wellness

The cost of providing free or discounted hospital care for low-income Minnesotans rose 27 percent in 2010, driven by still-high unemployment and dwindling state coverage for public assistance, according to an industry group.

The Minnesota Hospital Association said in a report Monday that the state's hospitals provided $226 million in charity care last year. The cost to hospitals for treating low-income and disabled patients getting Medicaid grew by 13 percent to $498.5 million because the care wasn't fully reimbursed by state and federal government.

"Lots of people are losing their jobs, and those that kept their jobs are losing their health insurance because their employers had to tighten their belts," said Lawrence Massa, CEO of the association.

The report, based on data from 135 of Minnesota's 148 hospitals, aims to quantify the ways in which tax-exempt hospitals give back to their communities. The data does not include the Minneapolis Veterans Medical Center, Shriners hospitals or such state-operated facilities as St Peter, Anoka or other mental health facilities.

In all, Minnesota hospitals contributed $2.28 billion to their communities, an increase of more than 8 percent over last year, according to figures that align with new Internal Revenue Service filing requirements. That number takes into account charity care, unreimbursed care for low-income patients covered by public insurance plans, residency training for doctors, clinical research and free programs for such things as immunizations, nutrition, weight loss or smoking cessation.

Together, those costs accounted for 11.6 percent of hospitals' operating expenses, a slight bump from the 11.4 percent share the year before.

The report is being released as legislators prepare to return to the Capitol next Tuesday. With budgets tight, state and local governments nationwide are taking a closer look at hospitals to see if their work in the community warrants tax breaks.

In Illinois, the Department of Revenue moved to strip property tax exemptions from three hospitals, saying they hadn't provided enough charity care.

Minnesota hospitals had a profit margin of 3.2 percent in 2009, while Twin Cities area hospitals had the largest profits in a decade of 6.5 percent, according to the most recent data from independent analyst Allan Baumgarten. Legislators last year scrutinized profits at the state's nonprofit hospitals and health plans.

At Twin Cities hospitals, total cost of community benefits was about $823.7 million, a 10 percent increase, according to the Hospital Association report. Charity care rose 28 percent, to $135 million. Unreimbursed costs for Medicaid rose 8 percent.

New requirements

As part of 2010 federal health care reform laws, hospitals for the first time are required to more clearly report charitable activities and other community benefits to the IRS. The new rules establish more consistent accounting for activities to justify hospitals' tax-exempt status and to make it easier to compare results from state to state.

Calculations differ. The Minnesota Hospital Association has come up with much more generous totals of hospitals' contributions than the Minnesota Department of Health, which began calculating community benefits in 2007.

Unlike the hospital group, the state doesn't include bad-debt write-offs or gaps in payment for Medicare services, the federal insurance program for seniors, in its calculation. The state is not expected to release its report for several months.

In 2008, the last apples-to-apples comparison, the state determined that hospitals' contribution to the community accounted for almost 6 percent of their operating revenue. The Hospital Association reported that the uncompensated work ate up a bigger chunk, about 9 percent.

As health care reform efforts move payments away from the traditional fee-for-service model, where doctors get paid for treatments, toward one that encourages keeping people healthier and out of the emergency room, hospitals will continue to make charity care a priority even as they feel the strain, Massa said.

"We're in an uncertain time," Massa said. "Even if the Affordable Care Act is declared unconstitutional or is repealed ... the whole notion of health care organizations changing to deliver care in different ways will continue to put pressure on community benefit and how we define it."

Jackie Crosby • 612-673-7335