Determinants of hospital bad debt: multivariate statistical analysis.

Although the issue of uncompensated care (bad debt plus charity care) has been actively debated in the public arena, there has been little discussion of the bad debt issue alone. This issue is important since issues of bad debt, charity care and uncompensated care are significantly different from each other. Based on 1992 State of Missouri data, the results of our study indicate that more efficient hospitals (measured by occupancy rate), hospitals with more patients covered by prospective payment systems (measured by Medicare discharges), and for-profit hospitals incurred significantly less bad debt cost than other hospitals. However, the difference in bad debt between for-profit hospitals and not-for-profit hospitals is dissipated when using a multivariate statistical model. In addition, this study also reveals that hospitals which provide more charity care have the lowest bad debt costs. Policy implications are also discussed.     

Factors affecting charity care and bad debt charges in Washington hospitals

Uncompensated care has become a major issue in hospital finance as the number of uninsured persons has increased and hospital revenues have declined. Uncompensated care charges have two components--charity care and bad debt--that are distinct conceptually but often are commingled in hospital accounting practice. Data on charges assigned to charity care and bad debt in 1987 for 82 short-stay hospitals in Washington were merged with data from the 1987 Medicare Cost Report and AHA Annual Survey. The regression analyses performed indicate that the determinants of the percent of charges for charity care, bad debt, and total uncompensated care differ and suggest that bad debt should be isolated from charity care when estimating a hospital's level of effort in providing care to indigent patients.     

Reporting charity care. Hospitals must prepare to comply with new AICPA accounting rules

To comply with new accounting rules issued by the American Institute of Certified Public Accountants (AICPA), hospitals will have to change the way they report charity care in the financial statements they prepare for fiscal years ending mid-July 1991 and later. In the past, those hospitals which did report charity care information usually lumped it with bad debts under a caption such as "uncompensated services" or disclosed a specific amount of charity care to comply with Hill-Burton or other governmental programs. From now on, however, providers' financial statements must distinguish bad debt from charity care, not report gross patient revenues in the income statement, not imply that charity services generate revenue or receivables, make specific disclosures about the level of charity care provided, and report bad debts as an expense, rather than as a deduction from revenue. Distinguishing bad debts from charity care will be difficult. The AICPA defines bad debts as actual or expected uncollectibles resulting from an extension of credit, and charity care as services for which the provider does not expect payment. The AICPA believes that facilities which establish a definitive management policy on charity care should be able to distinguish between the two. To collect the data necessary to meet the AICPA requirements, hospitals need to establish a method to catalog the charity services they provide. Facilities should also ensure that patients and staff are familiar with their charity care policies.     

Hospitals put teeth into efforts to collect bad debt

The growth of bad debt and accounts receivable is prompting hospitals across the county to adopt more stringent collection policies. Some hospitals that have gotten tough are finding that these programs can significantly increase cash flow. But experts warn that such measures invite public criticism. Many hospital administrators, however, are finding they have no choice except to go after patients who have the means to pay.     

The costs and financing of perinatal care in the United States.

OBJECTIVES. The purpose of this study was to estimate the aggregate annual costs of maternal and infant health care and to describe the flow of funds that finance that care. METHODS. Estimates of costs and financing based on household and provider surveys, third-party claims data, and hospital discharge data were combined into a single, best estimate. RESULTS. The total cost of perinatal care in 1989 was $27.8 billion, or $6850 per mother-infant pair. Payments made directly by patients or third parties for this care totaled $25.4 billion, or about 7% of personal health care spending by the nonaged population. Payments were less than costs because they did not include a value for direct delivery care or for bad debt and charity care, which accounted for $2.4 billion. Private insurance accounted for about 63% of total payments, and Medicaid accounted for 17% of the total. CONCLUSIONS. National health reform would provide windfall receipts to hospitals, which would receive payment for the considerable bad debt and charity care they provide. Reform might also provide short-term gains to providers as private payment rates are substituted for those of Medicaid.     

Assessing the Differences and Similarities Between Hospital Chains and Independents Regarding Revenues,Profits, and Community Contributions

Hospital systems or chains continue to grow their market share relative to independent hospitals. This trend generates concerns among health care industry observers as historical performance suggests chains charge more for health care services than the independents while providing reduced contributions to their community. This study empirically assesses key performance measures of 67 acute-care hospitals in Virginia by testing if there are differences between chains and independents regarding total patient revenues, revenues per admission, profitability and community support, including charity care, bad debt, taxes paid and Medicaid participation. Implications to industry policy-makers as well as to hospital executives and marketing managers are then presented.     

Alternative funding policies for the uninsured: exploring the value of hospital tax exemption

The tax exemption accorded private, nonprofit hospitals is being subjected to more scrutiny as the numbers of uninsured grow; meanwhile, charity care competes with market-driven priorities. Current public policies tie hospital tax exemption to the provision of charity care, but there is a gap in the size and distribution of values between tax exemption and the charity care that is provided. Most hospitals, in a study reported here, provided free care at a level below the value of their tax exemption, even when 50 percent of bad debt was included in the care value. However, hospitals in the poorest communities offered considerably more care than the value of their tax exemption, whereas those in wealthier communities offered considerably less. Policies at local, state, and federal levels should be designed to exert leverage on hospitals to provide free care at a level commensurate with the value of their tax exemptions.     

Inner-city hospital closures: financial decision or impediment to access?

This article applies a financial ratio model and a behavioral model of health services use' to examine inner-city hospital closures. We use Medicare Cost Report financial information and demographics to find evidence that hospitals with high debt, less severity of illness, and lower occupancy rates are more likely to close, as expected. We also find that urban hospitals with a high elderly population are more likely to remain open. However, hospitals in our study with a high proportion of Medicare patients and a high minority population are more likely to close. This last finding may have important public policy consequences for access to health care for vulnerable populations, particularly in a recessionary economy under health care reform.     

Charitable intentions. CHA, VHA unveil community-benefit guidelines developed to help not-for-profit hospitals justify their tax exemptions

With new guidelines from the CHA and VHA on reporting community benefits, not-for-profit hospitals are being advised to drop bad debt and Medicare shortfalls from their accounting of how they fulfill their mission. While the AHA doesn't agree, some experts do. MedPAC member Nancy Kane, right, says bad debt "is a tough one, but I don't think a lot of bad debt is a community benefit.     

Health care providers under pressure: making the most of challenging times

Whether the slowing economic recovery, tight credit markets, increasing costs, or the uncertainty surrounding health care reform, the health care industry faces some sizeable challenges. These factors have put considerable strain on the industry's traditional financing options that the industry has relied on in the past--bonds, banks, finance companies, private equity, venture capital, real estate investment trusts, private philanthropy, and grants. At the same time, providers are dealing with rising costs, lower reimbursement rates, shrinking demand for elective procedures, higher levels of charitable care and bad debt, and increased scrutiny of tax-exempt hospitals. Providers face these challenges against a back ground of uncertainty created by health care reform.     

Hospitals and health systems: the best of times and the worst of times

Hospitals and health systems, whether general acute care hospitals or specialty-driven hospitals, are attempting to prosper in a unique time. This year, hospitals throughout the country will see increased reimbursement for hospital inpatient services, rather than decreased reimbursement. Many hospitals are examining a multitude of options for debt financing and a number of the nation's hospitals are in the process of renovating, expanding, or replacing their current hospitals. Further, more private equity and venture capital funds are pursuing hospital investments than seen in several years. Despite the positive signals stemming from many of the country's hospitals, this remains a time of tremendous uncertainty and risk in the hospital industry. This article discusses five strategic and development issues facing many hospitals and addresses how hospitals can prepare for the future should the current climate, supportive of growth, development, investment, and debt financing, change.     

公立医院债务风险成因及化解策略探讨

在财政投入有限的情况下,医院为扩大规模,改善就医条件,提高综合实力,对外举债无疑是一条重要的筹资渠道,但是公立医院长期背负债务负重前行,在目前结余率极低的状况下,总体资产良好的局面会很快消失,取而代之的是沉重的债务负担,这既不利于维护公立医院的公益性质,也给医院的可持续发展带来了风险。文章通过对某地区18家公立医院的债务融资的现状进行分析,探讨其产生的根本原因,提出债务化解的方法和建议。     

Evaluating the underlying factors behind variable rate debt

BACKGROUND: Recent trends show a greater usage of variable rate debt among health care bond issues. In 2004, 63.4% of the total health care bonds issued were variable rate compared with 30.6% in 1995 (Fitch Ratings, 2005). PURPOSE: The purpose of this study is to gain a better understanding of the underlying factors, credit spread, issue characteristics, and issuer factors behind why hospitals and health system borrowers select variable rate debt compared with fixed rate debt. METHODOLOGY: From 2000 to 2004, this study sampled 230 newly issued tax-exempt bonds issued by acute care hospitals and health care systems that included both variable and fixed rate debt issues. Using a logistic regression model, hospitals with variable rate debt issues were assigned a value of 1, whereas hospitals with fixed rate debt issues were assigned a value of 0. FINDINGS: This study found a positive association between bond insurance and variable rate debt and a negative association between callable feature and variable rate debt. Facilities located in certificate-of-need states that possessed higher case mix acuity, earned higher profit margins, generated higher debt service coverage, and held less debt were more likely to issue variable rate debt. PRACTICE IMPLICATIONS: Overall, hospital managers and board members of hospitals possessing a strong financial performance have an interest in utilizing variable rate debt to lower their cost of capital. In addition, this outcome may also reflect that investment bankers are doing a better job in educating senior hospital management about the interest rate savings benefit of variable rate compared with fixed rate debt.     

Uncompensated hospital care for pregnancy and childbirth cases.

BACKGROUND: The large number of medically indigent patients in the United States is a major concern to policymakers and may be due to recent increases in the number of uninsured people. The purpose of this study was to identify the factors that affect the amount of unpaid hospital charges for services provided to pregnant women. METHODS: Individual and hospital data were collected on a representative set of 235 pregnancy and childbirth patients with unpaid hospital charges from 28 hospitals in the state of Indiana. RESULTS: Most of these patients did not have insurance coverage (63.8%), yet the majority were employed in the public or private sector (72.3%). Over half (55.5%) of the total uncompensated care amount for this group was from the $1000 to 2499 debt category. The median charge for these patients was $1468, of which the typical hospital was able to collect only 25.5%. CONCLUSIONS: The findings support the belief that any national effort to expand the availability of health insurance coverage to women through increased employment will not totally eliminate the uncompensated care problem. The findings also indicate that rural hospitals face the uncompensated care problem mainly because a significant portion of rural patients are without adequate health insurance coverage.     

Wyoming physicians are significant providers of safety net care

BACKGROUND: This study describes the contributions of family and general practice physicians from Wyoming to the health care safety net. METHODS: We surveyed family and general practice physicians in Wyoming about provider demographics, practice composition, and policies for treating the underinsured or uninsured. Two-tailed chi(2) tests and limited logistic regressions were used to test for differences among characteristics of safety net providers. RESULTS: From a 50% response rate, 61% made less than the national mean family physician income (USD$130,000), and women are less likely than men to make this mean income, even when controlling for hours worked (OR, 0.09; CI, 0.009, 0.862). Close to two thirds claimed bad debt of over USD $10,000, and 29.3% noted forgiven debt of over USD $10,000. Physicians with less income than the prior year were more likely to decrease their charity care. CONCLUSIONS: Wyoming family and general practice physicians provide significant amounts of informal safety net care, which is threatened by income loss. Thoughtful public policy is needed to ensure that vulnerable rural Americans have access to care that is not tied to the financial well being of their health care providers.     

A determination of institutional and patient factors affecting uncompensated hospital care

For this study, a sample of 985 patients classified as "charity" and "bad debt" cases in 1986 were identified from 28 Indiana hospitals. In a multiple regression model, insurance coverage, total hospital charge, pregnancy-related diagnoses, marital status, employment status, discharge status, urban location, and total hospital revenue were significant factors in predicting unpaid hospital bills, when controlling other demographic characteristics. Sixty percent had some form of insurance and were responsible for 40 percent of the uncompensated amount, justifying the need to examine the adequacy of patient insurance coverage. However, providing insurance coverage will not entirely eliminate the problem of uncompensated care; hospitals also need to increase collection efforts for all unpaid bills.     

What next after the ‘commercialization’ of public hospitals? Searching for effective solutions to achieve financial stability of the hospital sector in Poland

The problem of hospital indebtedness has fraught the Polish health care sector for many decades. While it is largely attributed to the shortcomings of the legal form of the independent public health care unit (SPZOZ), which is the main legal form in which public hospitals operate in Poland, analysis of hospital indebtedness shows that the problem had been apparent before this legal form was introduced in 1999. The problem also did not appear to diminish with the transformation of the SPZOZs into Commercial Code companies, which effectively started in 2011 and was recently halted. While the shortcomings of the legal forms (SPZOZ and others) in which public hospitals operated did contribute to the accumulation of debts in the hospital sector, limited public spending on health and certain reforms were also to blame. Further, repeated rounds of debt reduction financed by the state have likely instilled the conviction among the hospital directors that debts would always be cleared eventually and provided little incentive for prudent financial management. While the government has recently pledged to increase public spending on health, this alone does not guarantee to resolve the problem of hospital indebtedness. Other key changes, such as implementing rational financial management in the hospitals and shifting more care from hospitals to primary and long-term care, are also needed.     

Capital structure strategy in health care systems

The capital structures (the relative use of debt and equity to support assets) of leading health care systems are viewed as a strategic component of their financial plans. While not-for-profit hospitals as a group have maintained nearly constant levels of debt over the past decade, investor-owned hospitals and a group of leading health care systems have reduced their relative use of debt. Chief financial officers indicated that in addition to reducing debt because of less favorable reimbursement incentives, there was a focus on maintaining high bond ratings. Debt levels have not been reduced as sharply in these health care systems as they have in investor-owned hospitals, in part due to the use of debt to support investments in financial markets. Because these health care systems do not have easy access to equity, high bond ratings and solid investment earnings are central to their capital structure policies of preserving access to debt markets.     

我国公立医院债务融资的现状、成因和治理策略

公立医院债务融资是当前深化公立医院管理体制改革中一个迫切需要研究的问题.本文根据债务融资理论与原理,分析我国公立医院债务融资的现状,在讨论其产生原因的基础上上,从完善对公立医院的投入和监管机制、控制负债规模、保持合理的负债结构、拓宽公立医院投融资渠道、实施对外业绩信息发布制度、建立明晰的领导任期内经济责任制等方面提出了完善公立医院债务融资的政策建议.     

Hospital sector choice and support for public hospital care in New Zealand: Results from a labeled discrete choice survey

This study uses a discrete choice experiment (DCE) to measure patients’ preferences for public and private hospital care in New Zealand. A labeled DCE was administered to 583 members of the general public, with the choice between a public and private hospital for a non-urgent surgery. The results suggest that cost of surgery, waiting times for surgery, option to select a surgeon, convenience, and conditions of the hospital ward are important considerations for patients. The most important determinant of hospital choice was whether it was a public or private hospital, with respondents far more likely to choose a public hospital than a private hospital. The results have implications for government policy toward using private hospitals to clear waiting lists in public hospitals, with these results suggesting the public might not be indifferent to policies that treat private hospitals as substitutes for public hospitals.