The costs of unpaid care at Minnesota hospitals fell 6 percent last year as medical centers in the state reported a significant decline in charity care costs.
The drop in unpaid care is the largest in at least 20 years, and suggests financial burdens were less of a barrier to care for hospital patients last year, according to a report released Tuesday by the Minnesota Department of Health.
State health economist Stefan Gildemeister said the report can’t definitively say what caused the decline, but it coincided with the expansion of health insurance coverage during 2014 with the federal Affordable Care Act.
Looking at financial data for 126 out of 133 hospitals in the state, the health department found total uncompensated care costs fell from $313.8 million in 2013 to $294.1 million last year, a decline of $19.8 million.
“It’s a large change,” Gildemeister said. “It’s a change that differs from the historical trend — that makes it unusual.”
The Health Department report defines unpaid care as the combination of charity care, which is either free or provided at a discount to eligible patients, and “bad debt,” where patients neither pay their bills nor qualify for charity programs.
The report found that charity care declined by 22 percent, or $34.6 million last year — more than offsetting a $14.9 million increase in bad debt at hospitals and hospital-based clinics.
The findings fit with a Star Tribune analysis earlier this year that tracked charity care declines and increasing bad debt across hospitals and the broader system of clinics that many operate.
Lawrence Massa, president and chief executive of the Minnesota Hospital Association, called it “a good news story” that unpaid care is down, adding that less charity care is a sign of more people having coverage. A U.S. Census Bureau report found Minnesota’s uninsured rate fell from 8.2 percent to 5.9 percent last year.
“This is the expected result of the Affordable Care Act,” Massa said.
But concerns persist about rising bad debt, which many attribute to higher deductibles in many health insurance policies. To address the problem, hospitals are considering changes to charity care policies to make discounts available to people with very high deductibles compared to their income.
Another factor with the growing bad debt problem, the health department says, is the growing cost of health care.
“We are pleased that more Minnesotans now have the benefits of health coverage when they go to the hospital,” said Dr. Ed Ehlinger, the Health Department commissioner, in a statement. “However, the rising cost of health care continues to pose a threat to access to care.”
Two years ago, the Health Department projected the federal health law would cut hospital uncompensated care costs to between $184.8 million to $243.8 million by 2016. Gildemeister said the reduction in unpaid care thus far is heading in the right direction, but added: “It’s too early to say whether we’re on track to meet those numbers.”
Uncompensated care costs are a relatively small driver of overall hospital finances in Minnesota because relatively few people in the state have lacked health insurance over the years. Whereas unpaid care costs at hospitals across the country typically account for about 6 percent of expenses, Gildemeister said, their share in Minnesota fell from 2.1 percent in 2013 to 1.9 percent last year.
The Health Department report showed Hennepin County Medical Center (HCMC) was the largest provider of unpaid care during 2014 followed by two Mayo Clinic hospitals in Olmsted County.
In interviews with the Star Tribune earlier this year, HCMC officials attributed the decline to the federal health law while Mayo Clinic pointed to overall efforts to control the cost of care.
The federal health law expanding coverage in the state-federal Medicaid program for Minnesotans at or below the poverty line. The law also created the state’s MNsure exchange, where people could buy policies with the help of federal tax credits.
“Uncompensated care … is viewed as an indicator of financial burden that can restrict access to health care services,” the report said. “The Affordable Care Act attempts to reduce this type of burden by increasing the number of people with health insurance and limiting total out-of-pocket costs for people with health insurance.”