Charity care/ payment reform






The Issue

New York stands to lose hundreds of millions of dollars in federal funding if it does not change the way it distributes charity care dollars to hospitals.  Traditionally, the federal government has given states billions of dollars in Disproportionate Share Hospital (DSH) funding to help hospitals cover the costs of treating uninsured and Medicaid patients. In 2009, NY hospitals received $1.6 billion in DSH funding. Starting in 2013, the federal government will start making big cuts to this funding.


DSH funding is critical to the financial health of safety-net hospitals, which provide the majority of care to Medicaid and uninsured patients. Even after the Affordable Care Act is in place in 2014, many New Yorkers will remain uninsured – either because they are ineligible or can't pay for insurance – and will receive treatment from safety-net hospitals. Safety net hospitals will need DSH dollars to provide care for these patients.


To ensure that these hospitals can stay afloat and provide care for uninsured New Yorkers, the state needs to do everything it can to get the maximum amount of federal DSH dollars. Unfortunately, NY's current way of distributing charity care dollars does little to meet this goal. Under the ACA, states have to use DSH funding to target high Medicaid use hospitals and pay for the care of the uninsured. Paying for bad debt is not allowed. The formula the state currently uses is complex and provides hospitals that don't care for the uninsured or large numbers of Medicaid patients a great deal of money from the charity care pool. Next year, NYU Langone Medical Center will receive $10 million from the state charity care pool, even though it sends all of its poor patients to Bellevue, the public hospital.


The Impact

NY's current way of distributing charity care funds places the future receipt of hundreds of millions of DSH dollars in jeopardy. The current method is not in line with federal law. Without DSH dollars, public hospitals that provide care to a large number of uninsured and Medicaid patients will be forced to make drastic cuts in their services and staffing. The loss of these dollars may result in the closure of private safety-net hospitals, which will leave medically underserved communities without access to health care services and exacerbate health care disparities.


The Solution

A draft bill, which has not yet been introduced to the legislature, calls for a three year phase-in (from 2013 to 2015) of changes to the way NY distributes charity care dollars. During the phase-in, hospitals will receive almost the same amount of money that they have in the past, and continue to use the dollars to fund bad debt. The bill keeps the same system in place for three years – past the time when the federal reductions will go in effect and NY's receipt of DSH dollars will be jeopardized. 

This three-year period is simply too long to wait for the system to change.  The bill should be amended to a call for a one-year, rather than three-year, transition phase-in. The proposed language should be changed to ensure that NY provides the most funding to hospitals that provide care to a high volume of Medicaid and uninsured populations. Lastly, the state should seek approval of changes to its charity care methodology from the federal agency, the Center for Medicare and Medicaid Services (CMS), to make sure that NY gets these important dollars.

For additional information, please contact:

Judy Wessler, CPHS 
45 Clinton Street 
New York, New York 10002

Yes! I would like to sign on!


Charity Care Summary- February 22, 2012

Paying New York State Hospitals More Fairly for Their Care to Uninsured Patients: A Report to the Commission on the Public's Health System (CPHS)
- can also be found on the Reports page

Charity Care Report Summary
(16 pgs)
New York has a long history of using public financing to help hospitals provide care to uninsured and underinsured patients.  The State remains committed to supporting those institutions that provide this care.  If you examine the way in which that money has been allocated, however, some inconsistencies arise.  The formulas that allocate bad debt and charity care funds are complex and opaque.  It is not clear how the allocation of money connects back to actual care provided to actual patients.  CPHS has long advocated for a more transparent system, where money indeed follows the patient.

In the current fiscal climate it becomes even more important that public funds are used for their intended purposes.  As funding for health care tightens, and as the allocation of public money is subject to increased scrutiny, it is time to revisit the formulas that drive the indigent care pool funding.  Under new federal law funding will be reduced and the means by which it is allocated will be re-evaluated.  These factors make it essential that we revisit the goals of New York's indigent care pool, and work to create a transparent funding methodology that assures that public dollars are being spent appropriately.


CPHS Charity Care Proposal
A new proposal for Charity Care in New York State. This proposal includes 3 major recommendations.

New York City Hospitals Charity Care Policies

Since 1983, New York State has been paying hospitals to provide care for the uninsured residents of the State. Allocation of the Indigent Care/Charity Care pools has been criticized for the inability to track actual care provided to patients. Instead, hospitals report based on an antiquated accounting methodology and they are paid based on a homogenized blending of claimed costs for care of the uninsured mixed in with the costs of bad debts.

In other states, the Charity Care pool is distributed on the basis of a hospital showing it had provided care to an uninsured patient. (See CPHS report). Efforts were made over the last more than twenty years to improve how hospitals report and are paid for uncompensated care.

It was not until 2007, when a 24-year old, employed but uninsured, young man was told to come back for brain surgery when he became eligible for Medicaid. Before eligibility was confirmed however, the young man died. This horrendous incident led the State Legislature to enact "Manny's Law" for the young man who died, which is formally titled the Hospital Financial Assistance Law (HFAL). The law required all hospitals to adopt and post a Charity Care policy, as well as inform patients about the availability of financial assistance. Questions are now raised about the way that hospitals are complying with this law.

As part of reviewing the questions about implementation, Disha Shah reviewed the web sites of each of the hospitals located in New York City to report on their Charity Care policies. Only some hospitals made their policy available on their web site. For three hospitals, there was no information available. Ms. Shah visited several hospitals to review how they were physically implementing their policy.
Disha Shah, CPHS summer student intern August 2011

Charity Care- In Some States
This paper compares and contrasts differences and similarities among several states and their management of Charity Care. The Commission on the Public's Health System (CPHS) is concerned about the allocation of charity care dollars to hospitals in New York State and this paper was produced to show how the allocation is done in other states.