Hospital Charity Care: Could it become the Cap and Trade of the health care industry?

A debate rages in Illinois about how much of its annual revenue a hospital must spend on charity care and still qualify for the tax abatement offered due to their non-profit status. In 2010, a downstate Illinois hospital in the Provena system lost its tax exempt status after allocating only about 0.7% of its annual revenue as charity care.

In September of this year, the State challenged the property tax exemptions of 3 more hospitals. State regulators use a narrow definition of charity care limiting the dollars they count to free clinical services provided to patients on hospital campuses and ignoring other significant community benefit such as funding community wellness and preventive programs, teaching, and research.

Now comes a proposal from the Illinois Department of Revenue -- a carrot and stick approach to encourage hospitals to provide more pure charity care in exchange for tax credits. If a hospital does more direct charity care, the more tax credits it gets. If it does less, the more taxes it pays. Perhaps the taxes paid could even be directed into funds to shore up the State's Medicaid program or go into an account to support community clinics.

To me it sounds like the power industry's carbon cap and trade program for carbon emissions.

Although the proposal is creative and could encourage laggard hospitals to pull their charity care weight, the first thing to do is to agree on what counts as charity care. Is it the narrow definition of providing free care for a patient in the hospital or an x-ray or scan? Or does it include the broader resources that hospitals provide as community benefit? The more taxes a hospital has to pay, the less community benefit it will want to provide.

Non-profit hospitals are not paying shareholders and investors. They are reinvesting in the community. As one of the only expanding industries in our sputtering economy, their new buildings and projects create jobs, massive durable goods and supply orders, and community investment.

Let's hope that in the effort to evaluate and redesign hospitals' commitments to community benefit, that we don't end up in the trauma unit with a shot to our own collective foot.

Your Piece of the Health Care Pie: How much would you pay?

This post is re-purposed from Erie Family Health Center's Beats per Minute blog, with permission.


Would you pay $1.94 per day in health insurance for the privilege of unlimited access to comprehensive preventive and primary care services at the level of quality provided by Erie Family Health Center? It sounds like a pretty good deal.

Health care reform pie is on a lifeline in Washington, DC, and cost is of high concern. Meanwhile, around the country, at over 1,200 health centers like Erie, data staff hit the send button this week and uploaded information for 2009 on the 20 million medically disadvantaged people cared for at community health centers. The fix is in, and the data show that health centers provide very cost effective primary care and preventive services.

I’d like to show some of Erie’s results as example. (read more)


Over 33,000 patients now access primary care services at Erie. Perhaps an indication of our economic times, the number is up 10% from a year ago. And patient visits climbed accordingly, to 142,000 in 2009, up 7% in 2009 from 2008.

Our annual report to the feds allows us to calculate the average cost to provide a year of health center services to an Erie patient: $700 per year, or $59 per month, or $1.94 per day. This includes unlimited doctor visits, laboratory services, counseling, case management, oral health care, delivering your baby, 24/7 answering service and coordination of care with our hospital partners. Erie competes for federal grant dollars to help support the 34% of our patients who are uninsured. The annual cost to the feds per uninsured Erie patient is $360 – less than a dollar a day.

If you like a bargain, you are thinking – good deal!

A recent report by Lo Sasso and Bryck in the journal Health Affairs predicted that for every $500,000 additional funds a health center receives, 540 additional patients can be served -- $925 per patient per year, $2.50 per day. Erie is doing better than the national average.

But health the health care pie is really divided into three slices. The first slice is primary and preventive care like Erie provides, a good deal as we see. The second is both basic and sophisticated outpatient testing such as x-rays, mammograms, CT scans and MRIs, to which Erie arranges affordable and deeply discounted linkages with partners. The third is the most expensive – hospitalization, surgery, rehabilitation, and Erie provides linkages as well. And I’m not even going to touch the issue of long term care (a whole other pie).

It’s that first slice of pie, $1.94 per patient per day, which has the most potential to prevent over use of the other two slices. The other two slices are super expensive, their costs are rising, and they are breaking our health care system.

As negotiators try to resurrect health care reform in Washington, they should keep an eye on health centers as a cost-effective and expandable slice of the health care pie. We are ready to do more. END OF POST...Thanks for reading.

Reacting to the Future of Primary Care

There is a provocative Perspective article in the November 13, 2008 issue of the New England Journal of Medicine. The basic question argued about is whether or not it is physically possible to provide primary care to the extent required to prevent illness and treat chronic disease effectively. There are so many things a primary care provider must do that she or he would need to work 18 hours every day. Whereas a specialist can focus on just one part of the body or one illness, a primary care provider must focus on everything from acute illness to preventive care to managing chronic illness -- and all in a 15-20 min patient visit. What do you think? No time to read the article? Check out the video.



As an example from my own practice, a 72 year old man has just been discharged from the hospital after being admitted for shortness of breath. He has chronic illness which include the following: diabetes, hypertension, coronary artery disease, sleep apnea, renal failure, severe arthritis, glaucoma and high cholesterol. He needs his list of medications from the hospital reconciled which what he was taking before he was admitted. In addition, he is due for his flu shot and other preventive interventions. Go. You have 20 minutes start to finish.

And, don't forget the follow up phone calls to pharmacy and specialists after the visit is over. Of course, now we have email too.

Is this an extreme example? Not really. Many adult patients suffering from chronic illness have more than one; way more than one.

As of 2008, health care providers get reimbursed based on the individual patient encounter. One visit equals one payment. Complexity of illness only plays a minor role in the amount of reimbursement, and all work done outside the exam room doesn't count. This is just as true for those providing health care without regard to the ability to pay, like community health centers, as it is for practices caring for a largely insured population. At health centers such as ours -- Erie Family Health Center -- we look for innovative ways to soak up the cost and we rely on winning competitive federal, state and local grants.

But our doctors, nurse practitioners, certified nurse midwives, physicians assistants, and dentists all have the same stress and challenge of trying to do everything, every day. We clearly need to invent something new.

END OF POST. THANK YOU FOR READING.