May 14, 2014—Hospitals shoulder roughly 60 percent of the cost of uncompensated health care in America, more than four times the share borne by private office-based practices, Urban Institute researchers report in the latest edition of Health Affairs. [ms-protect-content id=”2799″]
The study, part of a themed issue on uncertainties faced by hospitals and their medical staffs, used two different data sets to estimate how much all U.S. health care providers spent on uncompensated care in 2013. The first projection came in at $84.9 billion and the second at $74.0 billion. “We believe that the lower estimate understated uncompensated care in 2013 and that the $84.9 billion estimate is more accurate,” the researchers wrote.
The data that yielded the lower estimate, however, could be sorted to explore how the burden of uncompensated care is shared among providers. According to that analysis, hospitals picked up 59.5 percent of the cost. Publicly funded community-based providers, such as community health centers, bore the second-largest share, 26.4 percent. Office-based physicians had the lowest share, 14.0 percent share.
The study estimated that only about two-thirds of all providers’ uncompensated care costs are offset by government sources such as Medicaid and Medicare disproportionate share hospital payments. The Affordable Care Act calls for cutting Medicare DSH payments by 28 percent and Medicaid DSH payments by 50 percent through 2020, under the rationale that Medicaid expansion and the establishment of health insurance exchanges will reduce the ranks of the uninsured.
The study notes, however, that “hospitals will likely have a higher level of uncompensated care than had been projected after the enactment of health care reform” given that half the states are not expanding their Medicaid programs or still debating the option.
The researchers estimated that private insurance paid for around $21.8 billion of the cost of uncompensated care, representing about 2.4 percent of private insurers’ expenditures of $925.2 billion in 2013.
The Urban Institute’s uncompensated care figures for hospitals roughly correspond with those reported by the American Hospital Association. The AHA said in January that U.S. hospitals provided a record-high $45.9 billion in unreimbursed care to indigent and underinsured patients in 2012, an 11.7 percent increase over 2011. In a separate report a month earlier, it said hospitals in the 340B drug discount program supplied $28.6 billion of that care.
According to the AHA, hospitals’ unreimbursed care has risen from $14.7 billion in 1992, the year that 340B was established, to $45.9 billion in 2012. Total U.S. spending on prescription drugs increased during the same period from $47 billion to $326 billion.
Projected Uncompensated Care Costs in 2013, by Place of Service, Billions of Dollars
| Place of service | Uncompensated care costs | Percent of costs |
| All places | $74.9 | 100.0 |
| Hospitals | $44.6 | 59.5 |
| Community | $30.3 | 40.5 |
| Publicly supported | $19.8 | 26.4 |
| Office-based physicians | $10.5 | 14.0 |
Source: Health Affairs
Rising Cost of Oncology Drugs
In another recent report, the IMS Institute for Healthcare Informatics repeated a previously published finding that the U.S. average monthly cost of treatment with brand-name cancer drugs skyrocketed over the past decade, doubling from about $5,000 in 2003 to $10,000 in 2013. Some newer drugs cost many times more, it said. For example, Yervoy, approved by the Food and Drug Administration in 2011 for late stage melanoma, costs more than $117,000 for a 12-week course of treatment. Provenge, approved in 2010 for advanced prostate cancer, costs about $100,000 for a six-week course.
Shock over those kinds of prices is causing the medical profession to pay closer attention to cancer drugs’ price/benefit ratios, the report notes. In 2013, it said, U.S. cancer drug sales reached $37.2 billion.
The IMS report also repeated previously reported research findings that “accountable care organizations and healthcare organizations that are covered by the 340B drug discount program have expanded their presence in oncology, moving more patient care from physician offices to hospital outpatient facilities.”
“To reflect hospitals’ higher costs and overheads, they receive higher reimbursement to administer drugs compared to physician offices,” it said. “For typical therapies that are infused or injected by an oncologist, reimbursed costs for hospitals are at least double for those for physician offices,” increasing costs to payers and possibly increasing out-of-pocket costs to patients “depending on the patient’s insurance plan and benefit design.”
Alliance for Integrity and Reform of 340B, the drug industry-led group that advocates scaling back 340B significantly, issued a news release in response to the IMS study stating it demonstrates “that the 340B drug discount program is causing a rise in cancer patients’ treatment costs.”
Safety Net Hospitals for Pharmaceutical Access, which represents hospitals enrolled in 340B, also issued a statement.
“Safety-net hospitals must accept all patients, regardless of ability to pay,” the group said. “Private oncologists have the luxury of passing along their uninsured, underinsured and low-income patients to the nearest hospital for treatment….Hospitals don’t set medicine prices. They do give outstanding care to cancer patients while shouldering the heavy burden of providing treatment for tens of millions of our most vulnerable patients.”
A spokesperson for the American Hospital Association told Kaiser Health News that hospitals can qualify for the discount program only if they serve a disproportionate share of low-income and uninsured patients or provide essential services to rural communities.
“Hospitals today face many challenges to maintain the services their communities have come to expect. This vital role 340B hospitals play in their communities cannot be boiled down into a few data points derived from publicly reported information,” according to a statement from the hospital group. [/ms-protect-content]