Unpaid patient bills, cost of caring for the poor increasing

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LEWISTON — As the nation’s economic recovery slogs on, the number of patients refusing to pay their hospital bills and the amount of free care given to the poor at Maine hospitals has risen to unheard-of levels, with the losses in some cases outpacing even the controversial debt owed hospitals by the state.

Portland’s Maine Medical Center, the state’s largest hospital, has seen the amount of charity care given away to the poor nearly double in the past four years, from $18.2 million in 2007 to $35.2 million in 2010.

Farmington’s Franklin Memorial Hospital’s charity care doubled in only two years, giving away $2.3 million worth of care in 2008 and $4.7 million in 2010.

And bad debt — the amount owed to hospitals by patients deemed able to pay — has skyrocketed at some hospitals: 80 percent at Southern Maine Medical Center in Biddeford, from $5.4 million to $9.7 million; and 44 percent at Central Maine Medical Center in Lewiston, from $9.3 million to $13.3 million, over the past four years.

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A Sun Journal survey and analysis of the state’s largest hospitals and the four smaller hospitals in Central and Western Maine shows that charity care and bad debt figures are high and rising, reaching levels hospital experts had never seen. While some Maine hospitals have largely blamed the lack of full MaineCare reimbursements from the state for the financial woes that have led to recent layoffs and a slew of other cuts, the Sun Journal found that bad debt and charity care appear to be bigger factors in many cases. 

Two factors cited by some hospitals as contributing to their financial woes — fewer patients coming to Maine hospitals and a larger number of MaineCare patients — did not seem to play major roles.

Bad debt, charity care

Like other businesses affected by the economy, hospitals have struggled financially. In the past year, a number of hospitals have announced cost-cutting measures, including slashes in spending, benefit reductions, hiring freezes and job cuts.

St. Mary’s Regional Medical Center in Lewiston restructured in an effort to save money and make patient care more efficient. In September, Central Maine Healthcare, the parent organization of CMMC, Bridgton Hospital and Rumford Hospital, announced it was laying off 35 workers, eliminating 45 empty positions and cutting by 8 percent the salaries of administrators, all to help fill a $10 million budget gap. 

Many hospitals blamed their financial problems on four factors:

— The $300 million in MaineCare bills unpaid by the state (based on state figures).

— Fewer patients.

— An increasing percentage of patients insured by MaineCare, which pays less than private insurance.

— More patients unwilling or unable to pay their hospital bills.

The Sun Journal analysis showed that most hospitals surveyed did not see a significant increase in MaineCare patients, with percentages remaining steady or falling slightly for nearly all.

St. Mary’s Regional Medical Center in Lewiston and Mercy Hospital in Portland showed the largest increase — a little more than 4 percent each — but both hospitals could provide 2010 figures only for part of the year, which can make percentages appear higher than normal.

The Sun Journal also found that while a couple of hospitals saw — or expect to see by the end of 2010 — a 20 percent drop in patient numbers over four years, most did not have a significant drop and some had an overall increase.

CMMC, for example, saw a 9 percent increase in patients over four years and steady patient levels between 2009 and 2010. But during its layoff announcement, the hospital blamed its financial difficulties, in part, on dropping patient numbers. When asked about the Sun Journal’s findings, CMMC spokesman Chuck Gill agreed that patient numbers were not down overall but said they were down compared to hospital projections.

MaineCare debt, however, has been an issue for years. Hospitals are owed millions, some tens of millions. CMMC says it’s owed $51 million for the past four years. Eastern Maine Medical Center in Bangor said it’s owed $58 million.

While the state agrees that it owes hospitals for MaineCare, it said it has paid them $2.7 billion in regular weekly payments since 2003 and nearly $1 billion more in debt payments since 2006, cleaning up money owed between 1993 and 2007. Brenda Harvey, head of the Maine Department of Health and Human Services, said MaineCare accounts for 16 to 17 percent of hospital revenue overall, making it, in her view, unlikely that MaineCare debt is largely responsible for a hospital’s financial difficulties.

“For most hospitals, we are not a significant revenue source, so other things have to be going on,” Harvey said.

Bad debt and charity care appear to be some of those “other things.”

For bad debt, Maine Medical, CMMC and SMMC show the biggest increases of the hospitals surveyed. There were also significant fluctuations in bad debt year to year for Penobscot Bay Medical Center in Rockport.

For charity care, Eastern Maine Medical Center in Bangor, Franklin Memorial Hospital in Farmington, MaineGeneral in Augusta and Waterville, CMMC and Maine Med had the biggest jumps. St. Mary’s Regional Medical Center also projected a significant increase.

Officials at Franklin Memorial began analyzing their charity care in 2008. At the time, it was $2.3 million. Two years later it was $4.7 million.

“We were just getting boatloads of applications,” said Melanie Meader, head of accounting for Franklin Memorial. “We were assuming (it was) the economy and at some point it would level off. It just hasn’t.”

In the first three months of fiscal year 2011 — July, August and September — Franklin Memorial’s charity care was twice what it was for the first three months of fiscal year 2010.

Many hospital officials believe the rise in charity care and bad debt is directly due to the economy. When patients lost their jobs, they typically also lost their health insurance. Those who still had insurance often found themselves with dramatically higher deductibles, co-payments and other out-of-pocket requirements. That’s because their employer wanted to save money on insurance or because they were suddenly solely responsible for their own insurance and sacrificed reasonable deductibles for an affordable monthly cost.

“We’re seeing more and more of an obligation to the patient,” said Carolyn Kasabian, chief financial officer for St. Mary’s. “Often the health-care bill is not the first bill that’s going to get paid. Let’s be honest.”

For at least some hospitals, bad debt and charity care are far surpassing money owed by MaineCare. At EMMC, charity care and bad debt cost $136 million over four years. MaineCare owed $58 million, officials said.

Hospitals still served people without insurance or with deductibles they couldn’t afford to pay. But now, those hospitals say, their budgets are suffering.

“There gets to be a time when there’s no cash left,” said Gill at CMMC.

‘We don’t see it improving any time soon’

Nationally, experts have predicted the economy — and the outlook for hospitals — could soon pick up. Local hospital leaders are skeptical.

“I’ve been hearing, ‘Things will pick up after the first of the year,’ forever,” Gill said.

Local health-care experts have their own predictions. Some believe it will take a major overhaul of the health-care system to get hospitals back in the black and keep them there for the long term. Others say it will take something more basic: a better unemployment rate. 

“Job creation cures a lot of ills,” said Steven Michaud, president of the Maine Hospital Association.

No matter what their predictions, no one believes anything will happen fast.

“We don’t see it improving any time soon,” Michaud said. 

As hospitals cope, one thing they say they won’t do as they wait for the economy to rebound is restrict services to the poor.

“We will continue to care for patients, regardless of their ability to pay,” Kasabian said.

Still, some fear full economic recovery won’t come soon enough.

“Unfortunately, you reach a point where you can’t reduce,” said Mer Doucette, chief financial officer for EMMC. “You can’t continue to perform the same service and continue to reduce the cost.”

ltice@sunjournal.com

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