Uncompensated care costs at Minnesota hospitals plunge since health law

Uncompensated care costs at Minnesota hospitals have declined by about 17 percent since the implementation of the federal Affordable Care Act, with the health law apparently helping more Minnesotans cover their medical bills.

In 2015, uncompensated care at hospitals fell from $305 million to $268 million, according to a Monday report from the Minnesota Department of Health.

It was the second consecutive annual decline, and took uncompensated care costs to their lowest level in Minnesota since 2008. Uncompensated care costs include expenses for charity care, in which hospitals provide care without expecting payment, and "bad debt," where hospitals expect to receive payment but ultimately don't receive it.

The study provides circumstantial evidence on the impact of coverage expansion under the health law, although it can't prove a connection.

"We can't really make inferences about the causal relationship, but there aren't really any other factors at play that could have caused this substantial decline," said Stefan Gildemeister, the state health economist, in an interview. "So, it's not a coincidence, even though we can't demonstrate a statistical relationship between the two factors."

A reduction in uncompensated care is important, Gildemeister said, because "it's likely that fewer people are rationing their own health care or experiencing fragmentation in care."

The Affordable Care Act allowed states to expand Medicaid coverage for low-income residents, with Minnesota doing so in stages during 2011 and 2014. The health law in 2014 also started providing federal tax credits to subsidize the purchase of individual health insurance policies through new government-run exchanges like Minnesota's MNsure website.

In 2013, hospitals in Minnesota saw a record $321 million in uncompensated care costs following steady — and sometimes steep — annual increases across most of the previous decade. The decline started in 2014 when the federal health law expanded health insurance coverage.

The health department report noted that an estimated 213,000 more Minnesotans had health insurance in 2015 compared to 2013. During the time period, the state's uninsured rate fell to 4.3 percent in 2015, down from 8.2 percent in 2013.

Uncompensated care decreased for both insured and uninsured patients, according to the report.

"While we still have significant challenges to ensure that all Minnesotans have access to high-quality health care at affordable rates, this drop in charity care and bad debt is a positive sign that reflects our progress in reducing the number of Minnesotans going without coverage," wrote Dr. Ed Ehlinger, the state health commissioner, in a statement.

In August, the Star Tribune reported that charity care costs at the 10 largest health systems were down about 15 percent between 2013 and 2015. Whereas the health department report looked only at hospital costs, the Star Tribune analysis included care provided across systems that typically include large clinic networks.

At the time, it was clear that bad debt costs for health systems declined between 2014 and 2015, but it was unclear how the tally compared with 2013. Bad debt numbers are a point of concern for hospitals, with medical centers saying the emergence of high deductible health plans are forcing them to try and collect bigger medical bills directly from patients.

When hospitals can't collect, the sums typically are classified as bad debt. The health department study showed that bad debt for hospitals in 2015 was $162.9 million — down slightly from $164.4 million in 2013.

Joe Schindler, the vice president for finance at the Minnesota Hospital Association, called the numbers "relatively flat," adding that hospitals still are concerned about bad debt trends.

On Tuesday, about 250,000 state residents will start buying 2017 coverage through the individual market, where all health plans will feature tighter limits on doctor and hospital networks. The limits mean more people could wind up using out-of-network hospitals, where cost-sharing rules will boost their out-of-pocket costs — potentially boosting unpaid medical bills, too.

"I know our members are concerned about it," said Wendy Burt, a spokeswoman for the Minnesota Hospital Association.

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck