Redefining hospital uncompensated care in California: The changing landscape from 1994--1998.

Abstract

Hospital uncompensated care (UC) plays a vital role in access to health services for the uninsured and underserved. This research redefines the traditional UC definition by including all unreimbursed services (charity care, bad debt and public payer reimbursement shortfalls) and subtracts all subsidies, notably Medicaid Disproportionate Share funds. This redefinition leads to these questions: (1) What is the distribution of UC across hospitals and are there significant differences? (2) Are hospitals responsive in providing UC to the uninsured given financial, organizational and environmental factors? (3) Are non-profits significantly different than for-profits and did Senate Bill 697 targeting nonprofit community benefits have an impact? Using California hospital financial data from 1994--1998, cross-sectional trends by hospital type are examined for three dependent variables---UC dollar volume, ratio to net patient revenues, and per discharge. Multivariate regressions estimate differences between hospitals while controlling for confounding factors and tests hypotheses about the uninsured, market characteristics and environmental factors. Under the expanded net definition, UC dollar volume is twice as high as calculated under the traditional definition. The change of definition increased the share of all UC provided by city/county hospitals. The share provided by all other hospitals decreased. The total UC dollar volume provided by all hospitals decreased between 1994 and 1998, due to increased public subsidies that offset unreimbursed services. Modeling results reveal that city/county and teaching hospitals provided significantly greater UC volumes than all other hospitals. Non-profit hospitals provided significantly more UC than for profits, and Senate Bill 697 had short-term effects on UC provided by non-profits. The consolidation of multi-hospital systems had mixed effects on UC provision. Finally, the changing percent of uninsured persons had a modest effect on hospitals' UC provision. These results suggest several implications. First, there are finite resources for the uninsured. Given hospitals' financial uncertainties, funding UC in the near future will be increasingly problematic. Second, different UC definitions have an important impact on measuring non-profits' community benefit provision and the consequent justification of their tax-exemption. Finally, uncompensated care for the uninsured is an important public good but other means of distributing these resources should be considered.