Bad Debt Rises at Minnesota's Hospitals; Charity Care Falls

Thirteen Minnesota hospital systems reported a bad-debt increase of $15 million between 2013 and 2014 even as charity care costs - reported by 10 hospital systems - fell by about $37 million in the same period, according to an analysis by the Minneapolis Star Tribune.

Lower charity care at hospitals was one of the key goals of the Affordable Care Act, said Nancy Kane, a professor of management at the Harvard T.H. Chan School of Public Health. People who rely on free care suffer from economic insecurity that can have negative consequences, she said, including delays in seeking needed care. 

One fear is that growing bad debt numbers might indicate people newly covered under the health law are facing a new form of insecurity - high deductibles that leave them with medical bills that are capped but still unaffordable.

"The bad debt piece is the wild card," Kane, who does research in hospital finance, told the newspaper. "A lot of the exchange products are affordable because of deductibles that are higher than people are used to."

The analysis draws on data from some of the state’s largest health care providers and numbers from two of the state’s largest charity care providers.

The Minnesota Hospital Association also is collecting numbers on uncompensated care to assess the weight of the Affordable Care Act. Responses from 26 hospitals point to a decline in charity care in 2014, along with an increase in bad debt. Stefan Gildemeister, Minnesota's health economist, said factors other than the health law could have contributed to the decline in charity care. The state’s economy was stronger in 2014, likely meaning people had more job-based coverage and income for medical expenses, for example. Charity care numbers at some hospitals also can fluctuate each year because of several factors, but there’s more evidence of a common explanation such as the health law when there is a change in the same direction across many facilities, Gildemeister said.
The Star Tribune analysis showed one of the biggest jumps in bad debt costs came at Children's Hospitals & Clinics of Minnesota. The state’s largest independent pediatric medical center saw bad debt rise by about 75% to nearly $13 million in 2014.Private health insurance policies for years have featured growing deductibles and other out-of-pocket costs as a way to limit growth in premiums. Hospitals have cited these changes as a key driver in the growing amount of unpaid bills they must write off. 

For reprint and licensing requests for this article, click here.
Consumer banking Debt collection
MORE FROM AMERICAN BANKER