Savannah, Georgia Area: Charity and Bad Debts

The hot topic right now in reimbursement is charity and bad debts and how that data is used in the Uncompensated Care DSH (UC DSH) formula. UC DSH was created to help cover hospital’s costs for care for the uninsured. It will not make the hospital whole, but it is more than nothing.

I covered some of the background in my Augusta, Georgia post.¹

Charity

We’ll start with CMS’s definition of charity:

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.²

Each hospital sets their own policy. This is important because it makes it hard to really compare charity costs between hospitals because the policy is not dictated by the government. I don’t think it should be, but it’s important to know that it’s not.

Hospital	Cost Report Year	Charity Cost
MEMORIAL HEALTH UNIV MED CEN	01/31/2018	$46,636,650
CANDLER HOSPITAL	06/30/2018	$30,130,691
ST JOSEPH’S HOSPITAL - SAVANNAH	06/30/2018	$24,100,079
BEAUFORT COUNTY MEMORIAL HOSPITAL	09/30/2018	$21,346,784
EAST GEORGIA REGIONAL MEDICAL CENTER	09/30/2018	$6,611,859
HILTON HEAD REGIONAL MEDICAL CENTER	12/31/2017	$3,212,830
WAYNE MEMORIAL HOSPITAL	06/30/2018	$1,496,016
MEADOWS REGIONAL MEDICAL CENTER	06/30/2018	$5,530,262
EVANS MEMORIAL HOSPITAL	09/30/2018	$62,687
COASTAL CAROLINA HOSPITAL	12/31/2017	$2,153,021
APPLING HOSPITAL	08/31/2018	$876,492

These figures are overwhelming. The hospitals are offering a lot of charity care. These are the charity care cost, which means they are netted down from the charge amount (charges * cost-to-charge ratio = cost). The county and state could be subsidizing these programs. The federal government is subsidizing a little through the UC DSH program. With all of these programs though, the facility still bears a good bit of the cost.

Bad Debt Expense

A bad debt occurs when a patient fails to pay their portion for the services they were provided within a time frame generally decided by the hospital. Let’s break this down a little further with an example. Patient comes to hospital due to symptoms of a heart attack. Patient survives and returns home after a short stay in the hospital. The patient’s insurance is billed and the patient is left with a $1,000 deductible that they are responsible for. The patient is not able to pay the deductible at this time. Six months pass and the patient makes no attempt to pay the bill. Eventually, the account goes from Accounts Receivable status to Bad Debt status. This is merely a formality because the patient still owes the $1,000. When the account goes to bad debt status and the hospital did what they could to collect the monies owed, the hospital is allowed to claim this amount on the Medicare Cost Report as a bad debt expense.

The example above is only provided to give you an idea of what might happen to cause an account to go to bad debt status. To further complicate things, Medicare bad debts are reported separately than Non-Medicare, so I’ll show the amounts separately. Since this is a governmental report, there are lots of nuances to this. I could go on and on, but I’m trying not to bore you too much with the details.

Now lets look at the amounts that are being claimed at these hospitals for bad debt expense.

Hospital	Cost Report Year	Medicare	Non-Medicare
MEMORIAL HEALTH UNIV MED CEN	01/31/2018	$851,977	$12,826,872
CANDLER HOSPITAL	06/30/2018	$887,478	$2,794,293
ST JOSEPH’S HOSPITAL - SAVANNAH	06/30/2018	$784,146	$3,429,350
BEAUFORT COUNTY MEMORIAL HOSPITAL	09/30/2018	$209,223	$8,393,450
EAST GEORGIA REGIONAL MEDICAL CENTER	09/30/2018	$672,071	$5,468,143
HILTON HEAD REGIONAL MEDICAL CENTER	12/31/2017	$245,160	$3,549,799
WAYNE MEMORIAL HOSPITAL	06/30/2018	$442,002	$3,857,321
MEADOWS REGIONAL MEDICAL CENTER	06/30/2018	$615,415	$7,380,512
EVANS MEMORIAL HOSPITAL	09/30/2018	$80,145	$803,250
COASTAL CAROLINA HOSPITAL	12/31/2017	$250,495	$2,645,479
APPLING HOSPITAL	08/31/2018	$477,124	$1,379,318

The Medicare figures are a little underwhelming. These are Medicare Part A & B bad debts. Medicare Part C (Medicare HMO or Medicare Advantage) bad debts are not a part of this number. They may not have a lot of traditional Medicare patients. I was surprised when I looked at Augusta’s figures too, so maybe I need to adjust my expectations. Things like this are a good learning opportunity for me.

Total Uncompensated Care

This is a combination of charity and bad debt expense.

Hospital	Cost Report Year	Total Uncomp Care
MEMORIAL HEALTH UNIV MED CEN	01/31/2018	$59,761,714
CANDLER HOSPITAL	06/30/2018	$33,235,601
ST JOSEPH’S HOSPITAL - SAVANNAH	06/30/2018	$27,803,880
BEAUFORT COUNTY MEMORIAL HOSPITAL	09/30/2018	$29,813,462
EAST GEORGIA REGIONAL MEDICAL CENTER	09/30/2018	$12,315,227
HILTON HEAD REGIONAL MEDICAL CENTER	12/31/2017	$6,848,435
WAYNE MEMORIAL HOSPITAL	06/30/2018	$5,508,037
MEADOWS REGIONAL MEDICAL CENTER	06/30/2018	$13,126,169
EVANS MEMORIAL HOSPITAL	09/30/2018	$893,988
COASTAL CAROLINA HOSPITAL	12/31/2017	$4,886,174
APPLING HOSPITAL	08/31/2018	$2,422,804

Holy cow! That’s a lot of bad debt expense. This is at cost. So theoretically, Memorial Health provided uncompensated services which cost them almost 60 million dollars. I only say theoretically because it’s probably not exactly the number calculated, but it’s in the ball park.

Uncompensated Care DSH Payments

Since we’ve looked at the amount of uncompensated care services provided, I want to show what the federal government provided as compensation through the UC DSH program.

Hospital	Cost Report Year	UC DSH Payments
MEMORIAL HEALTH UNIV MED CEN	01/31/2018	$7,986,896
CANDLER HOSPITAL	06/30/2018	$3,467,641
ST JOSEPH’S HOSPITAL - SAVANNAH	06/30/2018	$0
BEAUFORT COUNTY MEMORIAL HOSPITAL	09/30/2018	$2,246,732
EAST GEORGIA REGIONAL MEDICAL CENTER	09/30/2018	$2,191,425
HILTON HEAD REGIONAL MEDICAL CENTER	12/31/2017	$0
WAYNE MEMORIAL HOSPITAL	06/30/2018	$794,913
MEADOWS REGIONAL MEDICAL CENTER	06/30/2018	$1,325,409
EVANS MEMORIAL HOSPITAL	09/30/2018	$129,128
COASTAL CAROLINA HOSPITAL	12/31/2017	$179,780
APPLING HOSPITAL	08/31/2018	$391,231

In the last section, we saw that Memorial Health provided roughly $60 million in uncompensated care. We see in the above table that through the UC DSH program, they were compensated $8 million. That leaves a huge gap for these hospitals to shoulder.

There are two hospitals that received zero UC DSH payments: St Joseph’s Hospital & Hilton Head Regional. One of the qualifications for this program is that the hospital must have a disproportionate share of Medicaid patients. A disproportionate share is 15% by Medicare standards. St Joseph was at 12% and Hilton Head regional was at 9%. The St Joseph figure really surprises me. I just figured they could get to 15% easily. Obviously, I’m wrong, but it’s not the first time. Hilton Head Island is a beautiful island where many have second homes. I can see where maybe they don’t have a large Medicaid population. The census data will shed more light on this.

Musing Revalations

I’ve spent a lot of my career looking at these numbers for just a handful of hospitals. These figures surprise me greatly, but I consider this a good thing. I really want to learn more about these markets that I’ve never worked in. It’s remarkable how much these hospitals give back to their community. Looking at charity and bad debt figures cast a different light than most see for a hospital. Most of the time we hear about how crazy the charges are at a hospital. I don’t deny that part. But there is a lot of good provided by these hospitals. We could all use more positive news in our lives, even hospitals.

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.