Any new taxes on Texas physicians should recognize
the large contribution that physicians currently make to the
citizens of Texas by donating their medical expertise and resources
to care for patients who are unable to pay for their own care.
Hospital and physician charity care is an important method of
funding the care for indigent patients. Although many sources of
reimbursement are available to hospitals to defray the cost of
charitable services, physicians generally must absorb the cost of
charity care. That is becoming increasingly difficult due to flat
or declining physician payments and rising practice costs. Because
physician practices are more efficient providers of non-emergency
outpatient care than hospital emergency rooms, overall cost
reductions could be accomplished by encouraging care for uninsured
or indigent patients in physician offices or clinics. Indemnifying
physicians for their charity care services will require choosing
methods for identifying and valuing charity care services.
Background
In 2001, the Comptroller of Public Accounts published a
comprehensive study to quantify health care spending in the state
of Texas. Total Texas spending for 1998, the year studied, was $69
billion. As part of that study, it was determined that Texas
hospitals provide $2 billion in charity care to patients per year,
and physicians provide another $1 billion, making charity care a
significant source of funding for Texas patients.
Hospital charity care is delivered largely as a consequence of
the federal Emergency Medical Treatment and Active Labor Act
(EMTALA), which requires any Medicare-certified hospital to screen
and stabilize any patient who seeks treatment in its emergency
room, without regard to ability to pay or payment method. In
practice, this has meant that uninsured patients are treated in
emergency rooms for both emergency and non-emergency conditions,
though many could be treated at less cost in a physician's office
or outpatient clinic. To fulfill EMTALA requirements, hospitals
often require physicians who have admitting privileges to take
emergency room call on a regular basis, making themselves available
to treat any patient who needs their services. Thus, EMTALA also
effectively requires physicians to provide charity care.
Furthermore, physicians have an ethical duty to continue to care
for patients once a physician-patient relationship has been
established, whether or not the patient pays for his care. Failure
to do so may result in civil liability claims for patient
abandonment. Additionally, physicians may provide charity care as
part of a charitable calling or mission or from a sense of civic
duty. Some may be part of a formal volunteer program such as
Project Access; others simply volunteer some of their services when
they become aware of specific patient needs.
Sources of Funding for Charity Care
Many hospitals are able to access some outside funds to help
cover the cost of charitable care. Foremost among these is the
Medicaid Disproportionate Share Hospital (DSH) program, which
allows a special pool of Medicaid funds to be distributed to
hospitals that treat large numbers of Medicaid or indigent
patients. Texas DSH funds for 2004 were approximately $1.5 billion.
Other sources for hospital funding for uncompensated care include
private donations, federal programs to pay for care to illegal
aliens, Medicare reimbursement for bad debt, and the new Texas
trauma fund.
Physicians in private practice, on the other hand, have almost
no opportunity to be reimbursed for charity care. Although all
costs of operating their practices are deductible business
expenses, there is no available deduction or credit for the cost of
their donated professional time and services. Some physicians have
compensation arrangements with hospitals for emergency room
coverage, but a 2004 TMA survey shows that two-thirds of physicians
are required by hospitals to take emergency room call and fewer
than 30 percent were compensated by the hospital for their
services.
Issues in Identification and Valuation of Charity Care
Historically, the main obstacles to compensating physicians for
charity care have been issues of accountability, identification,
and valuation. Increasing automation of physician practices may now
provide improved accountability and auditability of physician
records.
Identification
The following categories of physician services could properly be
categorized as charity care:
- Services are provided with the full advance knowledge that
the patient would not pay for the care.
- Services are provided with or without knowledge of the
patient's ability to pay, that are subsequently uncompensated or
only partially compensated. This is typical of services provided
in hospital emergency rooms.
In most discussions of possible compensation for charity care,
there is an implied differentiation between charity care and bad
debt; the distinction is generally defined by the patient's ability
to pay. If a patient has the means to pay but does not, the unpaid
bill would be uncollected debt. Services provided to patients who
are unable to pay because they have insufficient income and
resources or overwhelming medical debt would generally be
considered to be charity care. The identification of charity care
may thus hinge on a determination that the patient is unable to pay
for the care.
Determining ability to pay, however, may be difficult. Patients
seeking non-emergency care may be willing to provide pay stubs or
other documentation of income, but patients who have already
received emergency care may be unwilling or unable to even provide
a home address. That may be one of the reasons that state and
federal rules do not prescribe a specific method for providers to
use in determining indigence. Most hospitals have established their
own methods for determining ability to pay; it would be reasonable
to allow physicians to rely on hospital determinations, when they
exist. When patients are treated wholly on an outpatient basis,
however, physicians should be allowed to develop their own simple
determination methods, as physician practices lack the resources to
engage in extensive investigations. Physicians also should be
permitted to rely on indigence determinations made by other
parties, including charitable programs such as Project Access.
Valuation
Once charity care services have been identified, they must be
assigned a reasonable value. Possible methods include:
- The physician's standard charge. Legislative resistance to
this proposal exists, in part, because of the prevalence of
contracted discounts.
- The Medicare allowable. Physicians would need to identify the
charitable services, and then assign the appropriate
Medicare-allowable amount for their geographic area. This would
be fairly simple for some practices but fairly difficult for
those that do not normally participate in Medicare. Furthermore,
Medicare sets no fees for some services, such as preventive care
visits. As Medicare currently pays less than average physician
cost and is scheduled for large future cuts, physicians would not
generally favor this methodology.
- The Medicaid allowable. This method has the same problems as
the Medicare allowable, but magnified by the lower numbers of
Medicaid providers and the even-greater insufficiency of the
Medicaid fee schedule.
- Assigned value per RVU. The state could assign a value per
relative value unit (possibly based on average cost per RVU data
from MGMA surveys). It might be relatively simple for physicians
to associate most procedures with the appropriate relative value
units, as the files are readily available. However, Medicare does
not assign relative values to all procedures, leaving large gaps
for services such as clinical laboratory procedures, implants,
supplies, injectible drugs, and vaccines.
- Ratio of cost to charges. The services could be reduced to
cost basis by multiplying the standard charge for the services by
the ratio of cost to charges. This method is currently used by
hospitals to value services at cost basis on Medicare cost
reports and elsewhere. The method is relatively simple, but it
would open total charges and total cost to government audit.
It is not clear which of the above methods would be acceptable
to the legislature, reasonable for physicians, and simple to
calculate and audit.