Bad Debt Compels Hospitals to Require Upfront Payments

Medical bad debt, non-profit hospitals and upfront payments made the front page of The Wall Street Journal today as the paper recounted the story of a Texas woman with cancer that was refused admittance to a hospital until she made a payment of $105,000 in cash.

More hospitals are asking more patients to make payment before receiving treatment according to the story, “Cash Before Chemo: Hospitals Get Tough.”

Hospitals say that bad debt and charity care is costing them more so they must ask for the upfront payment. The American Hospital Association has reported that uncompensated care cost the hospital industry $31.2 billion in 2006, up from $21.6 billion in 2000.

Demands for upfront payments have drawn fire because not-for-profit hospitals receive tax breaks for providing uncompensated care and other community benefits. About 80 percent of all hospitals are not-for-profits. The Internal Revenue Service found that 14 percent of 481 nonprofit hospitals that responded to a 2006 survey demanded upfront payments.

The Journal reports that Lisa Kelly was diagnosed with Leukemia in 2006 and went to M.D. Anderson hospital in Houston. Kelly has limited-benefit insurance that Anderson refused to accept because it wouldn’t cover all her costs. A limited-benefit plan is “meant to be a bridge or a gap filler,” according to UnitedHealth Group, the company that provided Kelly’s plan.

Kelly visited Anderson in December 2006 for blood tests and a biopsy and a hospital oncologist suggested she be immediately admitted. Kelly gave Anderson a check for $45,000 but the hospital asked for another $60,000 for treatment.

Kelly and the hospital negotiated a lower payment and she began a year of treatment. At times, an appointment would be blocked until she made a payment. Kelly switched to a plan from Blue Cross Blue Shield but still owes Anderson more than $145,000, according to the Journal.
 
Anderson is one of five hospitals that are exempt from taxes as part of the University of Texas system. Anderson saw 2007 net income of $310 million from revenues near $2 billion, according to the Journal. The paper found that Anderson began its upfront payment requirement in 2005 and spent that year $144 million on indigent care. That dropped in 2007 to nearly $99 million. A hospital spokesperson says the total declined as Anderson shared its doctors with other local hospitals, so fewer poor patients visited Anderson.

The American Hospital Directory found that 77 percent of nonprofit hospitals were profitable, compared with 61 percent of for-profit hospitals, the Journal reports.