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UW Hospital and other hospitals in Madison and throughout Wisconsin have provided less charity care since 2014, when the Affordable Care Act boosted the number of people with insurance. Hospital officials said they will likely see more patients needing free or discounted care if Congress overturns the law, known as Obamacare.

Hospitals in Madison and throughout Wisconsin have provided less charity care in recent years as more people have gained insurance through the Affordable Care Act, with some hospitals directing the savings to disease prevention.

That could change if Congress overturns the law, known as Obamacare, and increases the ranks of the uninsured. And if Medicare payment cuts that helped pay for the law’s expanded coverage also remain, hospitals could end up shifting more costs to people with private insurance, officials say.

“If you end up with the Medicare cuts and no coverage expansion, that’s the worst-case scenario,” said Brian Potter, senior vice president for finance at the Wisconsin Hospital Association.

UW Hospital has spent some of the money it saved from reduced charity care to expand nurse calls to patients to get mammograms or colonoscopies and prevent emergency room visits and hospital stays among the chronically ill, said Bob Flannery, chief financial officer for UW Health.

“Shifting the burden of charity care … back to providers will really be a problem,” Flannery said. “It’s going to be harder to get those (prevention efforts) done.”

Hospitals in Madison and statewide appear to be financially healthy, with operating margins generally at or above the national average, according to a Wisconsin State Journal analysis of hospital data.

The State Journal assessed hospital charity care and other financial indicators as the Senate works on health care reform, following passage by the House last month of the American Health Care Act.

The bill would roll back the Affordable Care Act, which boosted insurance rates beginning in 2014 through subsidized insurance exchanges, Medicaid expansion and a requirement that most people be insured.

It would leave 14 million more Americans uninsured next year and 23 million more uninsured in 2026 — some of them willingly, freed from the insurance mandate — and some of the country’s sickest people would pay more for health care, according to the Congressional Budget Office.

Hospitals’ costs rising from Medicare, Medicaid

Statewide, charity care — free or discounted care for patients with low incomes — decreased 46 percent from 2013 to 2015, falling from $328 million to $176 million, according to the hospital association.

Bad debt, which occurs when patients not approved for charity care don’t pay their bills, went down 34 percent, from $285 million in 2013 to $188 million in 2015.

The main reason for the declines, Potter said, is a similar reduction in the number of residents without insurance. That figure went from 518,000 people in 2013 to 323,000 people in 2015, a 38 percent drop, according to the U.S. Census Bureau.

While hospitals have saved money from decreases in charity care and bad debt, they have absorbed Medicare cuts that helped pay for subsidies on the health law’s exchanges, Potter said. For Wisconsin hospitals, the cuts are expected to amount to more than $2.6 billion over 10 years.

In addition, more people are on Medicaid, the state-federal health program for the poor. It pays hospitals 65 percent of costs, he said.

The Affordable Care Act “moved the bucket from dollars in charity care to Medicare shortfalls and Medicaid shortfalls,” Potter said.

Meanwhile, bad debt appears to be rising again, likely because people with private insurance are having to pay more for care through high deductibles and cost sharing, he said.

At Madison hospitals, varying impacts seen

At UnityPoint Health-Meriter, charity care fell from $5.6 million in 2013 to $1.7 million in 2016. But bad debt went up, unlike at most hospitals, and the portion of care provided through Medicaid increased from 13 percent to 15 percent, said Ron Schroeder, regional director of accounting.

“There’s no extra money,” Schroeder said.

Charity care at SSM Health St. Mary’s Hospital decreased from $9.6 million in 2013 to $3.6 million in 2016, with bad debt down in 2014 and relatively stable since then. That year, the hospital started an interest-free loan program, which has helped reduce the financial burden on patients with outstanding bills, spokeswoman Lisa Adams said.

At UW Hospital, charity care dropped from $26.2 million in 2013 to $14.9 million in 2016. Bad debt went down in 2015 but increased in 2016.

The charity care savings have been invested in enhancing medical records so nurses can better manage patients with complex needs and remind patients when tests are due, along with other efforts that fall under the umbrella of “population health,” Flannery said.

“The Affordable Care Act reduced the impact of uncompensated care … (and) freed up resources for other uses,” he said.

Jon Peacock, research director for the Wisconsin Council on Children and Families, said he hopes other hospitals will spend charity care savings on prevention programs if the number of patients with insurance continues to increase. But if insurance rates fall, as could happen under a repeal of Obamacare, hospitals might shift some of the cost of an increase in uncompensated care to people with insurance, he said.

Over the past five years, the average operating margin has been 4.8 percent at Meriter, 8.1 percent at St. Mary’s and 7.4 percent at UW Hospital.

Statewide, the average for 2012 to 2015 was 9.7 percent. Nationally, the comparable figure is 6.2 percent.

Experts traditionally have said nonprofit hospitals should have margins of 3 percent to 5 percent. But Potter said the rule of thumb is becoming outdated because hospitals are increasingly parts of larger health systems, which often lose money through other services, such as HMOs, doctor groups, nursing homes and home health.

For 19 Wisconsin health systems in 2015, the average operating margin was 6.3 percent. “That’s a more accurate look at how health care is going,” Potter said.