Stories from the Tampa Bay Business Journal (https://www.bizjournals.com/…/how-community-health-systems-…) and the Tampa Bay Times (http://www.tampabay.com/…/City-Council-sinks-deal-to-alter-…) confirm that distrust of Community Health Systems (CHS) by the St. Petersburg City Council torpedoed CHS’ proposal to pay the City of St. Petersburg $26.5 million for its 20% stake in Bayfront Hospital. In short, CHS said that owning all of the hospital would make it easier to manage and sell. For the City, it was a matter of getting assurances that CHS would agree to a guarantee, in the contract, of $10 million in charity care.
As NICHE reported previously, the City’s $1.5 million in shared annual costs for a 20% state would assume a profit share of $7.5 million and thus the $26.5 million would be equal to a bit less than 5 times a year’s profits. In retrospect, it would seem that the offer from the Fort Wayne Physicians group that sought to purchase Lutheran Health Network (LHN) would seem reasonable.
According to St. Petersburg Councilman Charlie Gerdes, the issue that led to a 5 to 3 vote against selling was trust–or lack thereof. “The only place I can go is to suspicious places,” Gerdes was quoted as saying. “It’s a provision in the lease that a potential purchaser wouldn’t like.”
Uncompensated care is defined as charity care and bad debt. The total dollar amount of charity care is calculated annually using a hospital’s full established rates. Since Medicaid is “needs based,” that part of services for which hospital costs were not covered by Medicaid’s payment is considered “charity.” With bad debt, a bill for services has been provided and the part unpaid comprises bad debt. This may seem straightforward, but it is far from standardized since hospitals all have different costs, and since some hospitals also consider that part of a bill not covered by Medicare as “charity.” However, while Medicaid is needs-based, Medicare is not, and many hospitals do not consider their costs in excess of Medicare payment as charity. As NICHE has reported previously, Francis Crosson, M.D., the Chairman of MedPAC, has claimed that hospitals bargaining with insurers has led to better payment from those insurers. As an unintended result of having better combined net margins, the hospitals have allowed their own costs to increase, thus making Medicare profit margins seem low. It is not, claims MedPAC, that Medicare payments are inadequate but that hospital cost efficiencies need improvement.
In any event, local hospitals in Fort Wayne handle charity care differently. Both Parkview and IU Health do not consider debt incurred by Medicare payment deficiencies as charity (but do consider Medicaid underpayment). Lutheran Health Network considers both Medicaid and Medicare underpayment as charity (see http://www.lutheranhealth.net/report-to-the-community, “Uncompensated Care is composed of: Charity Care, Bad Debt/Uncollected Debt for Services, Medicare Underpayments and Medicaid Underpayments). It may be that the St. Petersburg City Council found such variances as a reason to insist on clarity of language in reaching an agreement on charity care.