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.