Kentucky hospitals say they gave back $1.67 billion to their communities in 2010, mostly by absorbing losses and bad debts

By Tara Kaprowy
Kentucky Health News

With the downturn in the economy part of the reason, Kentucky's hospitals say they gave back a whopping $1.67 billion to their communities in 2010, mainly by providing care for which they were never paid.

That's 13 percent more than the hospitals reported last year, and just one of many figures in the latest annual report from the Kentucky Hospital Association, which runs a little over a year behind because it takes a long time to compile the data from more than 100 hospitals.

KHA's 2010 Community Benefits Report shows hospitals absorbed $435.5 million in bad debt in 2010, which accrued when patients came to the hospital and were treated but did not pay their bills.

Shortfalls in Medicare and Medicaid payments cost even more — $456.2 million — because the federal government reimburses Kentucky hospitals for about 85 percent of the cost of Medicaid patients and 95 percent for those on Medicare. That's big, because 71 percent of patient days in Kentucky are covered by one of these programs, said Pam Mullaney, KHA's director of membership services. Hospitals also gave $274 million to charity-care programs that are set up to include free or discounted care to people who are unable to pay. Those three categories of losses increased by more than $158 million over 2009. KHAcalls them community benefits because "you're not getting any type of margin," Mullaney said.

A 2009 Thomson Reuters study showed the average U.S hospital reported an operating profit margin of 3.7 percent. The average operating margin at Kentucky hospitals was 2.44 percent in 2009. Forty percent of hospitals lost revenue from patient services that year, Mullaney said. Still, reported community benefits increased by 13 percent, a total of $190 million.

This is the third year of the report, which was based on a voluntary survey to which 104 of 123 hospitals responded (Eight hospitals were not surveyed because they treat limited types of patients, such as veterans, children or psychiatric cases.) Mullaney said the number of hospitals turning in figures "has grown a little bit each year, but it’s not consequential."

Hospitals are asked to describe and put a value on the programs and activities they provide at or below cost that help their community. Though community benefits are "the greatest single affirmation of not-for-profit hospitals' tax-exempt status," Mullaney said data show Kentucky's 26 for-profit hospitals "do every bit as much as the not-for profits."

In the past two years, Pikeville Medical Center has absorbed $70 million in charitable care and bad debt. The Murray-Calloway County Hospital is in the ninth healthiest county in Kentucky, but has felt the crunch too. From 2010 to 2011, bad debt increased from $7 million to $7.8 million and charity care increased from $5.1 million to $6.2 million.

T.J. Samson Community Hospital in Glasgow has also seen bad debt increase and business decrease when the economy crashed and then stagnated. "Our elective procedure volumes have come down. Patients often wait until they're sicker before they come in," said Laura Belcher, director of planning, marketing and development. The hospital has responded by cutting costs, adopting the "lean philosophy" of eliminating waste and streamlining processes.

Interestingly, the hospital is also pushing for more preventive care since the economy went south. "People ask us, 'Aren't you putting yourself out of business?' But we really want people to be proactive about their health. We've done a lot more health fairs, more screenings," Belcher said.

Indeed, the report shows Kentucky hospitals spent $500 million in 2010 to actively help their communities, through such activities as health screenings, support groups, research, training of nurses and doctors, addiction recovery and neonatal intensive care, or simply donating money to community functions. Many of these programs "are provided at no cost or at a financial loss and would not be provided if the decision was based on monetary decisions," Mullaney said.

Realizing there was a need in the area for children with special needs, the Glasgow hospital set up C.A.M.P. T.J. Kids, a weeklong day camp in the summer for children with special needs. "These children often receive services through school and during school," Belcher said. "But we found many of the families could not afford or handle the transportation to get here during the summer. This is almost like a summer booster."

The camp falls under the umbrella of the Discovery Academy, funded by the hospital and money raised by volunteers. The academy also hosts an annual overnight camp for children with autism. While the children swim in the hotel pool or interact with each other, parents are "in a conference setting to learn about ways they can learn to be better parents" to kids with autism, Belcher said. "In the evening, while children are being supervised, the parents get to go for a quiet, romantic dinner."

When tornadoes struck Kentucky March 2, Pikeville Medical Center kicked into high gear and co-hosted a radio-a-thon that raised $200,000. "We allowed our employees to donate their vacation time, which we converted to actual dollars based on their rate of pay, and we offered employees the ability to do payroll deductions to contribute to the cause," said Cindy Johnson, director of public relations and the Medical Leader, the hospital's community newspaper.

The Murray hospital has increased its community outreach efforts and adopted a mission to provide the local school system with athletic trainers, whose salaries are paid entirely by the hospital, as well as school nurses, which are partly hospital funded. The goal is to promote health and wellness, said marketing director Melony Bray.

The KHA's Mullaney said the annual report reminds people what their hospital does. "A lot of times people think of their hospital as a place to go when they need emergency help," she said. "They don't think of the hospital as one of the big providers in the community for health fairs, health professional education, types of efforts in the community to help improvements like playgrounds and common spaces. Those are things that hospitals often get overlooked for but they do that because they are part of the community."

Kentucky Health News is a service of the Institute for Rural Journalism and Community Issues, based in the School of Journalism and Telecommunications at the University of Kentucky, with support from the Foundation for a Healthy Kentucky.

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Cost of an MRI in America? $1,080. France? $280. Why? providers 'largely charge what they can get away with'

Why does getting an MRI in the United States cost $1,080 when it only costs $280 in France? The answer comes down to how the prices are set, reports Ezra Klein for The Washington Post.

"That may sound obvious," he writes. "But it is, in fact, key to understanding one of the most pressing problems facing our economy. In 2009, Americans spent $7,960 per person on health care. Our neighbors in Canada spent $4,808. The Germans spent $4,218. The French, $3,978."

The difference in expenditures isn't linked to the idea that Americans just use more health-care services (the opposite is actually true) or that we are sicker. A 2003 study on international heath-care costs and a survey released Friday by the International Federal of Health Plans both concluded it comes down to pricing. The latest survey showed that in 22 of 23 medical services, whether that was a routine doctor visit or coronary bypass surgery, Americans paid more than other developed countries.

The difference is based on the way the pricing is set. "Other countries negotiate very aggressively with the providers and set rates that are much lower than we do," said Gerard Anderson, who was involved in the 2003 study. In Canada and Britain, prices are set by the government. In Germany and Japan, the prices are "set by providers and insurers sitting in a room and coming to an agreement, with the government stepping in to set prices if they fail," Klein reports.

Outside of Medicare and Medicaid, which are cheaper than the commercial average, "it's a free-for-all" in the U.S., Klein wriotes. "Providers largely charge what they can get away with, often offering different prices to different insurers, and an even higher price to the uninsured."

Because the customer often doesn't have choice in whether or not he or she will purchase health care — one could be unconscious or very ill — "sellers of health-care services in America have considerable power to set prices, and so they set them quite high," Klein reports.

Fixing the problem is fraught with complication, Klein writes, because "centralized bargaining cuts across the grain of America's skepticism of government solutions." The prices are also set by very powerful industries. The federal health care reform law is not expected to fix the issue, Klein writes, though might spread awareness since there are provisions to expand transparency; hospitals will have to publish their prices, for example. "But this is, for the most part, a fight the bill ducked, which is part of the reason that even its most committed defenders don't think we'll be paying anything like what they're paying in other countries anytime soon," Klein write. (Read more)

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Recession has hit health departments hard: 23,000 jobs (15%) lost, core funding cut

Funding and job cuts as a result of the economic recession have weakened the impact public health departments have on their communities, says a series of articles published in the Journal of Public Health Management and Practice.

"Continued cuts to public health services will have an unsatisfactory impact on the health of individuals and the community," said Dr. Lloyd F. Novick, the journal's editor-in-chief. "There is a heightened vulnerability at the present time for adverse health outcomes. Above all, the realization of the vital need to maintain resources for our public health delivery system is imperative."

In 2009, 23,000 jobs in public health departments were eliminated, 15 percent of the total. By 2010, more than half the agencies had a cut in core funding. As they scramble to make do with their new bottom lines, more cuts are expected. "The current, alarming trend of diminishing resources, reduced workforce and impaired capacity to maintain public health programs pose major hurdles for local agencies, with consequences that will be felt well into the future," said Dr. Rachel Willard of the University of California.

To view an article on the impact of the 2008-2010 economic recession on local health departments, one on a local health department that is providing only essential services, and one on enhancing public health value in an era of declining resources, click here.

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Louisville hospital merger would be just one of dozens across the country, driven by economic and regulatory concerns

Hospitals are banding together to create organizations better able to withstand the changing tides of the economy and health-care policy. The proposed merger of Louisville's Jewish Hospital & St. Mary's HealthCare, Lexington-based Saint Joseph Health System and University Hospital at the University of Louisville is just one of many examples.

"The small, community hospital is soon to go the way of the dinosaurs," said Angela Mattie, associate professor of health-care management of Connecticut's Quinnipiac University, told Laura Ungar of The Courier-Journal.

Through September, 2011 had seen 71 mergers nationwide involving 132 hospitals worth $6.9 billion, plus another four deals in October. In all of last year, there were 74 mergers involving 126 hospitals and $5.8 billion, Ungar reports.

The poor economy is part of the reason for hospital systems merging because "people don't use hospitals as often; even those with insurance sometimes forego care to avoid co-pays," Ungar reports. In a tight economy, credit is more difficult to obtain, but bigger, richer systems have less trouble. Finances are a major impetus behind the big Louisville merger, with officials at University Hospital and Jewish arguing "if they don't merge they'll lack the money to make improvements going forward, partly because of economic pressures such as rising levels of indigent care," Ungar reports.

Catholic Health Initiatives, which owns the Saint Joseph Health System, plans to invest $320 million "to launch the merged network and strengthen its balance sheet," said CHI spokeswoman Mary Elise Biegert. Of another $300 million that would be generated by operations, two-thirds would be invested in Louisville's academic health center and $100 million would help pay for a switch to electronic health records.

Experts also say big systems have more bargaining power with health insurers, nd the federal health-care reform law means "It makes sense to enlarge a hospital system to capture as many as possible of the 30 million Americans expected to eventually be newly insured under the new law," Ungar writes.

Mergers also allow hospitals to consolidate and save costs, "by having one human resource or finance department instead of three," Ungar reports. (Read more) For another story on what has been termed "merger mania," click here.

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What would solve primary-care crisis, create jobs and help banks? Building community health centers, writer contends

The federal health-care reform law will mean a glut of new patients who will be newly insured and bog down the primary-care system. Thousands of construction workers are out of jobs as the economy remains stagnant. And the banking sector is still reluctant to lend. The answer to all three problems? Build more community health centers, writes Jeffrey Leonard in an opinion piece in The Washington Monthly. (Photo: Vista, Calif., Community Clinic)

"The way to meet the flood of new patients coming down the pike is to expand the nation's existing network of community health centers — nonprofit clinics that offer primary care to the medically under-served, often in rural areas or inner cities," writes Leonard, CEO of the Global Environment Fund and chairman of the magazine's board of directors. "But to get this done, there's no need to appropriate billions more in direct government spending. Rather, there is a way to lure skittish banks in lending private capital to finance a health-center construction boom in all 50 states, simply by tweaking the language of an existing federal lending program."

Though community health centers generally have difficulty raising their own funds to expand or build facilities, in part because they serve uninsured, low-income patients who can't donate to building projects, they are sound investments, Leonard contends, pointing out only "one or two" of the 1,200 community health centers in America today have ever defaulted on a loan.

Still, they have trouble getting loans from banks, even once they have been able to raise a chunk of funds, in large part because centers "in an economically distressed inner-city neighborhood serving a mixture of Medicaid patients and the uninsured, or one in a depressed heartland town where real estate prices are spiraling downward" are seen as a risk, Leonard explains.

Leonard suggests the centers be eligible for the Small Business Administration's 504 loan program, in which a small business asks a non-profit lender to issue "low-interest, fixed-rate, government-backed bonds to finance up to 40 percent of the project," Leonard writes. As of now, the loan program is only open to some for-profit businesses. But Congress could change that, thus opening up possibilities. Moreover, the loan program is "routine and efficient to process" and the "interest rates are among the lowest on the market," Leonard contends.

Another option would be for construction companies and real estate developers to put up the equity themselves, build the facilities and then rent them out to nonprofits "on a long-term lease or through various lease-to-own arrangements." "Indeed, hungry developers and construction firms would find any number of ways to get the hammers swinging," Leonard writes.

Overall, it's a win-win, Leonard argues."It's hard to imagine Congress appropriating any more direct spending to fuel the construction of health centers," he writes. "But there's no good reason why they shouldn't change a few words in a statute to achieve the same end. Not only would it quickly create much-needed jobs in the construction trades, it would also spark economic activity over the long run in some of the places in America that need it most." (Read more)

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Child abuse rates have risen significantly since the economy went into recession, survey in Ky. and 3 other states shows

Child abuse rose as the economy went into recession, shows a study of reported abuse to children under 5 in Kentucky, Ohio, Pennsylvania and Washington.

From 2004 to December 2007, before the financial meltdown, the rate of abusive head trauma in the four states was 8.9 per 100,000 children. During 2008 and 2009, the number jumped to 14.7 per 100,000. Though the study established no cause-and-effect relationship between financial difficulties and an increase in abuse, "earlier research has tied parental stress to child maltreatment," Frederik Joelving of Reuters Health reports.

The study "showed that from 2004 to 2009, there were 422 children diagnosed with what doctors call 'abusive head trauma.' The majority ended up in intensive care units, and 16 percent died of their injuries," Joelving reports. The average child examined in the study was 9 months old.

"The number-one perpetrators are fathers and male caretakers; very few perpetrators are mothers," said Rachel Berger, a child-abuse expert at nationally recognized Children's Hospital in Pittsburgh and co-author of the study. "It's the people that mothers give their kids to that end up being the perpetrator(s)." (Read more)

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Eastern Ky. jumps on national gardening bandwagon, big time

In response to the downturn of the economy, people in Morgan County and the rest of Eastern Kentucky have turned to their roots — getting down in the dirt and growing a vegetable garden, reports Sabrina Tavernise of the New York Times. The offshoot is that people can improve their health by increasing fruit and vegetable consumption. (Times photo by Luke Sharrett)

Vegetable gardening has been on the rise nationally since 2008, which was around the time when Lehman Brothers collapsed, starting the turmoil ion the nation's financial system. "Our sales have skyrocketed," said George Ball, chief executive of Burpee, one of the country's major vegetable seed retailers.

Unlike in urban centers, where buying locally grown vegetables often comes with a exorbitant price tag, eating in rural areas is usually cheaper. Teacher Rebecca Frazier said she "she had cut her food bill in half by growing her own and preserving and by buying in bulk from local farmers," Tavernise reports.

Timothy Woods, professor of agricultural economics at the University of Kentucky, said the number of farmers' markets in Eastern Kentucky has doubled since 2004. "You won't see certified organic products or any fancy marketing" seen in urban areas, he said. "It's a very different world."

Sarah G. Fannin, on ground in photo, is an agriculture educator for UK's Cooperative Extension Service. She said the service has fielded twice the number of calls from people who are asking for gardening help in the past three years. "Ten years ago, we hadn't really been thinking about where our food was coming from other than the drive-through or the grocery store," she said. "Now there's more concern."

Though Tavernise points out gardening does not necessarily lead to improved health, Bridget C. Booske, a senior scientist at the University of Wisconsin Population Health Institute, said County Health Rankings show Morgan County people are living longer and a smaller number of babies are born underweight. Obesity and diabetes rates remain high, however, and locals believe those rates won't significantly improve until there are more jobs and less poverty in the area.

But to create another source of income, Fannin is urging farmers to turn to gardening. The first time Robert Bradley, a former coal miner who turned to farming, planted sweet potatoes, he doubted the effort. But they grew so well, it was has prompted other farmers to try it out too. (Read more)

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Jewish Hospital cuts 155 jobs, reflecting national trend of patients deferring treatment for economic reasons

In the face of a bad economy and people putting off health care to save money, Jewish Hospital is cutting 155 positions at its downtown Louisville facility. The move is part of a national trend, experts say."People are looking very carefully at any financial expenditure," healthcare consultant Peter Young told The Courier-Journal. (C-J Photo by Matt Stone)

Jewish Hospital & St. Mary's HealthCare, which owns the downtown facility, saw a 15 percent drop in in cardiology procedures in 2010 compared to the year before. That translates to 7,000 less cases. In total, surgeries fell almost 9 percent, The C-J's Patrick Howington and Laura Ungar report.

This is the second big cut by Jewish & St. Mary's. In March 2010, it eliminated 500 positions. The latest round of eliminations show why Jewish plans to merge with University Medical Center and Saint Joseph Health System is so important. "Health care is changing, and volumes are dropping while bad debt increases," Jewish Hospital officials said in a statement. "To be effective, growing organizations, we must be flexible and adapt." (Read more)

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Program serving young, blind children hit hard by state budget cuts

A program that helps educate blind preschoolers throughout Kentucky has had its state funding drastically cut. Louisville-based Visually Impaired Preschool Services, also known as VIPS, will only receive $10,000 from the state this year, compared to $80,000 three years ago, The Courier-Journal's Deborah Yetter reports. (C-J photo by Michael Hayman)

The program provides free, at-home education for children who are considered legally blind until they turn 4. "The impact is that we won't be able to serve them as often," said Diane Nelson, the program's executive director. "It's so sad."

While the cut will not affect VIPS' preschool in Louisville, it will affect parents and children in more rural parts of the state because fewer specially trained teachers will be sent from Louisville and Lexington to help them. The program serves about 300 children in Kentucky and southern Indiana. Last year, about 50 of those children were outside Louisville and Lexington. This year, only 22 rural children are being helped. "We don't have the money to go out and find these kids," Nelson said.

The funding reduction is the latest in a series of cutbacks that have affected Kentucky public health in the past several years. All told, public health funding has been cut $12 million in recent years. (Read more)

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