Utah hospitals absorb $698 million in unpaid bills
Expanding Medicaid would be a band-aid, officials say, but not a permanent solution.
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The economy appears to be on the mend, but Utah's hospitals are getting no relief from demand for free and discounted care.

As ranks of uninsured and underinsured swell, the state's four major health systems have seen their uncompensated care — charity care plus unpaid bills — more than triple in nine years, to $698 million in 2012.

Nonprofit Intermountain Healthcare alone forgave more than half a billion dollars in charges. So at what point do hospitals insist that Utah expand Medicaid to cover more of the state's uninsured?

"Our board has not discussed that topic. They don't ask that question," said Mikelle Moore, vice president of Intermountain's Community Benefit Department. "Our commitment is to continue offering charity care. We believe we'll be able to meet the needs for the time being."

Utah leaders are undecided about whether to stretch Medicaid in 2014 to cover an estimated 58,000 uninsured adults. And powerful doctor and hospital lobbies haven't pressed the matter, though their unabashed support in other states has swayed half a dozen Republican governors to sign onto this controversial component of President Barack Obama's Affordable Care Act.

The federal government will pick up the entire bill for new enrollees the first three years, and at least 90 percent of the expenses after that, totaling $4.1 billion between 2014 and 2019.

But the state's portion is considerable and predicted to mount to $174 million by 2020, and maybe more if the deficit forces Congress to trim entitlement spending.

"States that have just jumped in haven't done the complexities justice. We want to see it happen, and we have financial reason to see it happen," said Utah Hospital Association President Rod Betit. "But we want to make sure all the financial pieces are in place, because if not properly funded, then what happens?"

Lawmakers, industry leaders and advocates are awaiting the unveiling of a state-commissioned cost study by Public Consulting Group, which has been delayed twice.

An economic boost • The economics of a Medicaid expansion make it a no-brainer, consumer advocates argue.

Federal Medicaid dollars generate rounds of spending as hospitals staff up and invest in equipment upgrades, and as health care workers spend their earnings on restaurants and cars.

In 2016, projected spending related to the expansion would support 5,900 new Utah jobs, generating $670 million in economic activity, according to a new report by Families USA and the Utah Health Policy Project.

"It's nothing less than extraordinary," said Matt Slonaker, the project's Medicaid policy collaborations director. "[This] is not just health care issue but an economic issue."

Hospital executives agree that covering the uninsured is a good for public health and their bottom lines. The most recent earnings forecast for HCA, owner of Utah's for-profit MountainStar Hospitals, fell short of analysts' expectations as revenue gains were overshadowed by unpaid patient bills.

On a national level, HCA supports expanding Medicaid.

But Utah's uninsured rate isn't as high as in other states, "which is why we are working with other health care providers [to find] … solutions that help in the short term and are sustainable in the long run," said MountainStar spokeswoman Audrey Glasby.

'Pressure' on University Hospitals • Unpaid care at University Hospitals and Clinics has grown from 6 percent to 8 percent of the budget in recent years, said CFO Gordon Crabtree. The system doled out $39 million in financial aid in fiscal 2011-12 and wrote off $59 million in bad debt.

To compensate, the university has cut about 300 staff through attrition over the past three years and squeezed drug and device makers for better prices.

"It puts pressure on us for sure," said Crabtree. "We have to have our costs where we can deliver enough of a net revenue to fund the uncompensated care, support for education and research and reinvest in equipment and facilities."

The Affordable Care Act promises relief by reducing Utah's uninsured rate, which rests at 377,700, 13.4 percent of the population.

Only a portion would be newly covered by a Medicaid expansion: An estimated 48,500 who are currently eligible but not enrolled, and 58,000 new enrollees.

"No one is saying the uninsured will go away," said Crabtree. "We don't know how many Medicaid clients will come in, or how fast."

Hospitals also face cuts in Medicare reimbursements and a phasing out of subsidies to hospitals that serve high numbers of indigent patients. In Utah those cuts will amount to $180 million.

"We'll get more patients, but our revenue will moderate," said Crabtree. "I'm not going to jump up and down if Medicaid expands. On the other hand it will, in the short term, reduce [about a quarter] of our uncompensated care."

Intermountain's charity challenge • Nowhere is the burden of charity greater than at Intermountain, the state's largest hospital chain. A nonprofit like the U., it must provide charity care in exchange for not paying certain taxes.

And health reform won't eliminate the need, said spokesman Daron Cowley. "Roughly a third of our uncompensated care goes to individuals who have insurance. They might have a high-deductible plan and be unable to afford the deductible."

Last year, Intermountain wrote off most of the costs of gall bladder surgery for patient Deanne Mosher-Cadena, who cares for her mentally disabled sister and works full-time in sales for $10 an hour — too much to qualify for Medicaid, even under the expansion.

Come 2014, she will be eligible for federal tax credits to put toward the purchase of private coverage. Time will tell whether that will be enough to make it affordable.

"I hope it is," said the 50-year-old. "I'm one of those middle people who don't earn much. But I work. I'm not one of those sit-at-home people."

She is still making payments to her doctor and anesthesiologist. "But they wrote off a huge amount," she said, "for which I'm eternally grateful."

For now, Intermountain can afford it. In 2011, despite giving away nearly half-a-billion dollars in care, it collected an unprecedented $4.1 billion in revenue, netting $528 million after expenses. That's up from the $378 million it pocketed in 2007 before the recession hit.

Moore at Intermountain credits its managed-care model. "We've been pretty committed to providing the best clinical care at the lowest clinical costs," she said.

The chain also benefits from offering its own insurance. It owns the private insurer SelectHealth and administers several government programs, including the state's Children's Health Insurance Program and a chunk of Medicaid.

Intermountain plans to spend about $475 million in 2013 for new equipment, buildings and remodeling, Cowley said, including a $165 million expansion of Primary Children's Medical Center. —

The debate: Expanding Medicaid

The question

Utah must decide whether to extend Medicaid to adults, who today only qualify if they fit a category, such as being poor and disabled or poor and pregnant, or an extremely impoverished parent. The federal health law aims to change that by allowing adults to qualify based on income alone, those up to 138 percent of the poverty-level, or a single adult earning less than $15,415 a year.

The Pros

Doing so will streamline eligibility and cover up to 190,000 uninsured, low-income Utahns by 2020, easing the burden on hospitals to provide free and discounted care. And the feds foot most of the bill, injecting $4.1 billion into the state's economy between 2014 and 2019.

The Cons

The state will have to come up with $174 million between 2014 and 2019, squeezing other budget priorities such as schools – and possibly more, say lawmakers who fear the federal deficit will eventually stem the flow of federal funding to states.

Sources: The Kaiser Family Foundation and Utah Department of Health.