Uncompensated Care Costs Decline the First Time Since 2001

During 2014, the first full year of the Affordable Care Act’s (ACA’s) insurance coverage expansion, total hospital uncompensated care costs (UCC) decreased to the lowest level since 2001. The decrease was only the second since 1990, according to the annual UCC report from the American Hospital Association.


UCC dropped from $46.4 billion in 2013 to $42.8 billion in 2014. The 2014 costs represented 5.3 percent of total expenses in 2014, the smallest since 1990.


Total national hospital UCC is defined as a hospital’s bad debt charges and financial assistance charges multiplied by its cost-to-charge ratio.


A new study published in Health Affairs credited Medicaid expansion, one of the features of the ACA, with immediately changing the payer mix for states with expanded eligibility in the first two quarters of 2014. The study’s authors noted that expansion states increased their share of Medicaid discharges, while concurrently reducing uninsured discharges. “These changes should reduce hospitals’ burden of uncompensated care,” the authors wrote. (“Affordable Care Act Medicaid Expansion Reduced Uninsured Hospital Stays In 2014,” Health Affairs, January 2016.)


Hospitals with lower demand for financial assistance and charity care should consider reallocating that funding to other areas of community benefit such as preventive care, wellness services or other activities outlined in their community health needs assessment. The IRS likely will monitor this reallocation, noted a private healthcare consulting firm.


ACA-related health insurance coverage expansions were noted by debt ratings agencies to drive hospital revenue sharply higher in 2014 and 2015. However, continued UCC reductions remain in doubt. For example, a November report highlighted an increase in UCC in the latter half of 2015. The finding raised questions about the sustainability of hospitals’ financial benefits from the ACA coverage expansion. (“Hospital Uncompensated Care Drops in 2014,” HFMA Weekly, January 29, 2016)


To read the American Hospital Association report, click here.




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