Picking Up the Tab

Regional hospitals are increasingly eating the cost of providing care for those who are uninsured, an in-kind charitable donation of perhaps half a billion dollars to the Kansas City region.

By Dennis Boone

In its most recent annual report, The University of Kansas Health System—home to the region’s largest medical center—noted $96.2 million in uncompensated care costs. If you averaged that across the 970 staffed beds at The University of Kansas Hospital, you’d have a loss of $99,175 per bed for the year.

The largest provider enterprise in the market, measured by staffed beds, is HCA Midwest Health, whose eight hospitals and other facilities ate $113.1 million in uncompensated care. That’s a staggering loss of $69,514 for each one of its 1,627 staffed beds.

Two organizations, nearly $210 million in what amounts to, in the most charitable assessment, a charitable gift to the region. But those two entities account for only about one-third of the 7,243 hospital beds in the Kansas City area. Even if the remaining organizations posted losses at half the combined rate of the two biggest players, that would be an additional $224.6 million in care that produced no revenue.

Those figures are one reason why KU Health’s CEO, Bob Page, has been beating the drum for the Kansas Legislature to expand Medicaid coverage, something that lawmakers have steadfastly refused to do since passage of the Affordable Care Act in 2010.

“With expanded Medicaid coverage and less uncompensated care, hospitals and clinics throughout the state will be able to focus critical resources on evolving patients needs,” he wrote to lawmakers in earlier efforts to secure Medicaid funding. “It is especially important for smaller hospitals, as they will see greater impact when Medicaid payments increase at the same time uncompensated care decreases. It will significantly impact their operations.”

Democratic Gov. Laura Kelly will take yet another crack at winning over a Republican-controlled statehouse in January, having seen the opposition diminish slightly in recent years, leaving her just shy of the votes needed to push Kansas into the Medicaid-expansion camp.

Additional funding for hospitals is top of mind for health-care executives who last year had to weather a $60 million decrease in federal assistance for uncompensated care, dipping to $8.3 billion. That’s a far cry from the $42.7 billion cost incurred by hospitals nationwide in 2020, according to the American Hospital Association. 

Even when those dollars do show up, they cover just 75 percent of what otherwise would have been received in what are known as Medicare disproportionate-share hospital payments—which already fall considerably below the rates paid by third-party insurers.

Becker’s Hospital Review, among the most respected authorities on health-care issues, noted recently that hospitals had endured an exceptionally difficult financial year, with lower operating margins overall and a reduced chance of wrapping up 2022 in the black. 

The November “National Hospital Flash Report” by Kaufman Hall, drawn form data from more than 900 hospitals, pegged the median operating margin through October of this year at a slight loss, -0.5 percent, with operating margins falling 2 percentage points from the previous month, and 13 percent year-over-year.

Labor expenses, in particular, were driving that trend, up 10 percent for the year, with a huge 3 percentage point surge from September to October alone—an annualized increase of 36 percent. Non-labor expenses helped drag down the overall numbers, but were themselves up 5 percent through October.

Compounding all of that, staff shortages were making it increasingly difficult to discharge patients, increasing length of stays. Meanwhile, emergency-room visits were up 3 percent in October, and operating-room minutes up 2 percent, and medical authorities nationwide say emergency-room services are strained to a crisis point.

“Every aspect of patient care—from being admitted, to treatment, to discharge—is affected by the labor shortage and as we head into the virus season and potential new waves of COVID-19 the pressures on hospitals and their staff could mount,” said Erik Swanson, senior vice president of data and analytics with Kaufman Hall. 

Excel-medical.com, in a report released in September, showed that America’s insured population is picking up most of the tab, in the form of higher premiums and out-of-pocket costs. And they are getting less for that increased investment: Uncompensated care costs are a leading cause of hospital closures, an issue that’s particularly relevant to most of Kansas and Missouri. In just a three-year span—between 2013 and 2015—the AHA says 156 rural hospitals closed their doors.

Perhaps most disappointing to many in the health-care community is that, more than a decade after passage of the ACA, the uninsured rate still stands in double-digits: 13.5 percent of those between the ages of 18 and Medicare eligibility at 65. While that’s an improvement from the 17.5 percent rate before ACA, the act has failed to meet its original goal of securing coverage for all Americans.