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printed in Michigan Health & Hospitals Magazine, Jan/Feb
1999
The Community Benefits Column
A Community Approach to Managing Uncompensated Care
By Robert M. Sigmond
Estimated at more than $15 billion annually, uncompensated
care accounts for most of the community benefit costs reported
by the nation's hospitals. Reflecting the most basic of all
hospital goals, these expenditures are designed primarily
to benefit patients rather than communities.
In my last column (Nov/Dec 1998), I promised to explore practical
ways that communities and hospitals
can take charge of uncompensated care to improve patient care
outcomes as well as to reduce the
financial burden on hospitals and paying patients. Such an
approach can also enable hospitals to
provide greater community benefits beyond the enhanced benefits
to the individual patients.
The timeliness of this topic has been underlined as universal
entitlement has again receded into the
hazy future while the number of uninsured and inadequately
insured is rising. Hospital and health
system leaders may be ready to explore the feasibility of
a four-step community
solution to this problem.
Step One: Design a comprehensive community-based program
for managing six specific initiatives that can substantially
reduce, and in the long run, virtually eliminate the community's
need for uncompensated care.
Step
Two: Create a new profit-making community organization
to carry out the program. This new organization would be owned
in whole or in part by the area's hospitals, with a broadly
representative
and accountable community board of directors. The initial
goal would be a profit margin of 25 percent
by the end of the first year.
Step Three: For support of the new venture, the participating
hospitals agree to contribute money equal
to their budget lines for uncompensated care and other relevant
resources that can be transferred to
the new community corporation. The new organization pays the
hospitals for all uncompensated care, coordinates/oversees
the hospitals' management of uncompensated care patients,
and shares the
resulting profits with the hospital owners. The hospitals
commit to using the profits for expansion of community benefits
and for community care network development. Initially, the
major expenditure
of the new organization would be payments to the hospitals
for all uncompensated care, but this
would be expected to decline substantially as the program
succeeds.
Step Four: If the profit margin is less than 25 percent,
a tough management audit would be initiated to determine what
went wrong, leading to immediate corrective action within
the community organization
or at the hospitals.
The key first step is the design of an acceptable, comprehensive
program for managing uncompensated care, consisting of at
least six major initiatives to be carried out in close collaboration
with the hospitals, physicians, and many related community
organizations (See sidebar).
Theoretically, each of these six initiatives could be carried
out by the hospital alone, but not efficiently enough to justify
the effort. The remainder of this column will outline some
of the key elements of just
the first of the six major initiatives: expansion of hospitalization
coverage.
Initially, this initiative involves intensive organized efforts
to enroll the family of every individual receiving uncompensated
care in a program covering current or future hospital utilization.
A case-by-case approach can include systematic steps to assure
that such patients are taking advantage of all entitlement
programs. At the time when care is being provided, a family
is most open to the value of coverage, but these families
are not marketed because of their projected heavy loss ratios.
But these loss ratios are the very reason the hospitals and
community leaders should develop enrollment initiatives; nothing
to lose and everything to gain.
Beyond enrolling families of patients, this initiative would
involve a series of activities to identify and encourage enrollment
of every individual and family who are potential recipients
of uncompensated care.
This includes the hospital serving as a model for other employers,
including broad benefits, choice of plans, and participation
in payment of premiums of part-time as well as full-time staff,
etc. Related activities
include assistance to individuals in forming groups eligible
for group premium rates, assistance to
individuals in signing up for individual and family coverage
outside of groups, and assistance in
maintaining coverage following lay-offs, etc. The American
Hospital Association's Campaign for
Coverage is pioneering this approach, with special attention
to children.
A future column will explore the many explicit possibilities
for community enrollment of families of potential
or active consumers of uncompensated care. For example, an
interest-free loan fund might be created to assist such families
in payment of their premiums during periods of economic stress
such as hospitalization, unemployment, etc. Based on well-known
loss ratios of these families, the resulting savings could
be significant, even if the rate of loan repayment is not
close to 100 percent.
Other columns will explore the other five initiatives in a
comprehensive community-based uncompensated care program.
Impatient or skeptical readers can contact me at (215) 561-5730
for previews and more details. I would especially welcome
calls from individuals with successful or unsuccessful experiences
in managing the uncompensated care problem. Although I have
set out a rather specific approach to stimulate discussion
and action, clearly there is no one right way to proceed on
this or any other
community-based initiative.
ROBERT M. SIGMOND IS A SCHOLAR-IN-RESIDENCE AT THE DEPARTMENT
OF HEALTH ADMINISTRATION AT TEMPLE UNIVERSITY, PHILADELPHIA,
AND SPECIAL ADVISOR TO THE HEALTH RESEARCH AND EDUCATIONAL
TRUST AT THE
AMERICAN HOSPITAL ASSOCIATION.
07/06/2000