In 2005, the Missouri legislature approved significant cuts to the state’s Medicaid program. While many studies have examined the effect of those cuts on the newly uninsured, there has been less research on how this loss of coverage impacted hospitals. This project examines whether hospitals suffered an increased financial burden, how hospital utilization patterns changed, and the ability of one hospital to meet the challenge with an innovative strategy to improve service to the uninsured in its area.
Hospital Utilization Pattterns Change
Greene County had the largest decline in Medicaid where patient days fell (20%).Medicaid patient days fell at all three hospitals in Greene County; Cox Health Systems (22%), St.John’s Regional Health Center (19%), and Ozarks Community Hospital (10%).Aggregate Medicaid utilization decreased in the St.Louis region, though Medicaid admissions increased at the two largest hospital systems, BJC HealthCare and SSM Health Care.Closure of Forest Park Hospital’s obstetrics practice and expansion of the Illinois Medicaid program may partially explain the increases at BJC and SSM.
As part of the study, hospitals were asked to describe the effects of the 2005 reductions in Medicaid eligibility on their numbers Medicaid and uninsured patients.The following hospitals provided information and narrative descriptions of the impact on their hospital: Audrain Medical Center in (Mexico, MO) Audrain County, and Cox Health System, Ozarks Community Hospital, and St.John’s Regional Health Center in (Springfield, MO) Greene County.Information on St.Louis metropolitan area hospitals is supported by reports from the St.Louis Regional Health Commission (RHC).
Cox Health Systems (CHS) reported a significant increase in the amount of care provided to the underserved.More than 65 percent of 2006 neonatal ICU discharges at CHS were Medicaid and uninsured.CHS provides access to primary care through its Federally Designated Rural Health Clinics.Although CHS’s charity care in 2006 was the second highest in Greene County at $6.5 million or, 0.95 percent of operating revenue, it was below the average for study hospitals of 1.3 percent.Bad debt was the highest in the county at $23.7 million or, 3.42 percent of operating revenue.
In a position paper from the CEO of Ozarks Community Hospital (OCH), Paul Taylor reports, “Before the Medicaid program was reformed in 2006 by reducing the number of covered beneficiaries state-wide and entirely eliminating certain benefits such as physical therapy and wound care, over 40 percent of our patients were covered by Medicaid.Following the Medicaid reforms, the percentage of our patients covered by Medicaid declined dramatically and we saw a corresponding increase in the percentage of uninsured patients.By September 2006, the percentage of uninsured patients seeking treatment in our emergency room (ER) had climbed to more than 50 percent.At OCH, given the fact that a large percentage of our ER patients were uninsured, and in need of follow-up care by a primary care provider, we created a primary care follow-up clinic.While we did not offer the care free of charge, we did not require payment at the time of service and we billed for the services provided at a substantial discount.”
St.John’s Regional Health Center (SMHS) provided the largest amount of charity care in Greene County at $9.3 million, or 1.51 percent of operating revenue, and bad debt was the second highest in the county at $21.5 million, or 3.52 percent of operating revenue.
At the time this report was written, St.John’s provided a general description of a future plan to conduct a medical management demonstration project to provide access to health care for adults (18-64 years of age) that suffer from chronic disease and have annual household incomes equal to or below 150 percent of the Federal Poverty level.The demonstration project will be limited to a maximum of 25 patients per quarter and 100 per year.Patients will be eligible for this project if they have utilized St.John’s provider network or ED in the past.Patients will be required to apply for enrollment, and make co-payments for care.Specific details on the type or amount of any additional payments required of enrollees were not provided.
Bad Debt and Charity Care – An Important Distinction
Individual hospitals and regions had higher percentages.Greene and Polk counties exceeded the aggregate percentage for study hospitals and the all Missouri hospital average for uncompensated care as a percentage of operating expense in 2006.Why is their uncompensated care so much higher? Exhibit 3 below shows the service area of hospitals located in Greene and Polk, indicated by a circle on the Missouri map.Many of the counties they serve are in the lowest per capita income category.
Financial performance for certain hospitals in Greene County was also impacted.Charity care nearly tripled at Cox Health System (CHS) from 2005 to 2006 and bad debt increased by a third.2006 operating and profit margins were 0.90 percent and 2.47 percent respectively.Yet, in 2006 CHS had $476 million in reserves, equivalent to about eight months of operating revenue.CHS’s 2006 debt-to-equity ratio of 0.6 was slightly below the Missouri average.
Similarly, St.John’s Regional Health System provided the highest amount of charity care as a percentage of operating revenue in the county and bad debt increased 21 percent from 2005 to 2006.However, St.John’s was financially strong and, although operating results were affected, they were able to achieve a 7.3 percent operating and profit margin, well above state and national averages.Non-operating revenue was not reported by the hospital.In 2006, St.John’s had $350 million in reserves, equivalent to about five months of operating revenue, and a debt-to-equity ratio of 0.3, well below the Missouri average.
Also mentioned previously, Ozarks Community Hospital (OCH) experienced a large increase in uninsured patients resulting in a 52 percent and 7.5 percent increase in bad debt and charity care respectively from 2005 to 2006.OCH lost more than $2 million resulting in a negative (6.5%) operating margin in 2006.OCH’s low level of reserves fell to approximately $1.7 million in 2006, on average equivalent to less than one month of operating revenue.OCH had high levels of debt with a debt-to-equity ratio of 8.3, up from 3.0 in 2005, more than 13 times the state average.