An Audit Report on Charity Care at Health-Related Institutions
May 2007
Report Number 07-034
Overall Conclusion
Patients receiving charity care at selected state health-related institutions in fiscal year 2006 were eligible under the institutions' guidelines. However, identifying the amounts of charity care reported by each institution in its annual financial report is difficult because health-related institutions do not follow a consistent model for reporting the dollar amount of charity care they provide through their hospitals and practice plans. In identifying various charity care charges and costs, this audit focused on information reported in the annual financial reports because that information is publicly accessible and readily available.
Information reported in the annual financial reports is inconsistent because:
- The institutions' annual financial reports do not clearly and consistently present the total amount of charity care. Hospitals and practice plans follow different reporting guidelines for charity care. The effect of these differences is that the amount of charity care reported by practice plans cannot be compared to the amount of charity care reported by hospitals.
- One institution reviewed included charges in its practice plan for charity care that do not comply with State Auditor's Office reporting guidelines. The other two institutions reviewed in this audit generally followed the definitions provided in the General Appropriations Act when accounting for the amount of charity care they provide.
Reporting inconsistencies among these institutions diminish the value of charity care information and make it difficult to determine the financial impact of charity care on the institutions.
All three health-related institutions reviewed in this audit report charity care charges instead of the actual costs in the annual financial reports for their hospitals and practice plans, in compliance with current General Appropriations Act and State Auditor's Office guidelines. Charges are the amounts that the health-related institutions charge for the services they provide.
The following are a portion of the charges reported by the three institutions:
- The University of Texas Southwestern Medical Center at Dallas's (Southwestern Medical Center) practice plan reported $371.3 million in charges for charity care in its fiscal year 2006 financial report.
- The University of Texas M.D. Anderson Cancer Center's (M.D. Anderson) hospital reported $106.1 million in charges for charity care in its fiscal year 2006 financial report.
- The University of Texas Medical Branch at Galveston's (Medical Branch) hospital reported total charges of $164.3 million in charity care in fiscal year 2006.
While current reporting guidelines require institutions to report gross charges, reporting only charges does not provide a clear picture of the impact that charity care places on state medical schools and hospitals. Therefore, auditors asked the institutions to estimate the costs of providing charity care. The following is a portion of the cost estimates provided:
- The Southwestern Medical Center's practice plan estimated that the unreimbursed cost of providing charity health care during fiscal year 2006 was $51.8 million.
- M.D. Anderson's hospital estimated that the unreimbursed cost of providing charity health care during fiscal year 2006 was $89.4 million.
- The Medical Branch's hospital estimated that the unreimbursed cost of providing charity health care during fiscal year 2006 was $55.6 million.
The University of Texas System (UT System) stated that it made attempts to determine how to calculate the actual costs for providing charity care. However, the UT System asserted that these attempts to estimate costs have not yet produced reliable or verifiable data.
The Medical Branch does not ensure that it is accurately billing counties for charity care. The Medical Branch routinely provides health care to county indigent patients under the County Indigent Health Care Program. Auditors found that the Medical Branch's billing process does not always ensure accurate and timely billing to the counties; verify receipt of prompt, full payments; or adequately handle disputes with counties. The Medical Branch billed a total of $8.7 million to 36 counties and hospital districts in fiscal year 2006. At the time of this audit, the Medical Branch had received about $6.2 million of this amount from the counties.
Two health-related institutions appropriately determine patient eligibility for charity care. Auditors tested charity care eligibility determinations at the Medical Branch and M.D. Anderson and found that patients receiving charity care were eligible under the institutions guidelines. However, neither institution had a process to review cases in which patients were denied charity care.
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