Bad debts from patients have become a serious financial complication for health-care providers, and hospitals here increasingly are treating the problem with aggressive strategies to collect more of what theyre owed.


Uncollectible patient debt costs U.S. hospitals billions of dollars each year. In Spokane, for example, Sacred Heart Medical Center had bad debt last year of $7 million, up about 32 percent from 2002. The story is the same at Spokanes second-largest hospital, Deaconess Medical Center.


Every hospital in the country is in a distressed state because of more and more underinsured and uninsured patients that leads to bad debt, says Corey Shank, director of operations for Pacific Medicaid Services Inc., a Spokane-based company that helps hospitals find government funds to help pay patients bills.


Bad debts differ from whats called charity care, which refers to uncollectible amounts for care of patients who are determined to be financially incapable of ever paying their hospital bill. With bad debts, there originally is the expectation that the patient will be able to pay.


Hospitals are employing a host of strategies to minimize the bad-debt problem, including sending financial counselors to talk to patients in their rooms, asking for co-payments or deductibles in advance of non-emergency care, and hiring companies like Pacific Medicaid to seek out federal aid for patients where possible. So far this year, Pacific Medicaids work has resulted in about $6.7 million in payments for Sacred heart that it likely wouldnt have gotten otherwise.


Deaconess and Valley Hospital & Medical Center, both operated by Spokane-based Empire Health Services, began late last month offering uninsured patients a 50 percent discount on their bills for inpatient care, says Deaconess spokeswoman Christine Varela.


Uninsured out-patients now get discounts ranging from 25 percent to 50 percent, depending on how much they owe, Varela says.


Such patients can get another 10 percent off their bill if they pay within 30 days of the billing date.


Varela says the main reason behind the new policy is to bring more into line the price uninsured patients must pay for services compared with patients whose insurance programs have negotiated discounts as part of reimbursement contracts. Such contracts take into account that insurers pay promptly and deal in large volumes, she says.


As far as reducing bad debts at the hospitals, says Varela, the discounts give uninsured patients smaller, more reasonable bills that they are more likely to make payments on.


Kootenai Medical Center, in Coeur dAlene, takes similar steps. We give discounts to self-pay patients that bring their bills down so theyre about what theyd pay if they had insurance, says Tom Legel, Kootenai Medicals chief financial officer.


Legel says a five-person finance committee at the hospital meets weekly to determine which patients qualify for discounts and which bills will need to be written off as charity.


Kootenai Medical has four full-time inpatient counselors who visit with underinsured and uninsured patients while theyre still in the hospital, to determine if they qualify for state or federal financing and, if not, to help create a manageable payment plan for them.


Legel predicts that the national hospital bad-debt problem will continue to worsen, but adds, At Kootenai Medical Center we do not look at things from an ability to pay situation.


By law, hospitals cant deny services to individuals on a basis of their inability to pay. Still, with bad debt becoming such a severe financial strain, hospitals across the U.S. are doing whatever possible to collect the bills they are owed.


In many ways, the traditional means of collecting hospital bills hasnt changed significantly for years, says Michael Banks, chief financial officer at Sacred Heart.


As far as strategies, there is very little that is new except what the patient has to pay, he says.


Financial counselors are sent into patients rooms to help them draft payment plans; co-payments and deductibles are sought in advance for elective, non-emergency procedures; and efforts are made to determine whether underinsured and uninsured patients qualify for government assistance. An additional strategy at Sacred Heart, says Banks, is to offer a 5 percent to 15 percent discount to self-pay patients who pay their entire bill within 10 days of the billing date.


Even the best of counseling, however, doesnt always work, says Banks. He relays the story of one patient with a $90,000 hospital bill who would have qualified for major government assistance by simply spending down $2,000 of her savings account. She declined to do so, and the hospital eventually had to write off the bill as a bad debt.


For about three years, a big effort to reduce bad debts at both Sacred Heart and Empire Health has been spearheaded by Pacific Medicaid. Uninsured patients, says Shank, automatically are referred by hospitals to the Spokane venture. Many insured patients who would have difficulty paying a high deductible and the uncovered portion of a hospital bill also are referred to Pacific Medicaid by financial counselors at the hospitals.


Shank says Pacific Medicaid personnel often talk with patients in hospital rooms to determine which government programs they might qualify for. He says patients also have the option of talking with Pacific Medicaid after theyre released, sometimes through the mail or fax, if thats more comfortable for them.


Pacific Medicaid employs 28 people at its corporate office here and has 55 client health-care providers in Washington and Oregon, almost entirely hospitals, says Josie Sackmann, a projects coordinator at the company.


Though its based here, Pacific Medicaid also has offices in Minnesota, Illinois, and Hawaii. Sackmann says hospitals pay the for-profit venture a percentage of how much government money they are able to collect on behalf of a patient. She says the percentage is not a constant from one hospital to the next.


In addition to the about $6.7 million in government payments Pacific Medicaid has been able to collect for Sacred Heart so far this year, it has rounded up $2.7 million for Empire Health, which handles fewer patients, Shank says.


In the past six months Pacific Medicaid has sought state and federal aid for about 3,200 Sacred Heart patients. About 37 percent of those patients ended up getting such aid and coverage is pending on another 26 percent, he says. Another about 37 percent wont receive any coverage. At Empire Health, about 1,900 patients were assisted, 29 percent of whom received funding, 25 percent of whom have pending coverage, and 46 percent for whom no funding was found.


Deaconess Varela says that hospital and Valley Hospital both established a policy this year under which self-pay patients are asked to make a 50 percent deposit upfront for non-emergency services, though they never turn a patient away if theyre unable to pay.


Sometimes, all efforts to reduce or collect patient bills fails, and those cases normally are turned over to collection agencies, hospitals say.