Shapiro’s medical debt relief plan draws concerns from rural hospital’s admins | Don’t Miss This

HARRISBURG — Warnings about the fiscal health of Pennsylvania hospitals have sounded for years.

Roughly 4 in 10 operated at a loss in 2022, industry data show.

An estimated 20 million Americans carrying medical debt find themselves at a loss, too, including an estimated 690,000 Pennsylvanians.

The issues intersect at facilities like Evangelical Community Hospital in Union County, where the president and CEO, Kendra Aucker, bemoans the burdens carried by patients and providers alike.

“The government hasn’t figured out if health care is a right or privilege. In the way it’s managed it’s a privilege and a lot of people can’t afford it,” Aucker said.

“I personally believe health care is a right but in our country, it’s not laid out that way,” she said.

Aucker’s comments came hours after Gov. Josh Shapiro delivered his 2024 budget proposal including an initiative to buy and forgive $400 million in medical debt with a $4 million investment.

The governor is proposing to follow the lead laid out in a House bill that would have the commonwealth contract with a medical debt relief coordinator to negotiate purchases of lingering bad debt from hospitals and other providers.

A similar program is underway in Pittsburgh where rather than bad debt being bought by collectors for pennies on the dollar, a city contractor makes the purchase and the bills are forgiven. The city invested $1 million for the program this year and estimates relief of $115 million.

Under Shapiro’s plan, indebted patients earning up to 400% of the federal poverty level would be eligible. Negotiations would be handled independently of patients. They wouldn’t have to apply and would only learn of the forgiven debt after the fact.

Estimates on total debt held by Pennsylvanians vary in billion-dollar totals. About 7% of the commonwealth, or 690,000 residents, carry medical debt of at least $250, a study by the Peterson Center on Healthcare and Kaiser Family Foundation found. The Urban Institute estimates the median debt statewide at $500. Anyone who’s experienced injuries in a car accident or a serious health diagnosis can attest to debt potentially accumulating far more than that.

‘Obviously common sense’

Antoinette Kraus, the founding executive director of the Pennsylvania Health Access Network, said people with unpaid medical bills are less likely to seek care. When care is delayed, diagnoses worsen, the cost of care increases and bad debt grows, she said.

The state House already passed the medical debt relief bill last summer, and Shapiro endorsed the concept. Kraus said the state Senate could take up the House bill and move it to Shapiro’s desk. Whatever the course, she’s optimistic that a relief program will become a reality.

“It’s obviously common sense. I think once people understand it we’ll see support like we did in the House,” Kraus said, noting how the $1:$100 debt relief ratio results in a huge return on investment.

Allison Sesso, president of RIP Medical Debt, a debt relief coordinator operating Pittsburgh’s program, said she hopes the proposal sustains as a priority this legislative session.

“If approved, we will be able to use those funds ($4 million) to relieve nearly $400 million of medical debt for residents of Pennsylvania, removing both a financial and emotional burden on those least able to afford their outstanding medical debts,” Sesso said.

Payments necessary

The benefit for patients is obvious. For hospitals, Aucker and Evangelical Hospital’s chief financial officer, James Stopper, agreed with the observation that the benefit is largely reputational.

According to Stopper, the hospital’s return on debt collections is about 20%. The governor’s proposal for debt relief would result in about a 1% return.

Evangelical’s annual fiscal reports showed the hospital operated at a multi-million dollar loss in each of the last two years.

“We’re not Big Pharma. We’re not the payors (insurers). We’re working hard to keep our nonprofit status and meet the demand for the clinics and services we offer. We have to go after payment or we go out of business. It’s hard to stay operational,” Aucker said.

Uncompensated care at Evangelical approached $60 million in 2023, including $2.6 million in bad debt at cost and a combined $52.2 million in reimbursement shortfalls for patients enrolled in Medicare or Medicaid.

Nearly 65% of Evangelical’s patients are enrolled in either program, the latest annual fiscal report shows. That figure is trending upward, according to Stopper. He said that a 1% shift of patients moving from private insurance to Medicare would cost Evangelical about $2.5 million annually.

$752 million in bad debt

Shapiro noted struggles faced by Pennsylvania hospitals in his address. Thirty-three rural hospitals either closed or reduced services in the last 20 years, he said. He alluded to a forthcoming announcement on plans to offer further help.

Pennsylvania aided the hospital and broader health care industry in 2022 with a $210 million workforce assistance program to help retain and recruit staff. Another $50 million was included in the current year’s budget for emergency relief for struggling hospitals.

Efforts taken in the hospital industry, aided with state and federal relief, helped reduce turnover for direct care professionals by 28% on average, according to the Hospital and Healthsystem Association of Pennsylvania.

Unpaid hospital bills and charity care fell by 5.3% across the commonwealth in 2022, the Pennsylvania Health Care Cost Containment Council reported. However, while in decline, the figure is large: $752 million.

In reporting that 39% of hospitals operated at a loss that fiscal year, the Council showed that operating margins collectively fell as did revenues while expenses increased.

Chris Clark, president of three Allegheny Health Network hospitals including AHN Grove City in Mercer County, reflected on the challenges of medical debt, particularly on those disproportionately impacted in rural areas.

He also made the correlation between high medical debt and worsening health outcomes, saying the issue is equally about health and financials.

“While it doesn’t appear that the governor’s proposal would have a significant impact on hospital finances, at AHN Grove City or elsewhere, we are encouraged that he and others are exploring strategies and solutions that may help to minimize the burden of medical debt on individuals in our state,” Clark said.


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