Maximizing Schedule H Charity Reporting with Minimal Financial Impact

1. Maximizing Schedule H Charity Reporting with Minimal Financial Impact Presented By: Jack Hodge Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal  Revenue Code.

2. Sen Grassley’s comments: “…further evidence that there is no discernible difference between tax exempt hospitals and for profit hospitals…”

3. Current Processes • Financial Counselors • Charity Care Application • Approval based on measurement against each individual hospital’s charity care policies.

4. Examining the process further…. • Patients who qualify for charity can be generally classified into two broad categories of behavior: • Category 1: Patients with means, but with no intentions of paying • Category 2: Patients with limited or no means • Category 2 patients pose the greatest challenge to us in that they choose not to communicate or cooperate knowing that: • Services will continue to be provided • No impact on financial credit obligations or capacity • No negative effect on credit scores Medlytix Confidential and Proprietary

5. Optimal Current Processes??? • For the current process to work optimally, total patient cooperation is required. • If not, how can charity care amounts be increased over current levels?

6. Non-Elderly Uninsured Profile • A significant percentage of uninsured patients should qualify for charity care under most hospitals charity care policies. • Confirmed by low collection rates on the uninsured population. • Currently about 30-40% of uninsured patients are provided charity care based on existing processes. • These numbers could be significantly increased with more cooperation from patients or finding alternative methodologies. Medlytix Confidential and Proprietary

7. Presumptive Charity Care Objectives . . . • Accurately classify charity care • Increase the amount of charity care over current levels

8. Current Processes . . .used when patients provide limited/no information to identify presumptive charity care • Traditional Credit Scores • ***** • Should never be used • Measures character not financial ability • A millionaire late on Tiffany's or Dillards card may have really low scores Ratings Guide Best ***** Worst ***** Medlytix Confidential and Proprietary

9. Current Processes . . .used when patients provide limited/no information to identify presumptive charity care • Income Predictors • ***** • Directional, not absolute • Problem with no-hits • Black Box Ratings Guide Best ***** Worst *****

10. Current Processes . . .used when patients provide limited/no information to identify presumptive charity care • Manual examination of credit file and/or other sources • ***** • Intuitively correct • Labor Intensive • Problem with credit file no hits • Subjective Ratings Guide Best ***** Worst *****

11. Current Processes . . .used when patients provide limited/no information to identify presumptive charity care • Hospital Specific Charity Care Criteria ***** • Automation of manual examination • Easily understood (not a black box) • Objective • 100% coverage Ratings Guide Best ***** Worst *****

12. Developing a custom charity care model • Request a historical file from the hospital. For example: A hospital provides all patients discharged in 2009 What external characteristics differentiate Medicaid and Verified charity patients from the rest of the population? Analyze over 700 pieces of data at each individual patient level Credit Bureaus Demographic Database Internal Information Medicaid Other Insured Verified Charity Uninsured Medlytix Confidential and Proprietary

13. Taking a peek inside the criteria… In order to validate the solution, data statistics correlated to financial means were reviewed for each charity score segment and assigned to High Means (“HM”) or Low Means (“LM”). The results of the analysis are illustrated below.

14. Timing in the revenue cycle process • Charity care can be provided at different points along the revenue cycle process: • At registration (Point of Service) • During accounts receivable management • Prior to bad debt placements • Results of our analysis on over 150 hospitals: • On average, 3%-4% of uninsured patients have a change in Financial class in the first 120 days • On average, an additional 1.7%-3.2% of uninsured patients are identified as having insurance during the bad debt process • On average 2%-8% of uninsured patients with valid third party coverage are not identified at all during the entire revenue cycle process • >70% of patient payments occur between 30-90 days from discharge • Delaying the presumptive charity care assignment process to the maximum extent possible (prior to bad-debt) will help hospitals minimize opportunity costs (i.e. downstream patient payments, lost/unfound 3rd party payments) Medlytix Confidential and Proprietary

15. Case Study: Right Timing Impact Three health systems were selected to determine the impact on assigning charity at time of service versus at bad debt placement. The study was analyzed over a two year period. Provider demographics were as follows: Provider A- 700+ Bed Urban, affluent to moderate income Provider B- 250+ Bed Rural average to below average income Provider C- 900+ Bed Academic Med Ctr varied ranges *Revenue lost

16. Recap • There is no substitute for verified information • If your hospital intends to implement a presumptive charity care solution, the following criteria should be applied: • Does the solution make intuitive sense? • A good understanding of the underlying characteristics that drive the solution • Ensure that the solution is unbiased and objective • Timing is everything, this should be a very important consideration • If possible, compare products to identify solutions with the lowest opportunity costs

17. Good News for Charity

18. Good News Clinics • Good News Clinics (GNC), is a non-profit, faith-based charitable clinic that provides free healthcare services to indigent people who do not have insurance or cannot qualify for government-sponsored programs. • GNC receives no State or federal funding. • GNC is the largest free clinic in the State of Ga.

19. Northeast Georgia Health System • NGHS is a not-for-profit community health system dedicated to improving the health and quality of life of the people of northeast Georgia and receives no tax support from local government for indigent care.

20. Northeast Georgia Health System • NGHS is the largest employer in Hall County • Hall County is home to 47 Fortune 500 companies • 9.6% of families live below the poverty level • 19% are uninsured (www.healthyhall.com) • Medical staff of over 500 physicians • 557-bed hospital • Three Urgent Care Centers; • Mental health and substance abuse treatment center; • Numerous outpatient services.

21. Good News Clinics • The Medical Center Foundation contributed one million dollars through the Foundation’s first three-year Healthy Journey capital gifts campaign to help support expansion and service delivery. (The Medical Center Foundation is the philanthropic arm of NGMC.) • Subsequently, NGMC has pledged to contribute over 25% of GNC’s annual operating budget. • Services at GNC are provided by 45 physician volunteers, 46 dentist volunteers, and 2 employed nurse practitioners

22. Good News Clinics Impact

23. Good News Clinics A study conducted by Phaedra Corso, PhD and Angela Fertig, PhD, researchers at the Department of Health Policy and Management at the University of Georgia, researched the economic benefits associated with two free clinics in Georgia, one of which was the Good News Clinics. According to the study in both communities and clinics, • The costs associated with non-urgent ED care decreased 14% to 20% for a sample of patients in the year after they enrolled in the free healthcare clinic compared to the year before enrollment in the clinic • In-patient related costs declined by 20% to 34% in both clinics

25. Contact Info Sharon Roseberry 704-616-4207 Sharon.roseberry@medlytix.com Good News Clinics www.goodnewsclinics.org Cheryl Christian, Ex. Dir 770-503-1369