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Cleveland Clinic Reports 40% Drop in Charity Care After Medicaid Expansion

Officials credit Affordable Care Act for the improvement

The Cleveland Clinic, one of the largest hospitals in the country, has cut its charity care spending — or the cost of free care provided to patients who can’t afford to pay — to $101 million in 2014 compared with $171 million in 2013, according to Kaiser Health News.

Hospital officials credited the Patient Protection and Affordable Care Act (PPACA) for the improvement. “The decrease in charity care is primarily attributable to the increase in Medicaid patients due to the expansion of Medicaid eligibility in the state of Ohio and the resulting decrease in the number of charity patients,” the hospital’s year-end financial statement reported.

That 40% drop spotlights a trend in how payments are changing for all providers since the PPACA rolled out the Medicaid expansion and subsidies that help some lower-income people purchase policies on the new insurance marketplaces, said John Palmer, spokesperson for the Ohio Hospital Association.

“Now that you’re starting to see that shift from uninsured or underserved on over into health care programs, such as Medicaid and the exchange, that has had a good impact,” he said. “And, obviously, it is reflective of what hospitals are experiencing with uncompensated care in the areas of charity care especially.”

The clinic is not alone. The Department of Health and Human Services announced last week that the number of uninsured and self-pay patients has fallen substantially in Medicaid- expansion states since the program went into effect last year. In addition, states with expansion saw significant reductions in uncompensated care costs –– which include charity care and bad debt, such as when an insured patient doesn’t pay his or her share of a hospital bill. Hospitals in those states had an estimated savings of $2.6 billion over that seen in nonexpansion states.

Even so, Moody’s Investors Service released a negative outlook for the nation’s nonprofit health care sector. It pointed out that while the increased insured population will funnel dollars into the hospitals, that may not make up for federal cuts in Medicare and other programs.

Ohio is one of 28 states and the District of Columbia to expand Medicaid under the PPACA. More than 492,000 Ohio residents have enrolled through expansion. In addition, another 234,341 people in the state selected or were automatically re-enrolled in a private plan on the state’s federally run exchange.

“This has been good for patients because now they are insured through the state of Ohio’s adoption of Medicaid expansion and can go anywhere for the care they need,” a spokesperson wrote to Kaiser Health News via email.

Another financial report, released by the clinic in early March, indicates that total uncompensated care fell 27% to $211 million in 2014. That number includes both charity care and bad-debt costs. The clinic, however, announced in the earlier March report that 2014 was an “extraordinary” financial year, with operating income up 60% to $466 million on total revenues of $6.7 billion. Dr. Toby Cosgrove, the clinic’s chief executive, noted then that the economic improvement came from a reduction in expenses, with cuts in energy use, employee health insurance costs, and staff.

Source: Kaiser Health News; April 2, 2015.

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