UMC swallows big dose of unpaid debt

Published: Sunday, May 28, 2000


That charge is the most expensive of 20 large accounts written off as bad debt earlier this month by the county hospital's board of directors, making for a May write-off of $783,346. So far this year, large-account write-offs at UMC have increased by an average of $276,423 per month over last year.

This year, board members have written off almost $3.5 million for an average of $691,034 a month.

''I don't like it,'' said board member Delbert McDougal, who lamented during the meeting that there's really no choice but to approve the write-offs.

''I am never very happy when we charge off the kind of money we have to, but the reality is ... it's always the same,'' he said. ''You could say, 'No, I won't approve it,' but it's the same result. It's just a matter of when you are going to charge it.

''There are some pretty big numbers, which gives you a good indication that we serve a lot of people without insurance. I am comfortable with how (UMC CEO Jim Courtney) is handling it. I'm not comfortable with how much we are writing off.''

Board members are required to take action on bad debt write-offs for any delinquent accounts of more than $20,000, said Mark Vincent, UMC chief financial officer.

But board-approved write-offs are just the tip of the iceberg when it comes to bad debt. Smaller write-offs do not need board approval, and in an average year, the hospital writes off $23 million in total bad debt, Vincent said.

Last year, UMC wrote off $23.25 million in bad debt. In the first four months of this year, UMC wrote off $9.73 million. For the same period last year, the hospital wrote off $7.64 million.

UMC has often touted the fact that while many other university and teaching hospitals throughout the country are losing money and even being forced to close their doors, it remains financially healthy.

Despite the higher write-offs this year, that still remains the case, Vincent said.

''I think the trend is good for us, but we could be healthier,'' he said. ''We're in a good position because we have no debt. That's fairly unusual for an American hospital, especially a teaching hospital.''

Also unlike other university hospitals, UMC has $115 million in cash reserves enough to run the hospital for a year, Vincent said. That reserve supply is being depleted at about 1 percent a year, he said.

''By having that buffer zone there for us, we're able to withstand those little shocks,'' he said, referring to changes in Medicare that are causing deeper and deeper cuts in reimbursements each year.

Courtney explained that the Balanced Budget Act of 1997 lowered the amount of money hospitals receive from Medicare and Medicaid for performing certain procedures.

The legislation ''hit all hospitals hard, and it particularly hit teaching hospitals,'' he said. ''If changes aren't made in the (legislation), a lot of academic teaching hospitals are going to fail.''

Also, UMC is receiving about half of the government funds it once received for seeing disproportionate amounts of indigent patients. As a county hospital and teaching facility, UMC sees patients who can't pay either part or all of their medical bills. Some of them are eligible for government health programs, but the ones that aren't often end up as bad debt at the hospital.

''In our situation, we don't ask if they can pay when they come in,'' said Jane Ann Stinnett, a hospital board member. ''We are always worried about writing off things, but there are lower reimbursements. It's just one of those things. It costs more to treat people, but you get less money.''

Since Courtney took over in 1986, the hospital has paid off its debt and substantially grown its reserve funds, he said earlier this year.

But last year UMC didn't see a profit and ended the year at more of a ''break-even point,'' chief operating officer David Allison said earlier this year.

According to Vincent, UMC took in $148 million in cash and paid out $151 million for a $3 million cash deficit in 1999. Despite the higher write-offs this year, that cash deficit looks like it will end up somewhere around $700,000 at the end of 2000.

In addition to Medicare changes, another factor pushing up the delinquent accounts at UMC are tougher eligibility requirements for government aid programs and rising costs for private insurance, Vincent said.

''As the rates go up, employers are making decisions either not to buy insurance or to lower benefits,'' he said. ''For individuals, the house payment is the priority. Health insurance comes later.''

It also costs more to treat people now, particularly for medicines, Stinnett said. And it's those large accounts like the ones that must have board approval to be written off that are less likely to get paid, Vincent said. Large medical debts tend to look insurmountable to uninsured patients, so they sometimes make no effort to pay, he said.

Of the 20 large debts written off in May, only one had been paid on at all. It was a $21,949 surgery debt that had seen $1,798 in payments.

Another factor pushing up write-offs is that county insurance programs in New Mexico won't pay out-of-state hospitals. It's often faster for a trauma patient in Eastern New Mexico to reach UMC than hospitals farther west in New Mexico.

Write-offs were lower in 1999, Vincent said, because of a Y2K computer backlog at the state office where eligibility for government programs is determined.

''We didn't want to refer (bad accounts) to collection agencies until other efforts had been exhausted,'' he said.

Some of the accounts being written off this year are from patients who received treatment in 1999. Vincent said by the end of this year, he expects the 2000 write-off numbers to look more like 1998, when they averaged $621,031 per month.

No plans are in the works for a tax increase to help take care of higher costs, Vincent said. Stinnett said the hospital will have to look at other ways to save money.

''You can't cut back on things people need, but you have to look at all your operations and see where you can cut back,'' she said.

Kara Altenbaumer can be contacted at 766-8742 or