If current trends continue, Wallowa Memorial Hospital and its clinics will incur more than $1 million in uncompensated care when the fiscal year ends June 30. Uncompensated care is either charity –– provided to those who cannot afford to pay –– or “bad debt.” Between the two, bad debt far outweighs the hospital’s charity care.
The projected year ahead shows $276,000 in charity care and $811,000 in bad debt on a roughly $22 million annual revenue stream.
Larry Davy, the hospital’s chief executive officer, said that as a Critical Access Hospital, the facility is bound by law to provide treatment to anyone, regardless of ability to pay. Almost all Oregon hospitals pay 100 percent of the bill to anyone who makes less than 200 percent of the federal poverty level.
A family of five with $58,840 per year in income would qualify. In Wallowa County, 14 percent of residents earn less than the poverty level.
“It’s not a federal law,” Davy said. “It’s just hospitals trying to address access to hospitals and clinics.”
Not that the hospital doesn’t verify an applicant’s financial resources beyond their W-2 forms before allowing access to charity care.
“You have to be careful,” Davy said. “There have been people with low incomes as far as W-2s documented income that are multimillionaires. People can have a lot of cash resources, but their annual income can be under the poverty level.”
The board also placed caveats on program access. The procedure has to be medically necessary and with the exception of emergency care, those treated must be a Wallowa County resident.
The hospital can write off charity care as an expense. Bad debt includes people who don’t qualify for charity care and don’t pay their bill or people who do qualify for charity care and do not complete the paperwork required and do not pay their bill.
The IRS has legal requirements for nonprofit hospitals to maintain their tax-exempt status. The hospital must provide community care or uncompensated care equal to or greater than the property and income taxes the hospital would have paid were it not a nonprofit.
Over the last fiscal year, the hospital provided more than $1.7 million in community care between charity care, underwriting the Wallowa Valley Senior Living Center, the Complete Health Improvement Program and others. Bad debt, however, does not qualify as community care. For that reason, the hospital prefers charity care over bad debt if they can’t collect for provided treatment.
“It’s to our advantage that people apply and do the process and qualify, because that gives us credit in lieu of taxes,” Davy said. “Even though $811,000 this year will be uncollected as bad debt, (the IRS doesn’t) care. They only care about the charity.”
Particularly frustrating for the hospital are people the hospital treats for free who then refuse to complete the charity care paperwork. Consequently, the bill is filed under bad debt.
“We’ve had some very large accounts of many thousands of dollars for very expensive care that we are strongly certain would qualify but individuals refuse to fill out the paperwork and don’t give a reason,” Davy said. “Our staff is willing to help people fill it out. We bend over backwards to help, but some people are just resistant.”
He added that people who think they qualify for charity care can download a copy of the application at the hospital’s website or the hospital will mail one out on request.
The hospital budget for the coming year includes $300,000 bottom line to purchase new equipment and such. Davy said it’s easy to look at that amount and see how uncompensated care affects the hospital’s overall budget. At the March board meeting of the Wallowa Health Care District, the hospital’s chief financial officer announced that the hospital was unable to collect 46 percent of what was billed that month.
The CEO said that uncompensated or not, getting people to regularly access medical care saves money for the health care system in the long run as management of chronic health issues such as diabetes and high blood pressure can prevent catastrophic events in the future.
“For example, if you have unmanaged high blood pressure, and you have a stroke -- what’s that cost?” Davy asked.
Although the amount of bad debt the hospital acquires each year can be frustrating, Davy still sees it as a plus.
“The positive thing is that there are people, who through no fault of their own, that can’t afford access,” he said. “I think the nice thing is that we as a community are able to step up and provide that. Money is not a deterrent to getting good health care.”