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Rice sees tripling of need for charity care

WILLMAR -- Charity care provided at Rice Memorial Hospital nearly tripled last year and will continue to rise this year as well, hospital officials said Friday.

"It's just a sign of what's going on with the economy," said Bill Fenske, chief financial officer at Rice.

According to the city-owned hospital's annual audit for 2009, it provided $915,000 worth of charity care last year -- a significant increase over the year before, when charity care totaled $385,000.

Fenske said Friday that charity care likely will exceed $1 million this year. The hospital gave $200,000 worth of charity care during February alone, he noted. "We're continuing to see that number just gets pushed up and up."

But although more patients are struggling to pay their hospital bills, Rice has not seen a corresponding increase in the level of bad debt.

In fact, bad debt actually went down slightly last year. It has hovered around $1.7 million the past two years, or about 2 percent of net revenue. The national average is closer to 6 percent.

Charity care likely will loom larger as an issue for the hospital industry -- not only because it's getting harder for many patients to pay for their care but also because authorities are applying closer scrutiny to nonprofit hospitals.

Those that fall short in providing community benefits could find themselves reclassified under the Internal Revenue Service tax code, said Darryn McGarvie of the Larson Allen financial consulting firm.

"We've already seen some organizations lose their 501(c)3 tax-exempt status," he said.

A little-publicized provision in the federal health care reform bill requires hospitals to conduct an assessment of community needs every three years, McGarvie said.

In Minnesota, hospitals have already been publicly reporting their annual charity care and community benefit expenses for some years. Included under this umbrella is direct charity care to patients, as well as services such as free support groups and free health education, and unreimbursed costs for indirect benefits such as serving as a clinical training site for students in the health care professions.

"We're already ahead of the curve on that," said Mike Schramm, chief executive at Rice Hospital.

Rice Hospital estimates its total community benefits and contributions last year came to $18.5 million, which is about 20 percent of its total operating expenses. This figure factors in the cost of providing care that was not fully reimbursed by Medicare and Medical Assistance.

At the national level, there's talk of requiring a minimum threshold that nonprofit hospitals must meet in order to justify their tax-exempt status, Schramm said.

"That issue is going to continue to be discussed," he said.

Anne Polta

Anne Polta covers health care, business/economic development and general assignment. Her HealthBeat blog can be found at Follow her on Twitter at @AnnePolta.

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