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Hospitals tool up for changes to health care charity work

New reform act forcing nonprofit competitors to work together on ways to improve region's health

There aren't many things that Providence Health Systems, Legacy Health and Oregon Health and Science University do together. Usually they're competitors.

But in recent months, representatives of those hospitals and all others in the Portland-Vancouver area have met in an effort to forge a groundbreaking project: a collaboration to more efficiently disperse the money they historically have spent on charity care.

Those sums are enormous. Last year, the hospitals in just the three Oregon counties spent a combined $361 million in charity care. Most of that went toward treating patients who arrived at their doors without health insurance.

But the rules of health care have changed dramatically since passage of the federal Affordable Care Act. While few know for sure what the health care landscape will look like in the next few years, if the act remains law, the number of Oregonians without health insurance is expected to drop dramatically, from about 20 percent to about 9 percent.

If that happens, nonprofit hospitals won't see nearly as many uninsured patients as they have in the past. They might need new ways to spend the charity care dollars, which justify their nonprofit status. That's where the idea of collaborating comes in.

Upstream battles

Soon, Portland-area hospitals might spend a lot of money on community public health initiatives that in the past have mostly been the purview of county and state public health agencies.

Priscilla Lewis, executive director of community services and development for Providence Health and Services, says a desire to keep local people healthy is driving the Community Health Needs Assessment Group as much as hospital concerns about justifying nonprofit status.

In the future, hospitals and physicians are expected to get paid more frequently on a per-patient basis, as opposed to the current model in which more treatments and procedures yield more revenue. With a greater percentage of insured people, Lewis says, demands on hospital services may be much greater. One way to ease that potential demand, she says, might be for the hospitals to join in the upstream public health battles.

Lewis says that by working together, hospitals could attack societal problems that result in illness. For example, Oregon has the highest percentage of hungry children in the country, she points out, and is among the five states with the highest rate of teen suicide. Individual hospitals can't do much about issues such as those, Lewis says.

"These are examples of known and serious issues that can only be addressed collaboratively," she says.

Underinsured on horizon

The Affordable Care Act requires all hospitals to conduct community needs assessments. But national experts say only a few metro areas so far have taken the approach the Portland area has -- all 14 hospitals as well as the county public health agencies collaborating on one assessment.

Martha Somerville, senior policy analyst at the Hilltop Institute, a Maryland nonprofit providing guidance for Portland's community needs assessment project, says another factor driving hospital participation is the shrinking budgets of county public health agencies. Those agencies traditionally have dealt with large-scale community health issues such as obesity, diabetes and tobacco cessation, but increasingly they can use help, she says.

In Boston, Somerville says, Children's Hospital Boston has taken on that city's high childhood asthma rate in an extensive program that includes distributing special vacuum filters to families of children who are hospitalized for asthma, and sending nurses to look for asthma-causing items in the homes of those families.

"Hospitals are starting to catch on that this really ought to be a line item in their budgets," Somerville says. "If they haven't as many uninsured, they can be expected to shift that to community health improvement programs."

Andy Van Pelt, chief operating officer for the Oregon Association of Hospitals and Health Systems, says health care reform is changing who gets covered by insurance, but uncompensated care estimates at this point are just "speculation." For instance, Van Pelt says, one of the fastest growing segments of the population of late are people with health insurance but high deductibles.

"We're finding out people are getting health insurance they can't afford," Van Pelt says.

Underinsured patients, or patients with insurance who can't afford to pay their deductibles, could still require significant hospital "uncompensated care" coverage, Van Pelt says, leaving less for public health projects.

A game changer

The hospitals and public health agencies have awarded Multnomah County a one-year contract to facilitate the community needs assessment program for a four-county area.

Christine Sorvari, a Multnomah County public health employee hired to serve as the neutral facilitator, says she could see an issue such as infant mortality being tackled on a regional scale due to the collaborative effort.

Local health authorities already know that infant mortality is especially high among black women in the Portland area. But one county or hospital cannot fully address the problem, Sorvari says, because women move from one county to another, and some hospitals have resources others don't.

"It's nice to be able to look at it as a regional issue," Sorvari says.

Until now, according to Sorvari, county public health departments and hospitals worked together when the occasional E. coli outbreak affected people throughout the region, but rarely on anything such as chronic diseases.

With the new collaboration, she says, one hospital will be able to tell the others what assets it can provide toward a large-scale project, while another hospital might have a different contribution. But they won't be duplicating efforts, and they will be working on projects on which they have all agreed.

Each hospital has contributed funds to the project relative to its size, but most of the large hospitals have committed about $20,000 for the first year, according to Kevin Earls, senior vice president for the hospital association. All have committed to the project for at least two years.

"It's a game changer," Earls says. "You are creating a collaborative relationship between individual organizations that have been doing the same thing, but by themselves. This will greatly improve their collective ability to respond to the community."


Charity work helps hospitals avoid big tax bill

All the Portland area's major hospitals are nonprofits.

Historically, they've been able to justify not having to pay federal and state taxes on their revenues -- despite executive salaries that match those of private corporations -- mostly through their charity care and nonprofit research and educational contributions. Those sums are enormous. A study 10 years ago estimated that nonprofit hospitals nationwide reaped tax benefits of $12.6 billion per year.

But one of the peculiarities of the health care system in this country is that the federal tax code doesn't specify how much charity care hospitals must provide to maintain their nonprofit status.

A handful of states have set minimum standards for nonprofit hospitals providing charity care, but Oregon is not among them, according to Martha Somerville, senior policy analyst at the Maryland nonprofit Hilltop Institute.

Still, hospitals losing their nonprofit status is almost unheard of. Which means local hospitals intent on maintaining nonprofit status in a health care reform world would not necessarily have to match in uncompensated care what they spent before reform.