Major hospitals hurting from uncollected debt

Prices rise to cover those who don't pay for medical services

Posted: Friday, July 22, 2005

ANCHORAGE - Anchorage's Providence and Alaska Regional hospitals are awash in bad debt. Both hospitals - mirroring national trends - are suffering from an explosive growth in unpaid medical bills.

Since 1999, the amount of bad debt and charity care at both hospitals and related facilities has more than doubled, and in some instances tripled and even quadrupled.

The numbers reveal a disturbing trend: Debt and write-offs dramatically rise while profits, for the most part, fall. And at the same time, medical costs skyrocket.

"We have to continue to raise prices for the people who pay to cover those who don't. That's troublesome. That's why there is a national debate about this," said Bob Dvorak, chief financial officer at not-for-profit Providence Health System in Alaska.

Providence is the state's largest hospital. It got stuck with about $14 million in uncollected debt in 1999, together with its other medical buildings here and in Seward and Kodiak. Last year, that figure had ballooned to $47 million, according to a new report by the hospital.

A similar scenario is plaguing Alaska Regional. The hospital, located east of Merrill Field airport, reported about $5 million in bad debt in 1999. The number jumped to $13.4 million in 2004.

In 2000, Providence made $40 million in profit. Three years later, the profit fell to $13 million, according to numbers supplied by the hospital.

"The trend is troublesome," Dvorak said.

Last year, Providence profits recovered somewhat, climbing to $27.5 million.

Alaska Regional doesn't release its bottom line to the public, but the hospital's finance chief says the trend reflects that of Providence. Alaska Regional is owned by HCA Inc. of Nashville, Tenn., one of the nation's largest hospital chains.

Besides bad debt, charity care is also eating away bottom lines. Charity care is what the hospitals write off as financial assistance for needy patients.

Charity cases more than quadrupled at Alaska Regional over the last five years, rising from $1.3 million to $4.5 million. At Providence, they doubled, from $12 million in 1999 to $24 million last year.

What's fueling this dreary financial picture?

"There has been a large increase in the uninsured population," said Dan Houghton, finance chief at Alaska Regional.

An estimated one in five Alaskans lacks health insurance, said Catherine Schumacher, a doctor and researcher who heads the Anchorage Access to Health Care Coalition, a project aimed at making medical care more available to people of limited means. That figure hasn't changed much in recent years although a lack of good data makes it hard to say for sure, she said.

The number of uninsured may swell as the cost of medical insurance rises and individuals and employers choose to drop health plans, the local hospital finance chiefs said.

There's also a growing number of people who are underinsured, and that's driving up bad debt. As health care premiums climb, employers are shifting more of the costs to employees. Some people opt for more limited plans, choose higher deductibles, drop family members from plans or go without, Schumacher and others said. At the same time, insurance companies are placing more restrictions on what they'll cover.

That means when hospitalizations occur or people need to see a doctor for routine care, they often can't afford to pay their bills.

Medical debt is one of the leading causes of bankruptcy, Schumacher noted.

In general, the situation at local hospitals can be summarized this way, the finance chiefs say: Rising health care costs, combined with higher insurance costs, means fewer people with adequate insurance. That means more bad debt and charity care, and less profits.

To try to turn the tide, the hospitals are trimming costs and becoming more efficient where they can, such as buying pharmaceuticals and supplies in bulk, Dvorak said. There's also an effort to collect more from patients upfront.

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