Conquering a cash crisis
Rehoboth McKinley Christian Hospital faces mountain of bad debt

Gallup’s Rehoboth McKinley Christian Hospital has seen its debe nearly double in the past year. [Photo by Jeff Jones / Independent]

By Bill Donovan
Staff writer

GALLUP — Rehoboth McKinley Christian Hospital has managed to overcome severe financial problems that up until a couple of years ago threatened its very existence, but now it’s facing a massive financial problem of another kind — bad debts.

The amount of money owed to the hospital by patients has more than doubled over the past year, from about $2.5 million in FY 06 to $5.3 million in FY07.

That’s the amount, said RMCH CEO Chuck Wright, that the hospital will have to write off if it can’t collect the money in the coming months.

Much of this money is owed to the hospital from people who received services and have refused to pay, even though hospital officials feel they have the ability to pay because they have a good-paying job, a nice home and take expensive vacations. It’s one thing that some can’t pay their medical bills because their income is too small, but hospital officials are finding an increasing number of people with the ability to pay who have turned their backs on their hospital bills.

Wright said that in his 30 years of experience as a health professional, he has never seen bad debts explode like this, and the hospital is having to take steps to get the problem under control.

Part of the reason for the increased bad debts, he said, is because the fact that more Americans are not covered by health insurance, and the cost to go to the hospital — either as an inpatient or an outpatient — is rising by double digits annually. As the number of uninsured people in this area goes up, he said, the bad debt amount also goes up.

And these bad debts don’t include the monies the hospital just forgives because the patient doesn’t have the funds to pay for costly medical service.

Wright pointed out that RMCH is a nonprofit organization that is committed to providing health care to everyone, regardless of whether they have the ability to pay or not. If the hospital has to provide a long hospital stay and urgent medical care, the price tag could run into the tens of thousands. If the person is in a minimum wage job, for example, no one expects the person to be able to pay off that debt if he is uninsured.

So the hospital works with the individual and sets up a payment plan that he can afford — even if it is $10 to $20 a week — and writes off the costs over that. It’s listed as charity.

But even charity costs are almost doubling. In the last two years, the hospital has seen its charity account go from $900,000 a year to $1.7 million.

He admitted that part of the bad debt is because of changes within the Medicaid program and problems internally with the hospital’s billing system.

There have also been situations beyond the control of the patient that has sharply increased some bills. For example, if the hospital can’t find a place to relocate a patient — there are no openings in local nursing homes or there is a problem returning him or her to family care — the patient stays in the hospital and the bills mount up.

“You may have a patient that finds himself in the hospital for a month’s stay when if we were able to find someone else to take care of him, his hospital stay could have been only a couple of weeks,” Wright said.

Part of the problem may also be the fact that people have the impression that RMCH is a nonprofit hospital, if they don’t pay, nothing bad will happen to them.

Wright said that hospital policy will not allow RMCH officials to deny medical care to anyone who needs it, even if they have a major bill that they have ignored.

“We wouldn’t agree to do elective or cosmetic procedures — which we do very little of anyway — if the person owes us money, but we wouldn’t deny needed medical care,” he said.

The hospital rarely files a lawsuit against a patient, and the most it usually does — and plans to do in this case — is send out its bad debts of six months or longer to an outside credit company to collect.

Another factor that may play in people’s thinking is that the bad debts don’t matter because even with the increases in the bad debt and charity accounts, the hospital is continuing to make a profit.

The hospital, after seeing losses of more than $12 million four years ago, has bounced back under Wright and showed a profit of $500,000 two years ago and about $2.7 million last year. Wright said he expects that the hospital will show a profit of between $1 million and $1.2 million this year.

But the increase in bad debt means the hospital has been limited in what it can do to make improvements or buy equipment to provide better health care to this area.

On the other hand, the hospital is able to get some of its bad debts taken care of by a state and federal program that provides funds to sole-provider hospital.

This is a way for the county basically to pay for the medical care of indigents within the county who don’t qualify for Medicaid and don’t have the funds to pay for health coverage.

Last year, the program, which is funded mostly by the state and the federal government, provided RMCH $4.8 million.

The county has had to pay a small portion of this in matching funds and when the county couldn’t afford to make the payment, the hospital stepped in and made it because every dollar it paid into the program, it received $8 to $9 back.

But Wright said there’s a major question of just how long this program will continue to exist since many members of Congress have expressed a desire to turn this program over to the states to fund and if that happens, Wright said the amount of money that will be made available to hospitals will decrease substantially.