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Hospitals battle county on care for the poor

Monday, December 14, 2009
SouthtownStar
by Maura Possley

South suburban hospitals have united against a push to regulate the amount of free care they provide to poor patients. A proposed ordinance before the Cook County Board would require that hospitals devote a certain percentage of their operating expenses to charity care. Hospitals that don't meet the required threshold would pay fees that would go into a fund that would benefit the county's hospitals.

That system - which includes Oak Forest Hospital and Stroger and Provident Hospitals in Chicago - long has borne the brunt of caring for the uninsured and underinsured.

"They (private hospitals) don't have much incentive to take care of the people without insurance," said Dr. Srinivas Jolepalem , an attending physician at Oak Forest Hospital.

Hospitals say they already provide enough charity care to earn their tax-free status.

By law, hospitals must treat any patient who walks into an emergency room regardless of their ability to pay. But some are treated up front as charity care while others are billed later and, unable to pay, fall into the bad debt category. Certain needy patients unable to pay see those debts forgiven.

Hospital administrators said in trying to meet thresholds for free care and avoid paying fees, they would be forced to cut elsewhere.

"Instead of broadening the access to care, it could really threaten the access to health care by forcing the cutting of many of the community benefits programs that we do provide at all of our locations," said Nate Llewellyn, communications manager for Advocate Health Care, parent of Oak Lawn's Christ Medical Center and South Suburban Hospital in Hazel Crest.

Advocate - the state's largest hospital network - stands to lose the most. It has the lowest figures for charity care of Southland hospitals, according to the Center for Tax and Budget Accountability, a nonpartisan fiscal research group that studies taxes, spending and economic policies.

Called the Healthcare Access Protection Initiative, or HAPI, the proposed ordinance would mandate hospitals spend 4.5 percent of their annual operating expenses on charity care. Safety-net hospitals, which see disproportionate numbers of Medicaid patients, must provide 2.3 percent.

Hospitals with an annual operating margin below 2 percent would be exempt from the charity care threshold.

Ingalls Memorial Hospital in Harvey is one such hospital. When it closed its books for 2009 in September, its operating margin was 0.1 percent, said Kurt Johnson, its president and chief executive officer.

The ordinance thresholds were calculated using figures for average annual charity care provided by hospitals in the county, plus adding in half of each hospital's so-called "bad debt," or hospital bills that go unpaid for certain needy patients.

Proponents of the ordinance want hospitals to do more to identify patients who can receive charity care when they are treated instead of billing them and forgiving debt afterward, said Heather O'Donnell, of the research group and a member of the county hospitals oversight board.

"For hospitals that's an accounting issue," she said. "The point is for the hospitals to get a charity care plan in place rather than debt collection. To a patient, it makes a world of difference."

But Southland hospital administrators said it's a more difficult problem than accounting. Determining charity care means assessing a patient's income, assets and other financial information, they say.

Also, many patients decline charity care because of stigmas or, in the case of undocumented immigrants, out of fear they'll be deported, said Kevin Scanlan, president and chief executive officer of the Metropolitan Chicago Healthcare Council, which is lobbying against the proposed charity care ordinance on behalf of private hospitals.

Executives of Ingalls Memorial in Harvey, Little Company of Mary in Evergreen Park and St. James - with campuses in Olympia Fields and Chicago Heights - said the proposal opens up the possibility the county could increase the charity care requirements further, resulting in hospitals being fined, to gain more tax revenue.

"Once these programs are in place, they expand in scope and depth," Ingalls' Johnson said.

O'Donnell could not provide an estimated amount the county could stand to gain under the ordinance. The Chicago Healthcare Council estimates the ordinance would cost its member hospitals in excess of $340 million.

If national health care reform is passed - presumably insuring the millions of Americans without coverage - hospitals say the ordinance would leave them scrambling to meet the charity care thresholds to avoid fines.

Reform also could expand programs such as Medicaid and Medicare, which reimburse hospitals at a lower rate than private insurers, hurting their bottom lines, administrators said.

"This kind of a tax takes a hospital like Little Company of Mary and pushes it to the point where we're no longer making an operating margin," said Dennis Reilly, its president and chief executive officer.

O'Donnell maintained reform wasn't a guarantee the problem of the more than a million without coverage in the Chicago area would vanish overnight.

"The thresholds were set so that they are very achievable so that every hospital could meet the threshold if they chose to do so," she said. "I think hospitals don't want to be regulated."

THE HEALTHCARE ACCESS PROTECTION INITIATIVE

The proposed ordinance would mandate hospitals spend 4.5 percent of their operating expenses on charity care. Safety-net hospitals, which see disproportionate numbers of Medicaid patients, must provide 2.3 percent.

Fees paid by hospitals not meeting the standards would go into a health fund to benefit the county's massive and cash-strapped hospitals system, including Oak Forest Hospital, that bears the brunt of caring for the uninsured.

Regulations would be phased in over four years, with 2011 being the first year hospitals face standards of 1 percent of charity care for safety-net hospitals and 1.5 percent for others. In 2012, that bumps to 2 percent and 3 percent, respectively, before full implementation the following year.

Hospitals with annual operating margins below 2 percent would be exempt.

The ordinance would sunset in 2016.

The ordinance, sponsored by Commissioner Joseph Moreno (D-Chicago), could be put to a public hearing early next year. Southland Commissioners Joan Murphy (D-Crestwood) and Deborah Sims (D-Chicago) said last week they planned to vote against it.


HOSPITALS' CHARITY

Under the proposed ordinance, hospitals would have to spend 4.5 percent of their annual operating expenses on charity care or face fees. That threshold was created by factoring in average charity care costs and half of hospitals' bad debt, or the bills that go unpaid by certain indigent patients.

In 2008, based on their annual expenses, here is what south suburban hospitals spent on charity care, according to the Center for Tax and Budget Accountability:

• St. James Hospital, Olympia Fields and Chicago Heights: 3.4 percent of operating expenses devoted to charity care.

• Ingalls Memorial Hospital, Harvey: 3.1 percent charity care.

• Little Company of Mary Hospital, Evergreen Park: 1.6 percent charity care.

• Palos Community Hospital, Palos Heights: 1.4 percent charity care.

• Advocate Health Care Network, parent of Christ Medical Center in Oak Lawn and South Suburban Hospital in Hazel Crest: 0.9 percent charity care.


A storied history

Though the regulations on charity care are a first before the Cook County Board, the issue long has been debated in the medical community.

Community advocates say hospitals should be required to meet standards to earn their property tax exempt status.

Hospitals counter they already earn their tax-free status, providing millions of dollars in free care. They say charity care is a narrow definition of care that leaves out services provided in the community such as health screenings and educational programs.

In 2006, Illinois Attorney General Lisa Madigan tried to impose an 8 percent level of charity care on hospitals, far above levels they were operating at.

Nationally, fees on hospitals that didn't provide enough free care also once were considered a way, in part, to finance health care reform. The idea didn't last.



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