April 20, 2001
Commonwealth Fund Reports Rise in Charity Care Provided By Academic Health Centers
A new publication from the Commonwealth Fund reports that the share of charity care provided by academic health centers (AHCs) grew significantly between 1990 and 1996, particularly in competitive health care markets.
According to "A Shared Responsibility: Academic Health Centers and the Provision of Care to the Poor and Uninsured," the share of charity care provided by AHCs in general grew from 20.4 percent in 1990 to 27.9 percent in 1996.
The growth in charity care provided by AHCs was markedly higher in competitive health care markets, as community-based providers began to limit their charity care losses to counterbalance declining managed care payments. According to the study, from 1990 to 1996, the share of uninsured admissions at public AHCs in competitive markets soared from 23.2 percent to 36.4 percent, while the share at private AHCs rose from 8.2 percent to 13.8 percent.
Simultaneously, AHCs' share of Medicaid cases dropped from 24.3 percent in 1991 to 17 percent in 1996. As co-authors David Blumenthal, M.D., drector, Institute for Health Policy, Massachusetts General Hospital, and James Reuter, executive vice president for administration at Georgetown University Medical Center, explain in the report, Medicaid and Medicare payments to teaching hospitals are linked to Medicaid admissions. Subsequently, AHCs are "losing a key source of revenue at the same time they are being asked to increase services to uninsured patients."
According to the report, the combined growth in charity care and drop in Medicaid admissions had a substantial impact on the financial health of AHCs. While margins at hospitals with low charity caseloads grew between 1990 and 1996, the average margin for hospitals with larger charity caseloads was lower and actually declined between 1994 and 1996. The report also discusses the inequitable distribution of Medicare Disproportionate Share Hospital (DSH) payments among all hospitals, the lack of Medicare and Medicaid subsidies for charity care provided by faculty practice plans, and the role of AHCs as specialty care providers for the uninsured.
Fearing that the growing burden of charity care "could result in a downward spiral in the financial status of safety net institutions," the authors propose options to manage health care better for the uninsured. The Fund suggests maximizing public insurance through better enrollment programs and expanding coverage through "incremental reforms." In terms of provider payments, the report recommends targeting Medicare and Medicaid DSH payments to hospitals most involved in caring for the poor/uninsured. For example, the Medicare DSH formula could be changed to include a better measure of uncompensated care. Other recommended Medicare DSH changes include paying Medicare DSH payments to eligible hospitals when they treat Medicare+Choice enrollees. (Currently, DSH payments are made only when eligible hospitals care for Medicare Fee-for-Service patients.) The authors also suggest new medical school curricula that expand training and experience related to caring to the poor and uninsured so as to reduced the disparities that now arise when poor and uneducated patients receive treatment.
Information: Lynne L. Davis or Chris Mitchell, AAMC Office of Governmental Relations, 202-828-0526.
