity care, bad debt, and total uncompensated health care in its fiscal year (FY) within 120 days of the close of the fiscal year as part of the hospital’s year-end financial report. Hospitals also provide estimated charity care 30 days prior to the start of their fiscal year in their annual budget submittal. Two health maintenance organization (HMO - Group Health) hospitals are not included in this report since health care charges are prepaid through member subscriptions and therefore uncompensated health care is not incurred. This report is based on data collected from the remaining 90 licensed Washington hospitals for fiscal year 1999.

Charity care data reported to the State did not include the number of patients granted uncompensated care. Therefore, it is unknown whether the number of charity care cases is going up, down or remaining the same over time. This number is required to better characterize the provision of charity care in Washington. For that reason, the Department is currently requesting this information be reported along with charity care charges. 1999 data reported 56,138 charity care patients by 41 hospitals totaling $75.8 million in charity care. This represents 67% of the total 1999 charity care provided. Future reports will be able to compare this data as more hospitals report this information.

This report reflects mostly summary information, but additional data can be obtained from the Center’s Hospital and Patient Data Systems (HPDS) database. The Center for Health Statistics maintains a file for public use of all financial information submitted by Washington hospitals, which goes beyond the issue of charity care. The hospital financial database includes hospital utilization, revenues, and expenses. This office also maintains a database containing patient discharge information. Persons interested in obtaining more information should contact the Center by calling (360) 236-4200 regarding the availability and cost of specific data requests or copies of individual hospital reports.

Charity Care Defined

Charity care is defined in RCW 70.170.020 as necessary hospital health care rendered to indigent persons, to the extent that the persons are unable to pay for the care or pay the deductibles or co-insurance amounts required by a third-party payer. A person in need of care is considered “indigent” if family income is at or below 200% of the federal poverty level. Past hospital accounting practice did not consistently separate bad debt from charity care. The basic distinction between bad debts and charity care in the health care setting can be made between uncollectible accounts arising from a patient’s unwillingness to pay (bad debt) and those arising from a patient’s inability to pay (charity care).

Effective March 1991, the Department of Health adopted accounting rules which provided uniform procedures, data requirements, and criteria for identifying patients receiving charity care. These rules also provided a definition of residual bad debt. These changes have resulted in more accurate and consistent reporting on the components of uncompensated care. This report utilizes only charity care, rather than a combination of charity care and bad debts as in earlier reports (pre-1995).

Measuring Hospitals’ Charitable Contributions to Their Communities

Measuring what a hospital gives back to the community or comparing one hospital’s contribution with another is not an easy exercise. Hospitals often support their communities through free or low-cost services, which are not easily quantifiable and are not included in their uncompensated health care totals reported to Department of Health.

Comparisons based solely on data included in this report can lead to misleading findings. A high level of charity care may just as easily reflect demographic conditions in a service area (income level, unemployment rate, etc.) as the charitable mission of a hospital. Conversely, a low level may reflect a relative absence of need for charity care in a hospital’s service area, rather than a lack of commitment to serve the community. Therefore, this report makes no value judgment of any individual hospital provision of charity care. In addition, the state has not established the “appropriate” amount of charity care that a hospital should provide.

A hospital can provide only so much uncompensated health care and remain a financially healthy institution. Ultimately, if enough charges are uncompensated, whether they are attributed to bad debt expense or to charity care, the facility will face operating losses. Hospitals may attempt to recover uncompensated health care by shifting costs to other payers, subsidizing uncompensated charges with nonoperating revenue (e.g., parking lots, gifts shops, endowments), or increasing prices for hospital

services. With the advent of managed care, these options are becoming less and less viable.

Charity Care in Washington Hospitals

Charity care increased from $108 million in FY 1998 to $113 million in FY 1999. This represents a 3.9 % increase in total charity care from 1998 to 1999. Table 1 summarizes the statewide provision of charity care from 1997 through 1999. This table also presents charity care as a percentage of total revenue (including Medicare and Medical Assistance) and adjusted revenue (without those government programs). The decline in the percentage of charity care offered by hospitals may be due in part to an improved economy. With more people working, the ability to pay should be improved.

Table 1

Overview of Hospital Charity Care in Washington 1997-1999

	Average						Percent Change
	1997-99	1997	1998		1999		1997-99	1998-99
Charity Care
Total Dollars ($M)	$107.7	$102.0		$108.4		$112.6	10.4%	3.9%
Percent of Total Revenue	1.29%	1.37%	1.31%		1.19%		-13.1%	-9.2%
Percent of Adjusted Revenue	2.43%	2.63%	2.46%		2.19%		-16.7%	-11.0%

Source: Washington Department of Health Hospital Financial Data Year-end Reports FY 97-99

The hospital accounting concept of “adjusted revenue” subtracts Medicare and Medical Assistance (including Medicaid) charges from total patient care revenue to allow meaningful comparisons of hospital levels of charity care. Medicare and Medicaid have specifically excluded participation in covering charity care from their prospectively-determined payment levels. Since the payments that hospitals receive from Medicare and Medical Assistance do not cover charity care, the hospitals adjust their rates to recoup the charity care from their base of private purchasers and payers. This private paying base differs widely among hospitals as a percentage of their business. Therefore, the use of “adjusted revenue” allows for a comparison of hospital charity care as a percentage of this meaningful base of privately-sponsored patients.

A majority of the state’s charity care comes from relatively few hospitals. Nineteen urban hospitals each reported $2 million or more, and together provided $85 million in charity care (approximately 76% of the charity care provided statewide) in FY 1999 (see Table 2). The amount of charity care individual hospitals provided ranged from $0 to $26.6 million, which reflect differences in their size, types of services provided, provisions for charity care in their mission statements, and the characteristics of surrounding communities.

Table 2. Washington hospitals that reported more than $2 million in charity care, FY 1999
Hospital	City	County	Charity Care

Harborview Medical Center	Seattle	King	$26,579,184
University of Washington Medical Center	Seattle	King	5,992,168
Swedish Hospital Medical Center	Seattle	King	5,289,850
Children’s Hospital and Regional Medical Center	Seattle	King	5,019,456
Providence Saint Peter Hospital	Olympia	Thurston	4,163,091
Deaconess Medical Center	Spokane	Spokane	4,162,516
Southwest Washington Medical Center	Vancouver	Clark	3,466,839
Valley Medical Center	Renton	King	3,149,462
Saint Joseph Hospital	Bellingham	Whatcom	3,025,167
Good Samaritan Hospital	Puyallup	Pierce	2,930,771
Sacred Heart Medical Center	Spokane	Spokane	2,844,895
Providence Seattle Medical Center	Seattle	King	2,803,267
Providence General Medical Center	Everett	Snohomish	2,644,260
Overlake Hospital Medical Center	Bellevue	King	2,638,327
Saint Joseph Medical Center	Tacoma	Pierce	2,455,305
Tacoma General Hospital	Tacoma	Pierce	2,154,110
Yakima Valley Memorial Hospital	Yakima	Yakima	2,115,758
Evergreen Hospital Medical Center	Kirkland	King	2,033,778
Northwest Hospital	Seattle	King	2,016,685

Total			$85,484,890

Source: FY 1999 Washington Department of Health Financial Data Year-end Reports

Appendix 1 lists each hospital’s charity care as dollar amounts and as percentages of its total gross patient revenue and adjusted revenue. Statewide charity care in FY 1999 averaged 2.19% of adjusted revenue (2.46% in FY 1998).

The three hospitals providing the most charity care as a percentage of gross patient revenue were:

• Harborview Medical Center - Seattle, at 5.79%

• Children’s Hospital - Seattle, at 2.30%

• Good Samaritan Hospital - Puyallup, at 1.80%

The three hospitals providing the most charity care as a percentage of adjusted revenue were:

• Harborview Medical Center - Seattle, at 12.82%

• Lourdes Counseling Center - Richland, at 4.24%

• Yakima Valley Memorial Hospital - Yakima, at 3.95%

Three hospitals reported zero charity care in FY 1999.

Tables 3 and 4 group hospitals into five regions. The 1999 proportions of charity care show wide variations among different areas of the state. Four of the five regions are groups of 13 to 21 hospitals in contiguous counties. The fifth region, King County, is the state’s largest population center and has a concentration of 18 hospitals.

Table 2. Washington hospitals that reported more than $2 million in charity care, FY 1999