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KershawHealth may change charity care policy

Would cut off assistance at 133 percent of poverty line

Posted: July 31, 2014 5:05 p.m.
Updated: August 1, 2014 5:00 a.m.
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Fewer people may be eligible for “free” care at KershawHealth if the healthcare system’s board of trustees signs off on a “financial assistance policy” change. Currently, the charity care policy uses a “stair step” formula to determine how much assistance to provide lower income patients.

Persons whose annual household income meets up to 200 percent of the Federal Poverty Guideline (FPG) have their hospital bills adjusted by 100 percent, providing them free care. The adjustments are then gradually reduced: household incomes that are 300 percent of the FPG have bills adjusted by 75 percent; 400 percent FPG incomes have bills adjusted by 50 percent.

During Monday’s KershawHealth Board of Trustees meeting, Executive Vice President and COO/CFO Mike Bunch presented a policy which would eliminate the “steps” altogether and replace it with a flat 100 percent adjustment for persons whose household incomes reach up to 133 percent of the FPG.

According to information Bunch presented Monday, 133 percent of the 2014 FPG is as follows:

• Individual = $15,521.10

• Family of 2 = $20,920.90

• Family of 3 = $26,716.50

• Family of 4 = $32,197.50

• Family of 5 = $37,678.50

Bunch noted that the median household income in Kershaw County is $44,068, according to data he said he pulled from the U.S. Census Bureau.

Bunch said there are now more alternatives for those who would no longer qualify for adjustments under the proposed plan.

“They have options for federal potential tax subsidies They have options with the (insurance) exchange products (growing out of the Affordable Care Act) and other methods to get help with insurance,” Bunch said, referring to those over the proposed 133 percent FPG limit.

That limit, he said, is tied back to the Medicaid eligibility requirements under the Affordable Care Act.

He noted that the policy had not been changed since 2009 while other government non-profit hospitals like KershawHealth have changed theirs.

“Many changes have occurred” since then, Bunch said. “We’ve already talked about the Affordable Care Act and exchange products, expanded Medicaid in some of the other states. There’s also been enormous pressures from Medicare, Medicaid on reimbursements with decreases of payer reimbursements.”

Bunch projected that, without the proposed changes, charity care -- based on gross charges -- will be $15.7 million for the current fiscal year, which ends Sept. 30. The policy revisions would have reduced that figure by $3.1 million had they already been implemented, he said.

He also said that the administration is seeing “significant movement” in indigent care policies at other hospitals in the Midlands.

“That’s important to know because a lot of the dynamics create different types of scenarios where patients may come back at us -- they may be receiving very specialized things in other counties that we may not offer, for example. While we don’t need to follow what’s going on exactly, we need to do our due diligence and make a good decision about where we want our policy to be,” he said.

Bunch also said trying to manage the graduated scale process has been “very difficult to do.”

He said the administration’s request on the charity care policy is a modification of suggestions made by consulting firm CliftonLarsonAllen. KershawHealth hired the firm this spring to assist in aligning staff levels and functions to the services the healthcare organization provides. Specifically, CliftonLarsonAllen proposed keeping the 100 percent write-off adjustment for those up to 200 percent of the FPG.

Bunch said the administration is recommending the 133 percent line to be “more consistent with the market.” He also noted 133 percent FPG is the limit to be excluded in the healthcare reform law.

He also said KershawHealth would have to coordinate the change with other providers, such as the Kershaw County Community Medical Clinic.

Bunch called the proposal a “balancing act.”

“The charity write-offs would just drop,” he said, “and then we would go to collect that money. We anticipate the collections on that would be about $500,000. When we do this, bad debt will increase. Why? Because before we were writing it off; now, we’re going to expect to collect $3 million -- (but) you’re not going to collect. So, naturally, that money will ultimately flow over to the tax debt setoff program -- so, we’ll pick up some money there -- so debt setoff will increase.”

Bunch also said that, as more of a technical issue, the number of accounts receivable days will increase slightly because KershawHealth would be taking immediate write-offs for charity and moving them to accounts receivable.

“There’s some give and take on this to get to the bottom line that CliftonLarson’s looking at, and they’re saying ‘Follow this out and there’s, potentially, a half-million dollars on the table,” Bunch said.

He also said that KershawHealth may want to consider charging patients with financial assistance what he called a “nominal co-pay” in the future, if they want to see a doctor or specialist.

“One of the things that we’re cautious of is our current plan -- if someone qualifies at 100 percent charity … there’s less incentive for that patient to utilize their primary care doctor than to go to the emergency room,” Bunch said. “We feel like we need to have a strategy, moving forward, on some kind of nominal co-pay that would encourage patients to stick with their medical home the best they can, as long as they can until such time as they need urgent care or the emergency room.”

Bunch said KershawHealth has heard from some providers that the healthcare system’s current policy is causing them to lose money they would otherwise receive from their own patients.

Bunch originally told trustees the administration wanted the change to go into effect on Sept. 1. Some trustees, however, thought that would not give them enough time to consider the pros and cons of the plan.

Trustee Paul Napper, while not necessarily against the change, expressed concern for those that could no longer receive charity care.

“To have a $3 million cut and to receive $500,000 -- the flip side is you’re certainly going to affect a lot of people’s credit rating,” Napper said. “I’d just like to make sure that we can get together, that I understand completely what’s going on before I make a major decision. It seems to be a mighty big move and I’m not belittling $500,000 but we’re not making the step I would expect to make. This will affect, literally, a bunch of people’s credit ratings if we make this move.”

Napper was also concerned about the fact that a vote on the matter could come in just 15 days -- and at a meeting he would not be able to attend -- on Aug. 11.

Interim CEO Terry Gunn said Napper brought up a serious issue.

“This could affect a number of people that are above the 133 percent of the poverty level. With any change, there’s a process, there’s going to be some that didn’t get onboard (the healthcare exchanges) for whatever reason. A lot of our motivation is 1) certainly the revenue we could capture, but 2) to encourage people to take full advantage of the services and options that are offered to them without our subsidizing it,” said Gunn.

“I’m not against it,” Napper reiterated, “but I was just a little bit shocked on a $3.1 million move for getting $500,000 and yet we’re going to place quite a few people’s credit rating … I’ve got insurance and it’s not going to affect me, but there’s a lot of people out there hurting right now that don’t have insurance. I want us to get all the money we can, and I applaud you for making some kind of movement -- I know we’ve got to make some kind of movement. I want to make sure I understand that this is the best move.”

Trustee Eric Boland noticed other changes in the policy concerning the timing of when patients’ accounts are moved to collections. The current policy states that an application for assistance and its required documentation are required within 45 days of the final bill date. After that, the account is sent to KershawHealth’s “extended business office” for further collection efforts. The proposed policy would drop that timeline to 30 days.

The current policy also states that if the application and documentation are not received within 120 days of the final bill date, the claim will be referred to a collection agency. The new policy would reduce that to 90 days.

“It is less,” Bunch admitted. “We are trying to be bit more aggressive. What we hear is that patients sometimes wait until the last day, the end of process. Also, this lends itself to other initiatives, sooner we know, sooner we can help them. Sooner they get us paperwork, sooner we can help.”

Bunch also confirmed for Trustee Derial Ogburn that KershawHealth does have payment plans available for those who owe a balance but are responsible in repaying the hospital.

Trustees agreed to hold off on a vote for a full month and that the policy, if approved, would go into effect on Oct. 1, the beginning of KershawHealth’s fiscal year.

(Coming Monday: the board’s decision on what firm will provide KershawHealth’s legal services; another month of losses are reported for June; and plans to give the public more chances to meet trustees and learn about the healthcare system’s strategic plan.)

 

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