Hospitals contend with mounting bills from those who cannot pay

In fall 2007, the University of Virginia Medical Center admitted a transfer patient from Danville who couldn't pay for treatment.

The middle-age man, a foreigner who suffered from a mental illness, had no family and no known country of origin. There was no way to know if the man was a documented resident.

"Even though the patient could've been sent home, there's no home," said Larry Fitzgerald, UVa hospital's chief finance and business development officer. And, the patient would not have survived on his own, Fitzgerald added.

The man ended up spending a year in the hospital before UVa transferred him to a nursing home.

The cost of handling the indigent patient approached $2 million, and the hospital still pays for his care, Fitzgerald said.

Providing care for documented and undocumented immigrants "is a story playing out in academic hospitals" across the nation, Fitzgerald said.

But that situation is only one of several emerging issues regarding indigent care that UVa and other academic hospitals must contend with.

In the last three years, UVa hospital's write-offs resulting from treating all patients who can't pay their bills have climbed steadily, from gross charges of nearly $126 million in fiscal 2005-06 to about $165 million in the most recent fiscal year. The write-off totals account for what the hospital would have charged for service, not the actual cost for treatment.

UVa's most recent fiscal year deficit from treating nonpaying patients is much less, at $16 million: the hospital loses only what it costs to treat such patients, not what it would charge them, and the hospital receives $56 million from the state to lessen the burden of treating non-paying patients.

UVa, which along with the Virginia Commonwealth University Medical Center treats about half of the state's indigent patients, is not alone when it comes to caring for those who can't pay for treatment. According to the American Hospital Association, hospitals nationwide are seeing an increase in non-paying patients.

The struggling economy and uninsured patients are triggering closings, layoffs and cost-cutting at hospitals nationwide, according to news reports. According to a recent Associated Press report, Moody's Investor Service changed the outlook for nonprofit hospitals to negative, blaming the recession, bad debt and a credit crunch.

While the area's two hospitals - UVa and Martha Jefferson, both nonprofits - have experienced an increase in non-paying patients, both are weathering the storm.

"At this time our cash flows are at the level that we can manage indigent care," Fitzgerald said. This fiscal year, the hospital's net income totaled nearly $67 million. Fitzgerald said he doesn't foresee the increase in non-paying patients having a negative financial fallout at UVa - delayed building projects or layoffs, for example.

Mike Burris, chief financial officer at Martha Jefferson, said the hospital wrote off $5.5 million in non-paying patient charges between October 2007 and September 2008.

"And we are seeing some trending up in recent months," he said. "With the way the economy is trending down, I think you can say we'll see charity care increase."

Burris said he's an optimist and figures "we will weather this" recession.

The hospitals also get a helping hand from the Charlottesville Free Clinic, which provides care for uninsured residents who are employed. According to the clinic's 2008 annual report, it provided $4.95 million in care.

Indigent patients come from a variety of backgrounds.

While the homeless, such as the Danville man, represent a sizeable portion of indigent patients at UVa, "virtually anyone could find themselves medically indigent, if they lose their job," Fitzgerald said.

The state guidelines to be declared indigent are strict. A family of four, for instance, can make no more than $42,400 annually and hold assets worth no more than $3,200, according to Brent McGhee, UVa hospital administration manager of patient finance.

A person who no longer has a salary or insurance could easily meet that threshold, and hospital bills can mount quickly.

"You can have a $200,000 bill in a heartbeat," Fitzgerald said.

He pointed out that the uninsured employed are another emerging concern.

According to the Virginia Health Care Foundation, 1.135 million Virginia residents - 15 percent - lack health insurance. The foundation statistics also state that 57 percent of employed Virginians do not have insurance through their employers.

The state budget shortfall is something else that concerns Fitzgerald, especially with Medicaid.

Medicaid helps offset the unpaid bills for treatment at UVa, as well as with other patients who lack insurance. All of that funding could find itself on the wrong end of budget cuts.

Indigent care is "an emerging issue for UVa," Fitzgerald said, and is something that is "very high on our list."