University of Maryland Medical System Statement on Uncompensated Care December, 2008

The University of Maryland Medical System (UMMS) is a private, not-for-profit health system that includes nine hospitals: University of Maryland Medical Center, Baltimore Washington Medical Center, Maryland General Hospital, Memorial Hospital at Easton, Dorchester General Hospital, Kernan Hospital, University Specialty Hospital, Chester River Hospital Center and Mt. Washington Pediatric Hospital (which is jointly owned in partnership with the Johns Hopkins Health System).

Through our network of academic, community and specialty hospitals, UMMS provides comprehensive and highly specialized care to a diverse geographic and socio-economic patient population with hospitals in Baltimore's inner city, suburban central Maryland and rural Maryland. During the fiscal year ended June 30, 2008, UMMS treated more than 750,000 patients. These include people with advanced heart disease and cancer, patients who need lifesaving organ transplants, patients with severe traumatic injuries, and children with rare and complex health problems. We also provide the full range of emergency services to adults and children. The cost of care to those 750,000 patients was approximately $2 billion.

Providing the best quality of care is expensive. And we know that health care bills are a concern to many Marylanders, including those receiving care at our hospitals. It is the policy and practice of UMMS hospitals to work with our patients to identify available resources to pay for their care. The majority of our patients are covered by Medicare, Medicaid and commercial insurance companies. In the event that health insurance does not exist, we work with those patients and their families to determine if they qualify for Medicaid or other programs that would fund most or all of the cost of their care. The process is resource intensive and time consuming for patients and the hospital; however, if patients qualify for one of these programs, then they will have health benefits that they will carry with them beyond their current hospital bills, for outpatient and preventive care, as well.

If a patient does not qualify for Medicaid or another program, our hospitals have financial assistance programs which can significantly reduce the amount of the bill or even eliminate it . Of course, the patient and/or their family needs to work with our hospital staff to identify the level of financial assistance they can receive.

Of the $2 billion of care that UMMS provided during the year ended June 30, 2008, the majority of the cost was paid by insurance companies, Medicare or Medicaid, or the patients themselves. However, approximately 11.7% of that care was unpaid. A significant portion of the unpaid amount was forgiven as a result of our financial assessment of patients' financial circumstances. We and other hospitals follow a set of eligibility standards to make these determinations. Unfortunately, there are patients who do not communicate with us or respond to our efforts to collect unpaid bills. In those cases, we cannot know their financial situation or whether they may qualify for programs that might reduce their financial burden.

We and all Maryland hospitals are expected to do everything we can to bill and collect payment for our services. Uncompensated care creates a burden for everyone else who pays for medical insurance--taxpayers, individuals who buy their own health insurance and companies that provide insurance for their workers.

According to the requirements of the HSCRC, we must be certain that those patients who are provided "charity" care--a reduction or elimination of their bill-- in fact are eligible because of their financial situation.

Our process is to render a bill within seven days after care is received. If the patient does not have insurance, three letters are sent to the patient requesting payment or additional information on the account, such as insurance information that may have been missed at the time of registration. After these letters are sent, a representative of the hospital will attempt to contact the patient by phone.

Based upon additional research on the account and information available to the hospital, we may decide to send the account to an "outside" collection firm or to abandon efforts to collect the unpaid bill. If there is no response after a series of letters and phone calls from the collection agency, hospital management will consult with the collection agency and make a decision on whether to proceed with litigation or stop efforts to collect, based on information from public records including assets and employment. Sometimes the filing of a claim is the only way to receive a response so that we can work with the patient to arrange a payment plan.

Filing claims in order to collect payment is a rare occurrence. Fewer than half of 1% of our hospitalized patient cases ever result in a claim. We only take this step when we believe that patients have the ability to pay all or part of their hospital bill.

Maryland hospital charges are approved by the Maryland Health Services Cost Review Commission (HSCRC). As a component of the approved rates, the HSCRC includes an amount to fund a reasonable amount of uncompensated care (bad debt and charity care). This amount is established based upon a complex regression analysis using multiple years of hospital-specific and statewide data. Hospitals are expected to make reasonable efforts to collect unpaid bills from patients who are able to pay. Without these efforts, charges to paying patients and insurers could increase, thereby driving up the cost of health care.

There are periods when hospitals are not compensated in their rates for the charity care they provide, and there are also periods when the rates bring in more than the charity of care provided.. During times of economic slowdown, hospitals are at a higher risk of being underfunded. However, over a 7 to 10 year period, the fluctuations usually average out to neutral, so that hospitals are neither overcompensated nor undercompensated. As a non-profit institution, all of our revenue is reinvested back into our patient care activities.

To help our patients qualify and apply for Medicaid and reduce uncompensated care costs, the University of Maryland Medical System spends considerable resources to assist our patients to identify ways to cover their health care costs. Unfortunately, the costs of these services are not included in the rates approved by the HSCRC.

However, since these efforts result in reduced amounts of uncompensated care, insurers and paying patients will benefit in future years.

In addition to hospital-based services, UMMS provides health care to the community through local clinics and ambulatory care centers. If a patient is unable to pay, care at these outpatient sites is provided at a reduced cost or no cost. The costs of these services exceed the revenue generated. For example, our University of Maryland Medical Center's UniversityCare outpatient sites lost $3.6 million in fiscal year 2008. We also provide extensive community outreach with free health screenings, educational programs and other community benefits. For example, Maryland General Hospital's Community Health Education Center provides 18,000 free health screenings across the Baltimore area each year. These services are part of our mission and commitment to the community. These activities are not regulated by the HSCRC, so their costs are not included in our HSCRC uncompensated care provisions.

Maryland's hospitals are the safety net for Maryland residents, accepting patients who require care regardless of their insurance status. This mission is made possible, in part, through the HSCRC's rate setting system, which includes funds in hospital rates to provide uncompensated care. The regulatory system has evolved since its creation in the early 1970s. While rate-setting tools and methodologies have become more sophisticated, the key principles of the system--access to care for all, equity and accountability, as well as cost control, -- remain the cornerstones of the system.

REGARDING THE SPECIFIC CASE YOU ASKED US ABOUT:

We cannot provide details about a patient case because of patient privacy laws. However, the following is some general information that you may find useful regarding a type of case that may lead a hospital to go to court to seek reimbursement. When someone is injured as a passenger in a car crash, the patient's health insurance company may not pay the hospital bills unless the patient provides accident details or signs a form that would allow the health insurance company to be reimbursed from any future personal injury case. This is a routine procedural matter. Such "subrogation" agreements, as they are called, are a regular part of health insurance contracts.

Without the patient's cooperation, the health insurance company will not pay the patient's bills and the hospital may need to seek reimbursement from the patient. That action is not necessary in cases when patients sign the forms enabling their health insurance carrier to pay for their health care bills.

In these cases, if hospitals receive reimbursement, they may be forced to accept much smaller amounts compared to what they would have received if the health insurance companies had paid the bills.

In this particular case, it is part of the public court record that the case was settled for 17 percent of the outstanding bill.