University Physicians Healthcare Hospital at Kino will lose an estimated $184 million over the next five years, according to a consultant hired by Pima County.
The anticipated losses, mostly for providing indigent care, are driving the hospital’s request for $31 million in taxpayer support for fiscal 2010, which begins July 1, and nearly $30 million a year in county money in the years to come.
The county in March agreed to pay HFS Consultants $30,000 to review expenses at Kino. The group’s report, released Friday, paints a bleak picture of the hospital’s finances and managers’ actions to curb spiraling costs.
In a letter accompanying the report, County Administrator Chuck Huckelberry cautioned the Board of Supervisors against “drawing specific conclusions regarding the snapshot analysis conducted by HFS Consultants.”
UPH officials said the report offers county leaders at best an incomplete picture of operations at Kino.
“We were somewhat stunned,” UPH CEO/President Larry Aldrich said Monday. “It’s flat-out wrong in so many areas.”
Consultants criticize UPH’s methods for writing off bad debts, saying that the hospital is too quick to refer late payers to collection agencies. The hospital should wait longer to find out if those patients qualify for the state equivalent of Medicaid, the report said.
“UPH does not give patients adequate time to pay prior to referral to a collections agency, which hurts the patient’s credit rating and causes bad public relations in an already disadvantaged population,” the report said.
Providing care to those without insurance will cost the hospital about $12 million in fiscal 2010 and up to $17 million by fiscal 2014. Anticipating the increase, UPH management should work harder to find ways to reduce the cost of providing such care, the report said.
Instead, consultants “didn’t find evidence of (hospital financial counselors) aggressively working with the patients to obtain charity care.”
“There’s a fixed amount of indigent care that won’t go away,” said William Crist, vice president for health affairs at the Arizona Health Sciences Center at the University of Arizona. “I understand the county has needs, and one of them is poor, sick patients.”
The university has begun, under Crist’s leadership, to forge a better working relationship between Kino Hospital and University Medical Center. Doing so might lower some of Kino’s operating costs, Crist said.
But providing care to those who can’t afford it gets expensive, Crist said, and much of those expenses fall to Kino, the only hospital south of Broadway.
The HFS report noted that “the county has very little control over hospital operations, which makes the subsidy request tantamount to allowing UPH to operate the hospital as they see fit while shifting the financial risk to the county.”
Supervisor Ray Carroll, for one, can’t stomach spending another $31 million to keep Kino running.
“I won’t support that,” Carroll said Monday. “We have to get the issue out in the community. I think we need to have some stakeholder meetings.”
Under the terms of a 2004 contract, the county in fiscal 2010 would pay UPH $10 million to operate the hospital.
That’s all Carroll plans to support paying UPH.
“This hospital cannot be run for $10 million,” Aldrich said. “That cannot happen.”
Shutting it down would thrust an estimated 42,000 emergency room patients, including psychiatric patients, into other hospitals in the region, documents show.
“That’s not a very well thought-out position,” board Chairman Richard Elías said. “I think there are some things we can do to improve the patient mix that, if it doesn’t reduce costs, puts a hedge on them.”
In its response to the consultants’ report, UPH said no amount of effort on its part would reduce the cost to the county of caring for uninsured patients.
County hospitals across the country require significant taxpayer subsidies to cover such costs, Crist said.
In 2003, the last year the county ran Kino, it lost an estimated $33 million, officials said. The hospital that year had relatively few patients, most of them in the psychiatric ward.
“Yes, we’re still spending $31 million, but we’re spending it a lot better,” Crist said.
Finances at UPH
A county-commissioned report on the operations at University Physicians Hospital at Kino outlined several reasons for ongoing financial losses, including:
• Writing off too many accounts to bad debt.
• Being too quick to send accounts to collection agencies, rather than waiting to see if those patients qualify for Arizona’s version of Medicaid.
• Not identifying enough ways for patients to qualify for charity care.
• Poor overall financial management.
All told, the Kino center will spend an estimated $12 million providing uncompensated care in fiscal 2010, said the report by HFS Consultants. By 2014, the amount likely will increase to $17 million, the report said.
UPH officials, who had one week to respond to the report, said the consultants miscalculated certain losses and that the conclusions don’t fit the facts, namely that the hospital aggressively seeks to reduce its level of uncompensated care.