Financial Stewardship

Baylor stands at the nexus of all the trends impacting health care today: reductions in Medicare and Medicaid reimbursements at the federal and state level, shifting health coverage costs from employer to employee, increases in the uninsured and under-insured, reductions in reimbursements from managed care companies and the surge in the population of older adults. These factors have changed the playing field dramatically in just the last few years and will continue to impact how health care is organized, delivered and paid for – or not – for decades to come.

Among the troubling statistics challenging Baylor and other health care organizations that are committed to serving the community:

• 1 in 4 Dallas County residents lacks health insurance, which is one of the highest percentages for uninsured nationwide;
• In 2004, there were 5 million fewer jobs with employer-provided health insurance in the U.S. compared to 2001;*
• The cost of job-based health coverage to employers has risen 59% since 2000;* and
• At the same time that reimbursements from different payors are down, health problems persist: among Americans ages 55 to 64, about half have hypertension and around 40% are obese.

In Texas, the cost of charity – or uncompensated – care is rising along with the volume of uninsured patients. Year after year, Texas has the highest volume of uninsured patients in the nation. This represents an extreme business challenge for Baylor, which has committed to caring for all members of our communities.

Without intervention, the above statistics paint a picture that points to one conclusion: Baylor’s unprecedented community benefit expenditures in fiscal year 2006 of $407 million in unreimbursed costs will swell even more next year. And in the following year. And the year after that.

Cost-shifting and the New Uninsured, Under-insured

One of the trends impacting Baylor and other health care organizations is the cost-shifting occurring in the American workplace. This is leading to a new class of uninsured and under-insured people who are becoming a large source of unreimbursed care. Only 61%* of American workers are insured through their employers. According to the National Coalition on Health Care, between 2000 and 2005, employee spending for health coverage (or their portion of their family's coverage) has increased 143%.

As more employers require employees to shoulder a greater percentage of their health care costs, more employees opt out of company-sponsored health care coverage. This starts a vicious cycle in which employees may choose to forgo health insurance, or instead purchase an employee health insurance plan that offers a relatively low monthly premium in exchange for a very high deductible. A single trip to the emergency department or physician's office can put such individuals into debt because their $5,000 or higher annual deductible requires them to pay for care that once was covered by their health insurance company. A single surgery or other procedure pushes many of these individuals into chronic indebtedness and even bankruptcy.

Patients who carry high deductible insurance and do not pay their bills account for the fastest-growing category of unfunded care at Baylor. This signals a disturbing change in the problem of the uninsured and under-insured, with more and more working, middle-class individuals unable to cover their own bills and leaving them for Baylor to absorb.

The Unreimbursed Costs of Medicare

Baylor is committed to serving each individual covered by Medicare. Government underpayment for Medicare services represents the bulk of community benefit at many Baylor hospitals. In fiscal year 2006 alone, unreimbursed Medicare made up 67% of Baylor's community benefit. Yet the burden of these uncovered costs is growing, as government reimbursements shrink while the number of patients covered by Medicare soars.

A Trend in Managed Care Consolidation

A recent study from the American Medical Association finds a steep decline in competition in the nation's health insurance markets. The report shows that in "95% of markets a single insurer had a market share of 30% or greater, and in 56% of markets a single insurer had a market share of 50% or greater." This means that ultimately patients, with rising health insurance premiums and no additional health benefits, are not benefiting from this consolidation and many may no longer be able to afford the care they need. This, on top of an already increasing number of uninsured in the state of Texas, is disconcerting and will have a tremendous impact on access to health care.

Baylor's Regional Economic Benefit

In a study** conducted for VHA Southwest, the Perryman Group calculated that Baylor is one of the largest private-sector employers in the Dallas/Fort Worth area, resulting in billions of dollars in business activity indirectly linked back to Baylor. In addition, the organization, which encompasses hospitals, primary care and specialty care centers, senior health centers, rehabilitation clinics, ambulatory surgery centers and the Baylor Research Institute, contributes thousands of permanent jobs to the area.

*Henry J. Kaiser Family Foundation
**Providing Essential Healthcare in an Increasingly Complex Environment: The Impact of Baylor Health Care System on the Dallas Area and Texas. The Perryman Group, 2004.