Augusta, Georgia Area: Charity and Bad Debts
Today I want to explore Worksheet S-10 for the Augusta, Georgia area hospitals. This worksheet is THE hot topic these days in Medicare reimbursement. I’ll start off with a little background and then we’ll take a look at the data.
This worksheet is for Hospital Uncompensated and Indigent Care data. It is now used for disbursing the Uncompensated Care DSH money pool. What is DSH, you ask? DSH stands for disproportionate share hospital. The disproportionate share initially referred to Medicaid patients. Generally, state Medicaid programs are poor and don’t pay very well. If 15% of the patients at your hospital have Medicaid, then the hospital qualifies for an add-on payment through the Medicare program. Medicare was attempting to ease the burden of taking care of indigent patients.
Then came the Affordable Care Act. Man, this has created a ton of work in this industry. It has also caused a lot of headaches with all of the rules and paperwork.
The Affordable Care Act provisioned money for hospital’s uncompensated care. Where did this money come from? The DSH pool. With this new policy, the DSH pool was divided into two pools: Empirical DSH and Uncompensated Care DSH. Empirical is just the inital calculation for DSH, but reduced by 75%. UC DSH takes the 75% remainder and, through a bunch of calculations using charity and bad debt figures from S-10, Medicare distributes the money to the hospitals.
This is relatively new, so there is tons of wrinkles to iron out. Mainly, the instructions since they seem to change constantly.
I could easily step up on my soap box about this topic, but I’ll spare you for now and just get to the data.
Charity Care
Each hospital sets their own charity care policy. Here’s CMS’ definition:
Charity care and uninsured discounts result from a hospital’s policy to provide all or a portion of services free of charge to patients who meet the hospital’s charity care policy or FAP. Charity care and uninsured discounts can include full or partial discounts. 1
Bearing in mind that every hospital makes their own policy for this, here’s what is being reported for charity care cost. I’m repeating myself because a lot of auditors don’t seem to get this concept.
| Hospital | Cost Report Year | Charity Cost |
|---|---|---|
| AU Medical Center | 6/30/2018 | $34,444,214 |
| University Health Services | 12/31/2017 | $28,317,347 |
| Doctors Hospital of Augusta | 3/31/2018 | $15,722,453 |
| Aiken Regional Medical Center | 12/31/2017 | $11,305,493 |
| McDuffie Regional Medical Center | 12/31/2017 | $2,129,817 |
| Emanuel Medical Center | 6/30/2018 | $635,919 |
| Burke Medical Center | 5/31/2018 | $443,691 |
| Washington County Regional Medical Center | 8/31/2018 | $348,975 |
| Jefferson Hospital | 12/31/2017 | $206,100 |
These are costs, not charges. I’ll talk about cost-to-charge ratios in a little bit (charges * CCR = cost), but I wanted to make that distinction.
That’s a lot of charity care, at least on the surface. We’ll look at other markets to see how they compare.
Bad Debt Expense
A patient comes to hospital and has a procedure performed. Patient is self pay and can’t pay the bill. The balance will eventually go to bad debt status on the hospital’s books. Patient still owes the balance.
When the balance goes to bad debt status, it is now considered a bad debt expense. This is the gist of this number. Doesn’t have to be self pay. It can be the coinsurance/deductible/co-pay assigned to the patient from the insurance. Basically, any balance going to bad debt status. But the hospital is not supposed to claim amounts that should have been collected from an insurance.
For patients with Medicare, there’s a whole other set of rules for them to be claimed on the cost report.
So, they are broken out separately from non-Medicare bad debts.
| Hospital | Cost Report Year | Medicare | Non-Medicare |
|---|---|---|---|
| AU Medical Center | 6/30/2018 | $3,464,540 | $14,751,417 |
| University Health Services | 12/31/2017 | $762,594 | $6,213,206 |
| Aiken Regional Medical Center | 12/31/2017 | $1,287,761 | $3,616,507 |
| Doctors Hospital of Augusta | 3/31/2018 | $1,032,145 | $2,009,608 |
| Emanuel Medical Center | 6/30/2018 | $359,232 | $2,737,765 |
| Burke Medical Center | 5/31/2018 | $107,083 | $1,725,425 |
| Washington County Regional Medical Center | 8/31/2018 | $92,664 | $1,330,388 |
| Jefferson Hospital | 12/31/2017 | $121,654 | $897,242 |
| McDuffie Regional Medical Center | 12/31/2017 | $58,433 | $872,382 |
I am shocked that University Hospital’s Medicare bad debts are under a million. Not saying they are missing anything. I just figured given their high Medicare population it would be higher.
Total Uncompensated Care
This is a total cost of charity and bad debt expense by hospital.
| Hospital | Cost Report Year | Total Uncomp Care |
|---|---|---|
| AU Medical Center | 6/30/2018 | $50,408,220 |
| University Health Services | 12/31/2017 | $34,797,461 |
| Aiken Regional Medical Center | 12/31/2017 | $18,093,311 |
| Doctors Hospital of Augusta | 3/31/2018 | $15,372,716 |
| Emanuel Medical Center | 6/30/2018 | $3,499,415 |
| McDuffie Regional Medical Center | 12/31/2017 | $3,022,651 |
| Burke Medical Center | 5/31/2018 | $2,206,595 |
| Washington County Regional Medical Center | 8/31/2018 | $1,711,795 |
| Jefferson Hospital | 12/31/2017 | $1,145,921 |
Now that we see what the hospitals reported for uncompensated care, we’ll take at look at what they received in payments.
Uncompensated Care DSH Payments
This comes from a different worksheet in the cost report, but I wanted to see how the costs correlate to the payments. Now, the payments are based on prior year cost reports, so it’s not aligned with the current year reported costs. Let’s just see how it looks.
| Hospital | Cost Report Year | UC DSH Payments |
|---|---|---|
| AU Medical Center | 6/30/2018 | $8,936,479 |
| University Health Services | 12/31/2017 | $4,083,828 |
| Doctors Hospital of Augusta | 3/31/2018 | $2,892,621 |
| Aiken Regional Medical Center | 12/31/2017 | $2,243,518 |
| Emanuel Medical Center | 6/30/2018 | $405,859 |
| Washington County Regional Medical Center | 8/31/2018 | $289,663 |
| McDuffie Regional Medical Center | 12/31/2017 | $172,859 |
| Burke Medical Center | 5/31/2018 | $134,317 |
| Jefferson Hospital | 12/31/2017 | $91,104 |
AU Medical has $50 million in UC costs and received a little less than $9 million in payments. That about an 18% return on costs. The hospital provided services that cost them $50 million to provide and they received $9 million. That’s still a pretty hefty load to carry.
Cost-to-Charge Ratios
This is almost a side topic for this post. Cost-to-charge ratios (CCRs) are on this worksheet and they are used to calculate the cost of the charity and bad debt expense. So, they are relevant, but a post on CCRs could stand alone for sure.
Here’s a good example of how CCRs work. You come to the hospital and have a procedure done. The hospital sends you a bill for a $100 bandaid. You don’t have $100. Your bill goes to bad debt status. Your $100 balance is included on the cost report for bad debt expense. The CCR (which is calculated through a good bit of data on the cost report) is applied to the $100 charge to determine what is actually cost the hospital to provide the bandaid. Let’s say the CCR is .2. The bad debt cost would be $20 ($100 * .2). This is the bad debt expense. The CCR equalizes the hospitals to an extent since charge structures are different at every hospital.
| Hospital | Cost Report Year | Cost-to-Charge Ratios |
|---|---|---|
| AU Medical Center | 6/30/2018 | .254085 |
| University Health Services | 12/31/2017 | .275840 |
| Doctors Hospital of Augusta | 3/31/2018 | .090602 |
| Aiken Regional Medical Center | 12/31/2017 | .148949 |
| Emanuel Medical Center | 6/30/2018 | .222519 |
| Washington County Regional Medical Center | 8/31/2018 | .343348 |
| McDuffie Regional Medical Center | 12/31/2017 | .220859 |
| Burke Medical Center | 5/31/2018 | .393161 |
| Jefferson Hospital | 12/31/2017 | .547434 |
I’ve never studied charge structures, so I really have no opinion on them. They are all over the place though. That’s pretty interesting to ponder.
Musing Revelation
The amount of charity provided at these hospitals is staggering. Maybe it’s not for the industry, but for my pocketbook, it’s significant.
On the surface, the Medicare bad debts feel low, but that’s just a feeling. Could be a topic for another post. We’ll see.
Man, at the bad debt expense. These hospitals provide so much for these communities. The UC DSH payments from Medicare help, but there’s still quite a gap.
This covers a good portion of Worksheet S-10 on the Medicare Cost Report. All of this data is subject to change at any given time for any number of reasons. My only goal is to look through what is reported to learn more about these hospitals. Hopefully, somewhere along the line you will learn something too.