March 11, 2005

Cost of charity care could rise even higher

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Cost of charity care could rise even higher

Charity does not come cheap.

For a large, comprehensive health care institution such as Vanderbilt University Medical Center, providing charity care to the region's most financially vulnerable individuals is an expensive proposition. And if the proposed sweeping changes to the state's TennCare system successfully navigate the legal system and are approved by federal regulators, the cost of providing that care is likely to rise as more people become uninsured.

According to the latest figures available from the State Department of Health, VUMC spent nearly $23 million in 2003 providing charity care and care to the medically indigent. That figure is more than double the amount of charity and medically indigent care provided by Saint Thomas Hospital and Baptist Hospital combined.

In the most recently completed fiscal year, VUMC spent nearly $43 million on charity and medically indigent care, with the increase primarily attributable to TennCare eligibility changes that took place the previous year. When bad debt is factored in VUMC's uncompensated care — comprised of charity care, medically indigent care and bad debt — reached $91.2 million in 2003 and leaped to $119 million in 2004, according to figures provided by the Medical Center's Finance department.

The numbers are staggering. They dwarf the charity care, medically indigent care and total uncompensated care figures reported by every other health care provider in Middle Tennessee.

In fact, the $91 million VUMC spent on uncompensated care, of which $23 million went to charity/medically indigent care, in fiscal year 2003 is roughly equal to the combined total spent by nine of the largest health care providers in the Nashville region.

When viewed in list form the contrast is stark and the numbers fairly jump from the page, making it clear that VUMC is the true caretaker of Middle Tennesseeans in need.

“Vanderbilt has a long and proud tradition of caring for its patients, regardless of their ability to pay,” said Harry R. Jacobson, M.D., vice chancellor for Health Affairs. “That has been one of our core missions, and should be one shared by all physicians and all hospitals.”

VUMC's percentage of uncompensated care in relation to total gross patient revenue stood at 5.2 percent in 2003. Though not the highest in the area — that distinction belongs to Metro Nashville General Hospital, whose uncompensated care was 22.3 percent of gross patient revenue — the sheer volume of uncompensated care patients who come through Vanderbilt's hospitals, clinics and emergency departments is immense and it's quite possible that those numbers will only grow in the years to come.

Changes proposed to the state's TennCare system include cutting benefits and dropping 323,000 people statewide from the program. It's expected that nearly 100,000 of those dropped will be in the Middle Tennessee region. Many of these people will still need health care, but they won't have a way to pay for it. If past is prologue many of these families will look to Vanderbilt for their care.

“We do not have any expectations that volumes will change in the absence of intervention or alternative health care options to be developed by the state,” said Warren Beck, director of Finance for Vanderbilt University Hospital. “The biggest change we see is the change in payer mix. We expect to see the TennCare patients convert to self-pay and it's likely that this will result in an increase in charity or medically indigent write-offs.”

How much VUMC's uncompensated care might rise is difficult to predict, but early estimates show that it could rise from its current 5.6 percent of gross patient revenue to between 9 percent and 10 percent, with each percentage-point increase costing an additional $22 million.

These figures are projections and don't factor in the possibility of additional state and federal funds being made available to health care institutions, such as VUMC, who are deemed 'safety net' providers. Last month, Gov. Phil Bredesen appointed a task force to study the issue and make recommendations as to how best allocate any additional funds that are made available.

These dramatic changes in the landscape of health care will create unique challenges. Vanderbilt's response to these changes will need to account for just how much of the increasing burden of uncompensated care can be borne here without more support from the State and without a more active and energetic commitment from the other hospitals in middle Tennessee. Absent that, Vanderbilt may well have to explore setting limits on the amount of charity care it can provide. These are very difficult decisions that must be faced in the coming weeks.