Hospitals pay $150M in unreimbursed costs
A report says patients covered by Medicare, Medicaid and QUEST create a big shortfall
Hawaii's health care industry is critically ill, according to accounting firm Ernst & Young LLP.
Hawaii hospitals spent $228 million more to care for Medicare, Medicaid and QUEST patients in the past year than they received in payments, said a report prepared by Terri Fujii, managing partner of Ernst & Young.
Private payers made up $78 million of the difference, reducing the unpaid costs to $150 million, she said.
Major cost items include: personnel expenses and benefits, medical education, community programs, provision of services regardless of ability to pay, around-the-clock trauma care and patients waiting for a nursing facility bed.
"There isn't any one answer because of the significance of the deficit between the payments and cost of services," Fujii said in an interview.
"It's not as easy as eliminating certain programs because, obviously, hospitals provide services and programs because the community needs them."
Ernst & Young has reviewed financial trends of the health care industry annually for six years for the Healthcare Association of Hawaii, which represents hospitals, nursing, home care and hospice providers.
"The hospitals are focused on their costs and trying to provide services in the most efficient manner but there is only so much you can do to cut costs while still trying to maintain quality of services," Fujii said.
Reimbursements or payments for patient care, especially from government payers, don't cover the full costs and private insurance doesn't cover the shortfall, the report points out.
Bad debt and charity care totaled $582.8 million in the past six years, according to information provided from 27 hospitals and seven nursing facilities. The total was $98 million in 2004 and $103.4 million in 2005.
"We're continuing to see charity care and uncompensated care for our facilities go up, which is a big concern of ours," said Rich Meiers, Healthcare Association president and chief executive officer.
"If projections continue, the $103.4 million that was reported for 2005, which is up from $98 million, next year is going to be $108.2 million."
Hospitalized Medicare and Medicaid patients who are ready for discharge but waiting for a nursing facility bed is a growing problem, Meiers said.
Medicare doesn't pay for additional days and though Medicaid does, payments don't cover costs. As a result, waiting patients cost the hospitals about $110 million statewide in 2005, Meiers said.
Acute and long-term care chief executives and administrators began meeting three months ago to study the problem and look for solutions, he said.
Thomas Driskill Jr., Hawaii Health Services Corp. president and chief executive officer and past Healthcare Association board chairman, said as many as 50 or more patients are often put on waiting lists at Hilo and Maui hospitals.
"Every one of those patients is tying up a bed that needs to be available for acute care. ... Many nights of the year, all the beds are filled and emergency rooms have patients experiencing prolonged waits to get into beds, both in Hilo and on Maui."
Master planning is under way for the Hawaii Health Services Corp. hospital system, and "looking at the aging population, age 85 and over, and our current and future capabilities, it's scary," Driskill said.
The lack of nursing home beds is a huge part of the health care crisis, he said. "We've got to be creative as a state on how we approach that issue and meet that need."
Driskill said the state administration and Legislature are making a big effort to try to get increased federal Medicare and Medicaid reimbursements and address other problems.
"We have recently seen what is happening to our system with the announced closure of Kahuku Hospital, the sale of the St. Francis system -- and other facilities are also finding themselves in serious financial conditions," Meiers added.
Highlights of Ernst & Young's annual report on financial trends of Hawaii hospitals, nursing facilities, home care and hospice providers:
» Expenses have exceeded net patient revenues at hospitals since 2000. In 2006, total costs exceeded payments for hospitals by $150 million.
» Personnel costs represent about 47 percent of hospital expenses and benefits are about 16.2 percent of payroll costs.
» Community programs such as alcohol and drug treatment, services for the elderly, Hawaiian nutrition, adolescents and family planning cost $119.9 million the past six years with only $62.9 million received in payments. Unfunded costs averaged $9.5 million annually from 2001 to 2006.
» Costs for on-call trauma physicians, hospital staff and patient care exceeded payments by $29.5 million in 2005 at 21 acute care facilities.
» Medical education programs at seven teaching hospitals cost $19.5 million more than payments.
» Prescription drug spending nearly doubled between 1993 and 2004, to 11.6 percent of total health care expenditures from 6 percent.