Life & Debt: How Swedish-Providence fails on its charity care promise
Seattle expects that Swedish Medical Center, as a mission-driven nonprofit healthcare system in our community, will give patients the financial assistance necessary to get the care they need. Yet, patients’ experiences paint a different picture. Long applications, short deadlines, lost applications, and “uncovered” procedures lock patients out of the assistance they need and leave Seattleites deep in medical debt to Swedish-Providence. Swedish-Providence must live up to its mission and promise by providing comprehensive financial aid to all in need.
The responsibilities of nonprofit hospitals Swedish Medical Center has been an important part of our community for over 100 years. During that time, it has always been a mission-driven, nonprofit healthcare system, even as it has grown to multiple campuses across our region and has developed world-class specialties. Because we expect them to contribute to our community by caring for all patients who need it, we give nonprofit hospitals like Swedish-Providence significant tax breaks. At the federal level, the Internal Revenue Service requires nonprofits to provide community benefits.1 In Washington, hospitals must provide free care for people in households earning less than the Federal Poverty Level (FPL) and offer some discount for people in households earning up to 200% of the FPL.2 However, neither Washington State nor any local jurisdictions have set requirements for nonprofit hospitals’ charity care or community benefits spending— the amounts of these benefits and the type of benefit are discretionary. Swedish has adopted Providence’s charity care policy, which allows a discount for patients in households earning up to 400% of the FPL.3 But patients from the SwedishCherry Hill campus, which serves many patients from the Central District and South Seattle,4 report challenges in accessing charity care due to complicated applications and short deadlines which they were faced with at times when they were physically ill. This led to severe financial hardship, even foreclosure, for some patients.
Repeatedly lost charity care applications “I was feeling extremely ill and weak, so I went to the emergency room at SwedishProvidence. My condition quickly deteriorated, so doctors had to perform an emergency cardiac surgery. I spent six days in intensive care. I knew that I did not have the financial ability to cover the cost of the surgery, tests, and intensive care, so I inquired about charity care. I filled out a charity care application before I left the hospital. A few weeks after my emergency visit, I received several bills, demanding over $285,000 in payment. I was flabbergasted, so I - even though I was still recovering - went back to Swedish-Providence to try to straighten out the charity care. I was told that they never received my application, so I filled out another one. Again, they claimed they never received my application. I filled out a charity care application two more times and each time, Swedish-Providence lost my application. I eventually gave up, resigning myself to having medical debt for the rest of my life. I lived in the Central District for decades and primarily went to Swedish-Providence for my care. The outrageous cost of the medical care landed me in collections. As a woman who is unable to work because of my medical conditions, there is absolutely no way I will ever be able to pay off my debt. I am so afraid of gaining more debt that I skip checkups and important prescriptions. Medical debt has hurt my long term financial stability, and is a contributing factor to me moving out of the Central District to Tacoma. Rose Price, Patient and Community Member, Tacoma
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Internal Revenue Service Revenue Ruling 69-545, 1969-2 C.B. 117 (1969). In 1956, the Internal Revenue Service required sufficient levels of charity care as a requirement for maintaining tax-exempt status for hospitals. This directive was later amended in 1969 to a broader but vaguer requirement for the provision of community benefit, part of which included the provision of free and reduced care 2 RCW 70.170 et. seq.; WAC 246-453 et. seq. 3 For 2014 FPL guidelines, see here: http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Eligibility/Downloads/2014-Federal-Poverty-level-charts.pdf 4 See Washington’s Comprehensive Abstract Reporting System (CHARS) 2012 data on discharges by zip code.
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The Devastating and Disparate Impacts of Medical Debt Even with Medicaid expansion and more access to health insurance, many patients will continue to have problems paying their bills because of high deductibles and “underinsurance” – meaning unaffordably high co-pays, co-insurance, and uncovered procedures as well as out-of-network charges and other costs.5 The Centers for Disease Control estimates that around 20% of U.S. non-elderly adults live in families who are having problems paying medical bills.6 Medical debt has a deep impact on wellbeing. Studies have found that people who cannot pay medical bills deplete their longterm assets and face housing instability, bankruptcy, and difficulty accessing health care – the latter either by choice or by hospitals refusing non-emergency care.7 Debt itself can be a social determinant of health – high financial debt relative to assets can potentially lead to higher perceived stress and depression, worse self-reported general health, and higher blood pressure.8 Moreover, medical debt has particular implications for women and people of color. Women are already more susceptible to carrying medical debt than are men, and then are also more likely than men to forgo, delay, or ration health care because of medical debt.9 This leads to negative health outcomes for women. About 30% of African Americans reported that they or someone in their family had trouble paying for doctor and hospital bills in the past year. Nearly as many (24%) had trouble paying for prescription medicines.10 Among Latino registered voters, one-third had used up all or most of their savings on medical costs, and one-fifth had been unable to pay for necessities, like food heat and housing, because of medical bills – both of these numbers are markedly higher than similar rates in the general population.11 The study also found that having health insurance did not have a significant relationship to whether these Latino voters experienced a negative impact on their financial status due to medical costs.
Swedish-Providence Can Afford to Do More Swedish-Providence Medical Center alone is a large healthcare system, with 5 full-service hospitals in the Seattle metro area, 2 freestanding emergency room and specialty centers, and a network of more than 100 clinics. • In 2013, SMC brought in over $2 billion in operating revenue, and netted nearly $60 million in profit. • The 19 Lead administrators at Swedish’s 5 hospital campuses collectively earned more than $6 million in 2013.12 • The highest-paid lead administrator from Swedish’s First Hill & Cherry Hill campuses earned about $900,000 in 2013, a 47% raise over the year before.
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Kaiser Family Foundation’s analysis of 2012 National Health Interview Survey (NHIS) data: an estimated 1/3 of non-elderly U.S. adults fell into at least one of these categories: had problems affording medical bills in the past year, are gradually paying past medical bills, and/or have bills that they can’t afford to pay at all. The Henry J. Kaiser Family Foundation. (2014). Medical debt among people with health insurance. Centers for Disease Control. (2013). Problems paying medical bills: Early release of estimates from the National Health Interview Survey, January 2011-June 2012. Kaiser Family Foundation 2014. Also see Kalousova, L. & Burgard, S.A. (2013). Debt and foregone medical care. Journal of Health and Social Behavior, 54(2), 203-219. Sweet, E., Nandi, A., Adam, E., & McDade, T. (2013). The high price of debt: Household financial debt and its impact on mental and physical health. Social Science & Medicine, 91(SI), 94-100. Survey data analyzed is from the National Longitudinal Study of Adolescent Health. Wiltshire, J.C., Dark, T., Brown, R.L. & Person, S.D. (2011). Gender differences in financial hardships of medical debt. Journal of Health Care for the Poor & Underserved, 22(1), 371-388. NPR/Robert Wood Johnson Foundation/Harvard School of Public Health (2013). African Americans’ lives today. Medeiros, J.A., Sanchez, G.R. & Burciaga Valdez, R. (2012). Tough times, touch choices: The impact of rising medical costs on U.S. Latino electorate’s health care-seeking behaviors. Journal of Health Care for the Poor and Underserved, 23(4), 1383-1398. Data from the WA Department of Health’s 2013 Hospital Employee Compensation Reports for all 4 of Swedish’s hospital reporting entities (First Hill & Ballard report together).
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Swedish is now part of Providence, the third largest nonprofit health system in the U.S., with 34 hospitals, nearly 500 clinics, and a range of hospice programs, long-term care facilities, and supportive housing units across 5 states. 13 • In 2013, Providence booked over $11 billion in operating revenue, and netted $38 million in operating profit.14 • In addition, Providence has over $5.6 billion in cash and liquid investments,15 and has recently announced that it has launched a $150 million venture capital fund for healthcare investments.16 • The CEO of the Providence system pulled in $4.5 million in compensation in 2012.17 In 2013, Swedish claims to have spent $37 million on charity care at estimated cost, and $143 million on “community benefits.”18 Providence claims to have spent $313 million on charity care and a total of $951 million in “community benefit.”19 These are impressive but very opaque numbers that may not be justifiable.
Medical Debt’s Far-Reaching Impact “I have a life-threatening genetic connective tissue disorder requiring two heart surgeries, several prescriptions, dozens of tests, and treatment from many different medical specialists. My condition landed me in thousands of dollars of debt to Swedish-Cherry Hill. Swedish never mentioned the existence of charity care, but instead sent me to collections, leaving me with insurmountable medical debt. Medical debt from Swedish affects every aspect of my life. Bill collectors constantly harass me, forcing me to put a dollar amount on the value of my life and health. The thought of accumulating more medical debt stresses me out, so I avoid the hospital at all costs, forgoing cardiac checkups and physical therapy. Medical debt in collections forces me to share my personal medical situation with potential landlords in order to find housing. Medical debt makes me feel like I do not deserve health care, even though my life is at stake. In order to provide real community benefits, Swedish Cherry Hill needs to offer and advertise charity care to all patients and forgive medical debt. Swedish can afford to do better. “ Sarah Brownstein, Patient and Seattle resident
13 Accessed September 25, 2014. http://www2.providence.org/phs/Pages/default.aspx 14 2013 financial figures are from the Providence Health and Services annual financial statements for the year ending 31 December 2013. Downloaded here: http://www2. providence.org/phs/Pages/financial-statements.aspx 15 Year-to-date 2014 financial figures are from the Providence Health and Services consolidated financial performance report January-June 2014, the most recent report publicly available. 16 PRNewswire. (2014). “Providence health & Services Launches $150 Million Venture Capital Fund,”. Accessed September 24, 2014. http://www.prnewswire.com/ news-releases/providence-health--services-launches-150-million-venture-capital-fund-275314411.html 17 Data from the WA Department of Health’s 2012 Hospital Employee Compensation Reports. Providence reported out system administrator pay in 2012, but changed to hospital-specific administrator pay in 2013 reports. System-level administrator compensation will be available when Providence files its 2013 990 with the IRS. 18 Accessed September 25, 2014. http://www.swedish.org/about/overview/facts-figures/revenues-expenses 19 Accessed September 25, 2014. http://www2.providence.org/cbr/phs/giving-to-our-communities.aspx
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What is a “community benefit”? According to The Access Project, a respected national healthcare advocacy and reform group: Community health benefits are “the unreimbursed goods, services, and resources provided by healthcare institutions that address community-identified health needs and concerns, particularly those of people who are traditionally uninsured and underserved.”20 This is a good, though rather broad account of community benefits. And there is confusion about which specific goods and services should count as genuine community benefits. The following questions offer some guidance: 1. Does the hospital lose money by providing the service? a. Only the actual unreimbursed cost to the hospital of providing the service should be counted as a community benefit expenditure. 2. Does provision of the service generate revenue, perhaps in other areas of the hospital, that compensates the hospital for the cost of providing the service? a. If yes, the hospital needs to account for that. 3. Is the service voluntarily provided with the intent of serving those in need? 4. Is the program or service typically provided by for-profit hospitals, too? a. If yes, then it’s probably not a community benefit – it is likely motivated by business sense rather than by a sense of charitable mission. 5. Are members of the affected communities involved in the development and implementation of the program? 6. Does the program address actual unmet healthcare needs among uninsured patients, low-income people, communities of color, immigrants, or another traditionally underserved population? Swedish claims some community benefits that demand more transparency.21 Medicaid subsidy and negative margin services – Every hospital deals with low Medicaid payments- nonprofit or for profit- and hospitals openly admit to shifting costs by charging private insurers more to offset the Medicaid shortfall. This shouldn’t be counted as a community benefit. Charity care and non-billed services – This could be considered a community benefit if it’s provided to those in need without expectation of payment (are they still billing these patients?) and if care is not valued at inflated chargemaster rates. SwedishProvidence needs to provide more information about this benefit. Research and education – Residency and other education programs benefit Swedish-Providence by adding to the clinical and patient care staff, so that’s not a community benefit. Research programs are often reimbursed through grants and we have no way of knowing if this is an unreimbursed expenditure. Plus a genuine community benefit serves unmet needs among underserved populations. Research and education generally miss the mark for community benefits.
20 The Access Project, Community Benefits: The Need for Action, an Opportunity for Healthcare Change (2000), p. 2,. Accessed October 7, 2014. http://accessproject. org/community_benefits_manual.pdf. The ideas in this section are partly informed by the Access Project report. 21 Pie chart is from Swedish’s website, accessed October 6, 2014. http://www.swedish.org/about/overview/mission-outreach/community-engagement/community-benefits/2013-community-benefit-figures
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“Community building activities” – What is this? Did the community ask for this? Who does it serve? Does it have a side-effect of generating more business for Swedish-Providence? It’s curious that Swedish-Providence is “building” the community and claiming credit for it when it’s unclear what it is. This does not count until its meaning is explicit and impact is clear. Other costs – Can’t count it until it’s clear that it meets a need for underserved populations in the community. Without more information, the community should be skeptical of Swedish-Providence’s community benefit claims. Moreover, irrespective of how much money Swedish-Providence as a whole devoted to charity care in 2013, the question remains whether those who need it most are receiving charity care at SMC facilities. Finally, with the implementation of Medicaid expansion in Washington in 2014, Swedish-Providence is providing care to fewer charity care patients across all of its hospitals. At First Hill & Ballard, gross charges from charity care patients for the first of 2013 versus the first half of 2014 have dropped by almost 50%.
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Constant collection calls “A couple of years ago, my husband had a stroke and I was diagnosed with cancer. We went to Swedish to receive the care that we needed. At around the same time, we fell victim to the burst of the housing bubble and had to fight to stay in our home. Thankfully, we got to keep our home and my cancer went into remission. However, the process left us with thousands of dollars of medical debt. I tried to fill out a charity care application multiple times, but the process was long and confusing. They wanted bank statements, copies of our bills, and other information that I didn’t have available. I ran around trying to gather all the information to fill out the application, and when I sent it in, I never heard back as to whether I was approved or not. Now, Swedish-Providence calls constantly. I tell them that I cannot afford to pay, as every dime of our Social Security retirement goes to the mortgage, food, and utilities. Swedish-Providence needs to make the process easier to protect families and seniors, rather than ruining the lives of the most vulnerable in our community.” Dixie Mitchell, Patient and Central District resident 22 Data from 2013 is from the all-hospital quarterly table from DoH. Data from 2014 is from individual hospitals’ quarterly tables.
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The Labyrinth of Charity Care Application The process to apply for charity care at SwedishProvidence hospitals is cumbersome. Its official financial assistance form requires evidence of income, expenses, and assets, including copies of the patient’s and household members’ recent paychecks, income tax returns, and investment statements as well as information on bank accounts, mortgage balance, and possibly more. Swedish-Providence requires that patients submit all this paperwork within 14 days.23 For patients struggling to recover from serious illness or injury, this can be a daunting task. We spoke to patients who detailed the challenges of filling out the application in the time allowed, and with little to no support from Swedish-Providence. Moreover, there are other limitations on the SMC financial assistance. The policy is clear that it covers only medically necessary services at hospitals, as defined by WAC 246-453-010(7)24 and that it only covers medical bills from “our facility.” Other medical groups or physicians groups that might treat the patient inside the hospital may not offer charity care or may require a separate application, including the related Swedish Medical Group or Minor and James Medical Group. As a result, a low-income uninsured patient needing specialist services or follow-up outpatient care may not be eligible for any financial assistance under this policy. Swedish-Cherry Hill alone reported more than $17 million in bad debt expense for 2013. This is about two times as much as the amount of charity care the hospital reported that year.25 Forgiving the bad debt would cost Swedish just 28% of it’s profit, leaving it with $42 million in profit.
Retiree billed $30,000 “I received a knee operation, several medical tests and follow-up care at SwedishProvidence. After insurance paid a portion of the bill, my portion of the bill amounted to over $30,000. As a retired individual living on a fixed income, $30,000 is a substantial amount of money. I was never told about charity care, so I believed my only option to pay this bill was by refinancing my home. Refinancing my home caused extreme financial distress, causing me to enter foreclosure. After a costly legal battle, I barely saved my home. I will never recoup any of the money I lost due to the financial experience at Swedish-Providence. The lack of charity care from Swedish-Providence severely impacted my long-term financial stability. Swedish-Providence needs to tell all patients about charity care so that retired folks like myself aren’t facing long-term financial struggle. “ Lee Johnson, Patient and Central District resident
23 See the SMC Financial Assistance Form. Downloaded June 9, 2014. WAC 246-453-020, section 3. Fourteen days begins from the point of the person “seeking charity care” and passing a first screening with Swedish. Swedish promises to notify an applicant within fourteen business days of receiving the full application. 24 SHS Financial Assistance – Charity Care policy, effective April 2014. Downloaded June 9, 2014, from http://www.swedish.org/patient-visitor-info/billing/financial-assistance . The 14 day limit is set by WA Administrative Code (WAC) 246.453.040, section 3. 25 Cherry Hill financial data is from its year end financial report to the Washington Department of Health. Charity care at estimated cost ($7.8 million) is calculated using the DoH mark-up ratio. Per PH&S’s 2012 IRS Form 990, Schedule H, there was no amount of bad debt that should have been included in charity care.
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Undermining the Plan for Seattle’s Human Development The impacts of medical debt that some Swedish-Providence patients are facing are the opposite of Seattle’s long-term vision in the city’s Comprehensive Plan, which call specifically for the City to work towards Human Development Goals (HGDs) that are directly related to these issues of medical debt, bankruptcy, housing instability, and access to health care.26 Swedish-Providence has two campuses in Seattle city limits that are considered “Major Institutions” under city code and must develop Major Institution Master Plans (MIMP) in collaboration with community stakeholders and the City. The Cherry Hill campus is currently in the midst of a multi-year planning process for a new MIMP. In exchange for building density, these nonprofit institutions must address the Human Development Goals related to healthcare and education/employability in the midst of creating a new MIMP.27 At the date of print, the Draft MIMP failed to acceptably address how Swedish-Providence will unravel the impacts of the debt it is owed and relieve the burden of this debt on Seattle’s patients.
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Strive to alleviate the impacts of poverty, low income and conditions that make people, especially children and older adults, vulnerable.
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Create a healthy environment where all community members, including those currently struggling with homelessness, mental illness and chemical dependence, are able to aspire to and achieve a healthy life, are well nourished, and have access to affordable health care.
26 “The City of Seattle’s Comprehensive Plan, Toward a Sustainable Seattle, is a 20-year policy plan (1994-2014) designed to articulate a vision of Seattle will grow in ways that sustain its citizens’ values.” Page v. 27 Seattle Municipal Code 23.69.031, Section E.3. http://www.seattle.gov/dpd/cityplanning/completeprojectslist/comprehensiveplan/documents/default.htm
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Seattle needs to know more about patients in need To justify its ongoing tax exemptions, Swedish must be more transparent about its community benefits and charity care: 1. How many patients qualified for “indigent� status without an application in 2013? 2. How many patients received a discount, by level of discount and zip code of residence? 3. How many patients were denied charity care? a. What were the broad categories of reasons for denial? For example, late applications, incomplete paperwork/documentation, or lack of need. b. Of those patients, how many appealed the denial? c. How many appellants were granted some charity care? 4. How specifically does Swedish calculate the value of charity care given to patients?
Swedish-Providence needs to do more for our community Swedish-Providence must increase its charity care provision and reform its application and process to relieve the burden of debt on its patients. 1. Advertise charity care more widely in our communities where the need is great, especially in the Central District and South Seattle. 2. Simplify the charity care application. 3. Remove the 14-day deadline and instead allow a reasonable period of time for ill people to gather any materials and fill out forms. 4. Expand the types of procedures that qualify for charity care in Swedish facilities and create a single application that qualifies patients for assistance in all related facilities and practices.
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