Monday, October 5, 2009

“Healthcare Soundoff’s” perspective on Valley Health's $56million in "community benefits" for 2007

For the record, I am NOT disputing Valley Health's quality of care, but I am trying to get a better understanding on these huge profit figures that are NOT shared with the local community and the massive “community benefit” figures that they throw out in the public eye.

Bottom-line, it's becoming more known that the nurses are under compensated along with the blue-collar workers, for example: housekeeping associates.

As we all need to get a better understanding on this term "community benefit", an outside organization in Northern VA identified as HealthCare Soundoff was called upon for some help.  Attached below is their perspective on Valley Health's $56 million "community benefit" figure.

As it was explained to me in regards to "charity care" ... If you make a widget and you sell it for $100 but it only costs you $2 to build it, then you are only allowed to write-off $2 when you donate those widgets. That will help to explain "cost" vs. "charges" below.


December 4, 2008
Based out of Northern, VA

1.    They claim to have actually rendered $18.9 million in charity care.  Care they gave away.  The trick here is what does the $18.9 represent?  My guess is that they use "charges" as the basis for calculating this figure.  No hospital receives charges for their services anymore. All hospitals regularly give substantial discounts off of charges to insured patients.  So this is an inflated figure.

2.    They claim a loss on Medicaid of $10.8 million.  This represents what they collected from Medicaid for services and what they did not receive if they had again received "charges."  This is also funny money.  They got paid for these services according to a Medicaid agreement they have signed but have accounted for it in a way that allows them to claim a loss for "charitable purposes."

3.    They wrote off $17.5 million in bad debts as noncollectable. This is off a "charges" figure as well. This is self explanatory.  Couldn’t collect.

This totals $47.2 million.  The remaining $8.8 million they claim must be part of the expenses of all the services they list on that web page.

So if you were trying to figure out what the actual figure should be it would require you to assign a factor to "charges."  This represents a figure that the typical Blue Cross patient would pay.  I would say 85% of charges would be a good conservative starting point.  So the real figure would be closer to $40.1 million if they were using realistic numbers.  So overall it looks like Valley gave away $48.9million.

Now here is the kicker … Bad debt and Medicaid write offs are the bulk of this calculation.  Many have argued that using Medicaid write offs to bolster your charity care number is intellectually and actually off base.  Why?  The hospital actually collects something for all of these services, not their charges or even what they want but they do collect.

To get the most accurate information on how they are reporting I would suggest you got to the IRS website and pull down the Valley Health Form 990 which is a public record.  Looking at the IRS 990s will be the best source.  It is what they file with the IRS and vouches for their charitable purpose.  When they are counting bad debt, Medicaid bad debt, and free services in the figure they use on their web page, I am sure they are using figures that are based on "charges" and those figures have no relationship to net patient revenue.

There are very few hospitals that do not use "charges" to peg their write-offs and equate that with charity care.  Look at the 990s.  There are a couple of websites that store them.  Go to google and search IRS 990 or nonprofit 990 and you might find the 2007 990 for Valley Health.  It will include all sorts of interesting information.

They will probably file their 2008 sometime in February or March.  The 2007 should be there.  Also contact They may be interested in your story and position.

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