If there is one thing the average member of the public doesn’t understand, it’s the hospital billing and accounting system. That’s not surprising, based on the number of billings, insurance rejections, submittals, re-submittals, various write-offs, adjustments, and communications they receive – sometimes with notes in obscure codes. However, thanks to California’s Office of Statewide Health Planning and Development (OSHPD) – and the site truecostofhealthcare.org that assembled and analyzed the financial records of 387 California hospitals over a nine-year period (2003-2011) – it is a little easier.
I checked the 2011 report of Natividad Medical Center as a typical example. I selected Natividad because it is an acute care safety-net hospital owned and operated by Monterey County that provides access to all patients regardless of their ability to pay. If any hospital should have lost its proverbial shirt, surely it was Natividad. Remember there was no such thing as California Care in 2011.
In 2011, NMC provided 34,100 patient days of care. Medicare accounted for 7,600 patient days (22.2%), MediCal (California Medicaid) for 18,300 (53.6%); the balance, 8,200 patient days, fell into other categories such as uninsured or privately insured. There were also 72,400 E.R. visits in 2011, a 198 per-day average.
For all its services of every type, NMC billed $741.3 million in 2011. In 2006, the hospital billed $307 million for 31,000 patient days and 30,000 E.R. visits. In five years, patient days increased only 11 percent, but both ER visits and total billings increased 140 percent. The percent of Medicare and MediCal patients remained approximately the same in 2006 and 2011.
Slightly over $14.8 million (2%) of the billings were written off in 2011 as “charity care.” In 2006, NMC provided essentially no charity care. Bad debt accounted for $47 million (6.3%) in 2011 compared with $15.6 million (5.1 %) in 2006.
Then there was the dreaded “adjustment process.” Unlike the real world where you are required to pay your bills, this is the hospital world; “when a hospital bill is paid, it’s almost never paid in full.” The adjustment is the amount forgiven to, or disregarded by, the payer. NMC’s bills were adjusted down $529 million or 78 percent. Poof, more than half a billion dollars gone, or was it ever actually there? About $210 million or 74 percent was adjusted away in 2006.
NMC received $214 million in total revenue in 2011. There was $44 million for outpatient care, $138 million for inpatient care, and $31 million for miscellaneous items. The 2006 total was $115 million, a five-year revenue increase of 86 percent. In 2011, $143 million (67%) of the revenue came from government programs; in 2006, it was $84 million (74%). The dollars went up, but the government’s portion went down.
Finally, in 2011, the NMC made $16.4 million; in 2006, they made less than $2 million. The fiscal year figures are slightly different in the annual report. For four years, FY 2005-07, NMC lost $44 million; for the next four years from FY 2008-11 NMC had a profit of $64 million (they like to call it margin).
Many of you are going to do the math and tell me that it does not add up – but I already know that. I suspect the discrepancy has to do with when you take the adjustments, but there is something else that does not add up. How can they bill for $741 million and just write off $637 million (86 percent) for charity, bad debt and adjustments – and still make a profit of more than 9.5 percent? I’ve got to get into that business.
