Hospitals bill county for cost of uninsured
David Gulliver - posted 12 a.m. Monday, Oct. 12, 2009
Three local hospitals have taken the unprecedented step of billing Sarasota County for nearly $31 million, the amount they say the county owes them for caring for a surging number of poor and uninsured patients.
The three for-profit facilities claim they can do so under a heretofore unnoticed clause in the state law that governs the Sarasota Memorial Hospital district. The clause says the Sarasota County Commission shall reimburse any other hospital for indigent care the same way it reimburses Sarasota Memorial. They started submitting bills in December, and continue to turn them in each month.
County officials counter that the provision has been superseded by new laws and call it “an unlawful expenditure of taxpayer funds.” They say the county should not subsidize for-profit businesses.
They also say that if enforced, paying the bills would require raising property taxes another 1 mill, or $1 for every $1,000 of a house’s assessed value.
The issue next heads to Tallahassee, where lawmakers will consider the county’s request to strike the language from state law. But the dispute offers yet another illustration of the scope and cost of the uninsured on the country’s health care system.
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The Florida legislature passed the law establishing the Sarasota Public Hospital District in 1949, some two decades after leading citizens raised money and built what would become Sarasota Memorial Hospital.
The law was amended several times in the next decade, eventually delineating the elected board’s structure and duties, its authority to issue debt and to set a property tax millage, among many provisions.
In a section separate from the millage provision, a 1959 amendment lays out how the public hospital should bill the county commission for indigent care, by certifying and submitting a list of itemized charges.
It goes on to say:
“The said Board of County Commissioners shall in like manner reimburse any other hospital in Sarasota County, approved by the State Board of Health, for hospital services rendered to medically indigent persons as herein defined, upon like certification by such hospital and at such rates as shall not exceed those prescribed for such patients by hospitals owned and operated by said board.”
For almost 50 years, no other hospital sought that reimbursement. Sarasota Memorial itself does not bill the county for indigent care, instead covering the cost out of its operating budget. But in late 2008, officials at Doctors Hospital of Sarasota took note of the clause, and on Dec. 15 submitted the first of its bills, with a letter explaining the action.
“For many years, physicians and hospitals nationwide have faced rapidly escalating labor and operating costs in an environment of shrinking reimbursement,” wrote Chief Executive Officer Robert Meade.
“With the recent economic downturn, however, these challenges are reaching historic levels as many families have lost or greatly reduced their insurance coverage. This has resulted in a tremendous increase in indigent care provided by Doctors Hospital. This year, we will provide over $20 million dollars of care for the uninsured and underinsured.”
“Continuation of this trend will negatively impact the services we can provide and threaten our ability to achieve our core mission... again, providing quality healthcare for the Sarasota community.”
Attached was a five-page spreadsheet of line-by-line listings of 205 unpaid patients accounts, totaling $1.18 million, and a copy of the key section of the Sarasota Memorial law.
Englewood Community Hospital, like Doctors Hospital owned by Nashville-based HCA, submitted a similarly worded letter and a line-by-line bill.
On Dec. 17, County Administrator Jim Ley asked his staff to research whether the hospitals certified patients’ residency, whether the hospitals provided the true cost of care, not the charge, and whether the patients were admitted properly.
“These will require immediate attention,” he wrote.
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In subsequent letters, the hospitals certified that their bills properly cited costs, that the patients were uninsured county residents ineligible for Medicaid, and that the hospitals would not pursue collections of the accounts.
The bills continued to arrive each month. Venice Regional Medical Center, owned by Naples-based HMA and Sarasota County’s other for-profit hospital, started submitting bills in February. As of Oct. 5, the three hospitals now have billed the county for $30.7 million -- about $15 million from Doctors Hospital, $6 million from Englewood and $10 million from Venice.
In an Oct. 2 interview, Ley said the county had no plans to pay the hospitals. First, county attorneys believe the section of the Sarasota Memorial law was superseded in the 1968 revision of the state constitution.
If the county chose to pay the hospitals, it would require budget cuts or a tax increase, Ley said. The county spent $35 million in reserves to avoid cuts this year, but will have to reduce spending next year regardless, he said.
Bills to date indicate the three hospitals’ indigent care would run about $40 million a year, nearly 10 percent of the county’s operating budget.
Ley estimated a tax increase would be about 1 mill, based on Sarasota Memorial’s current levy of slightly more than 1 mill, and on all hospitals’ expected indigent care costs.
But he said the hospitals’ billing also raised a bigger issue. “It causes us to ask a question -- why should this county be required to subsidize the profit margins of private hospitals?” Ley said.
This year, Sarasota Memorial received about $47 million in tax revenues from its roughly 1 mill property tax levy -- long a bone of contention with the region’s for-profit hospitals, who get no such payment.
Ley said the other hospitals get no such revenue because they differ significantly from Sarasota Memorial. “If you’re going to get public tax support, why aren’t you providing a full range of services?” he said.
The for-profit hospitals no longer offer services like psychiatric care or delivering babies, two areas that lose money and are frequent targets of lawsuits. Sarasota Memorial offers both services. In 2008, it reported providing about $26 million in charity care, and writing off another $57.2 million in unpaid patient bills.
But if the billing shows anything, it demonstrates that the problem of caring for the poor and uninsured reaches beyond Sarasota Memorial’s doors.
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As anyone watching the ongoing healthcare debate knows, millions of Americans are uninsured, and the number has grown as the economy slid into recession.
The most recent Census estimates, from 2008, found about 65,000 Sarasota County residents under age 65 -- 25 percent of the total -- had no private or government-provided health care coverage at the time of the survey. Survey error indicates the uninsured rate could be about 2 percent greater or less than that.
Other studies, cited by the non-partisan Congressional Budget office, suggest that half to three-quarters of the uninsured have lacked coverage for at least one year.
Census and other studies indicate that thousands of county resident have lost insurance since the recession began. In 2004, about 44,000 Sarasota County residents under 65, or 18 percent of the total, had no health insurance, according to a survey by the University of Florida for the state Agency for Health Care Administration.
People without health insurance often turn to hospital emergency rooms for care, because federal law mandates hospitals treat and stabilize any patient that comes into an ER.
Indigent care vexes hospitals for two reasons. The less obvious is that it strains their relationship with doctors, who usually are independent contractors.
Emergency physicians and doctors who cover “call” -- providing orthopedic, neurologic or other specialized care to patients that flow through the emergency room -- bill patients separately and get little or nothing from the poor and uninsured. Traditionally, doctors have covered call in exchange for hospital privileges, the right to treat patients there. But more and more, hospitals are having to pay doctors up front for that coverage, often $1 million a year or more for all call coverage.
But the bigger reason is the monetary loss of providing care, often expensive, and getting little or nothing in return.
The average monthly cost for indigent care at Doctors Hospital and Venice Regional was about $1.3 million each. Englewood averaged about $600,000. But indigent care can be like Russian roulette: Records show a single uninsured patient in June cost Venice Regional almost $2.2 million -- double its typical monthly cost for all indigent care.
(note: that patient’s expense was omitted from calculating the hospital’s average costs.)
At the county’s request, Sarasota Memorial compiled one monthly bill, following the same parameters as the other hospitals. It reported indigent care costs for November 2008 alone of $8.1 million.
The hospital lost about $15 million on operations in its 2008 fiscal year, according to its audited financial statements. It took in $56.5 million in tax revenues and $20.5 million from investments -- nearly the amount of its bad debt and charity care combined -- and ended with a net $59.7 million profit.
The three for-profit hospitals appear to be suffering to varying extents. All three hospitals lost money in 2008, and two of them lost ground from 2006, when losses from uninsured started to soar.
According to hospitals’ financial filings, Venice Regional Medical Center lost $7 million on operations and $4.7 million overall in its 2008 fiscal year, compared with a $3.8 million operations loss and $2.9 million overall loss in 2006.
Englewood Community Hospital lost $5.3 million on operations and $2.7 million overall in 2008, compared to a $1.5 million operations loss and $578,518 overall profit in 2006.
Doctors Hospital lost money in 2008, $2.5 million on its operations and $152,097 overall. But that was an improvement on 2006, when it lost $8.3 million on operations and $6.8 million overall.
The three for-profit hospitals declined to comment on most of the issues around their action. In his letter, Doctors Hospital’s Meade said his facility has been “investing heavily in growth initiatives and efficiencies that allowed us to continue our core mission of providing quality healthcare for the Sarasota community.”
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A Doctors Hospital spokesman says the bills are a way of getting the county to take note of the problem and start working on a solution that considers all four hospitals’ expenses.
“We just want to get a fair hearing on the issue,” Lynda Cassan said. “It’s not a matter of taking from Peter to pay Paul. It’s a matter of a creating more equitable distribution.”
The commission appears to have little interest in a hearing. In an Oct. 5 letter, chairman Jon Thaxton asked state Sen. Nancy Detert to consider removing the “legislative artifact” in the Sarasota Memorial law.
The county believes paying the bills would be “an unlawful expenditure of taxpayer funds” because it would require a tax increase to subsidize for-profit businesses, a conflict with the state constitution, the letter said.
The letter suggests an alternative: Under state law, voters could set up a special district or create a tax to support indigent care, such as the one in place in Hillsborough County
County officials are confident that if the matter does go to court, precedent is on their side. They point to a 1987 ruling from the Florida Supreme Court, in Dade v. American Hospital of Miami, that found the state constitution did not oblige counties to pay hospitals of the cost of indigent care.
One difference, though, is that there was no language in state law obligating Dade County to pay the hospitals, where Sarasota County’s obligation is specifically spelled out in the hospital enabling legislation. And that legislation -- including the indigent care provisions -- was reviewed, overhauled and approved by state lawmakers in 2003.
The state Supreme Court’s ruling -- now 22 years old -- shows how little progress has been made.
“In conclusion, providing health care to our indigent citizens presents a perplexing problem, compounded by recent economic changes,” justices wrote.
“Just two decades ago, almost all hospitals were nonprofit institutions that voluntarily provided indigent care and funded the cost with paying patients, charitable
contributions, and tax funds. Today private-for-profit hospitals have appeared and multiplied. This restructuring of hospital care has complicated the problem of indigent health care.
“Even if courts had the authority, they are ill equipped to investigate and evaluate changing public needs in this area. Post-emergency, indigent health care is a problem for legislative solution.”
