THE EVOLUTION OF CHARITY CARE OF
THE UNIVERSITY HOSPITALS OF CLEVELAND
By
RICHARD HENRY CARTABUKE
Submitted in partial fulfillment of the requirements
For the degree of Master of Arts
Thesis Advisor: Dr. Jonathan Sadowsky
Department of History
CASE WESTERN RESERVE UNIVERSITY
August, 2009 CASE WESTERN RESERVE UNIVERSITY
SCHOOL OF GRADUATE STUDIES
We hereby approve the thesis/dissertation of
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candidate for the ______degree *.
(signed)______(chair of the committee)
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(date) ______
*We also certify that written approval has been obtained for any proprietary material contained therein. !"
Copyright © 2009 by Richard Henry Cartabuke All Rights Reserved #"
DEDICATION
I dedicate this thesis to my parents. Without their patience, understanding, support, and
most of all, love, the completion of this work would not have been possible.
$"
LIST OF TABLES
Table 1: Annual Patient Admission Data from Wilson Street Hospital (1872-1874) Table 2: Revenue Sources and Expenditures for Wilson Street Hospital (1872-1874) Table 3: Annual Patient Admission Data from Cleveland City Hospital (1876-1888) Table 4: Number of Days of Treatment Data for Cleveland City Hospital (1881-1887) Table 5a: Revenue Sources and Expenditures for Cleveland City Hospital (1881-1883) Table 5b: Revenue Sources and Expenditures for Cleveland City Hospital (1884-1888) Table 6: Annual Patient Admission Data from Lakeside Hospital (1889-1899) Table 7: Number of Days of Treatment Data for Lakeside Hospital (1888-1895) Table 8a: Revenue Sources and Expenditures for Cleveland City Hospital (1889-1891) Table 8b: Revenue Sources and Expenditures for Cleveland City Hospital (1892-1895) Table 9: Number of Days of Treatment Data for Lakeside Hospital (1898-1901) Table 10a: Revenue Sources and Expenditures for Cleveland City Hospital (1898-1900) Table 10b: Revenue Sources and Expenditures for Cleveland City Hospital (1901-1905) Table 11a: Revenue Sources and Expenditures for Cleveland City Hospital (1906-1908) Table 11b: Revenue Sources and Expenditures for Cleveland City Hospital (1909-1913) Table 12a: Annual Patient Admission Data from Lakeside Hospital (1914-1918) Table 12b: Annual Patient Admission Data from Lakeside Hospital (1919-1924) Table 13a: Number of Days of Treatment Data for Lakeside Hospital (1914-1918) Table 13b: Number of Days of Treatment Data for Lakeside Hospital (1919-1924) Table 14a: Revenue Sources and Expenditures for Cleveland City Hospital (1914-1917) Table 14b: Revenue Sources and Expenditures for Cleveland City Hospital (1918-1922) Table 15: Annual Patient Admission Data from Lakeside Hospital (1925-1930) Table 16: Number of Days of Treatment Data for Lakeside Hospital (1925-1930)
%"
ACKNOWLEDGEMENTS
I would like to thank Ms. Dianne O’Malia and the Stanley A. Ferguson Archives of
University Hospitals of Cleveland. I would like to thank Dr. Jonathan Sadowsky, Dr.
Kenneth F. Ledford, the staff of the Western Reserve Historical Society, and the Case
Western Reserve University Department of History. Without their guidance and efforts, this project would not have been possible.
&"
The Evolution of Charity Care of the University Hospitals of Cleveland
Abstract
By
RICHARD HENRY CARTABUKE
Hospitals are charitable institutions and, as such, should be responsive to those in need of medical treatment. As the ability to afford healthcare becomes increasingly difficult, it is necessary to trace the origins and ways in which hospitals have historically defined and handled their charitable obligations. This paper will examine the development and transformation of charitable care, and those factors that have contributed to the change in charitable care, that University Hospitals of Cleveland has provided from its inception through the twentieth century. The central argument is that, as payment for health services moved away from the patient to third parties, the hospital commitment to charitable care diminished. This trend will be demonstrated using financial and patient data from University Hospitals of Cleveland from 1872 to 1930. In addition, the paper suggests future avenues of investigation with regard to charity care and the University
Hospitals Health System.
The concept of charity care was the motive for the formation of many early hospitals and continues to be the raison d’être for non-profit hospital organizations and '" healthcare systems. Hospitals have an obligation to aid those in need of treatment with understanding and compassion because hospitals offer life-and-death types of services. It can be argued that it is unfair and morally wrong to deny treatment to anyone when hospitals possess the means to alleviate suffering. Hospitals are also business entities with limited financial resources, which constrain the amount of care that can be delivered. This conflict between charity care and profitability has played an important role in the evolution of the modern hospital system, particularly the allocation and use of public funds. Therefore, it is important to examine the role of charity care. As these institutions have evolved to encompass a host of free services and education that benefit the community, so has the relatively vague definition of charity care. Therefore, the first challenge in evaluating the evolution of charity is to define the meaning of charitable care. The first section of this monograph will explore the rationale for charitable care and select a definition that can be applied to a variety of institutional settings.
The need to provide for the medical care of the poor who reside in Cleveland began with the philanthropic efforts of religious groups to deliver health services to the indigent, such as the Society for the Relief of the Poor in the early nineteenth century.1
Over the ensuing one hundred fifty years, Cleveland hospitals have consolidated into two large systems, University Hospitals and the Cleveland Clinic, that dominate the health care landscape, literally and figuratively. The presence of University Hospital Health
System (UHHS) has had an enormous impact on the surrounding community. It is difficult to ignore the various buildings, roads, and infrastructure that continue to expand bearing the name of this institution, which includes University Hospitals of Cleveland,
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 1 Encyclopedia of Cleveland History. Hospitals and Health Planning, November 6, 1999, www.wrhs.org/html/philanthropictimeline. ("
Lakewood Hospital, Marymount Hospital, Lorain Community Hospital, Deaconess
Hospital of Cleveland, Lake Hospital System, and Geauga Hospital. This paper will explore the evolution of University Hospitals using published annual reports made available from the Stanley A. Ferguson Archives of University Hospitals of Cleveland.
The analysis is limited because University Hospitals stopped publishing annual reports in
1930, which would not resume until 1956. In addition, the author’s access was limited to published financial data. It would have been useful to review internal memoranda, committee reports and Board of Trustees minutes to determine the strategic decisions that were made during this period. The remainder of the paper will focus on the development and transformation of charitable care and those factors that have contributed to the change in charitable care that University Hospitals has provided from its inception through the twentieth century.
The central argument is that, as payment for health services moved away from the patient to third parties, the hospital’s commitment to charitable care diminished. This trend will be demonstrated using data recording the annual number of charitable patients undergoing care compared to the total number of patients treated, the number of days of charitable care provided as a fraction of the total number of days of care, and the income derived from charity patients related to annual expenditures. When the hospital stopped reporting data in this format, it was necessary to develop a surrogate measure of charity care. The amount of income derived from paying patients and third party payers was divided by annual expenditures to arrive at an estimate of charitable care. This was essential because the various sources of income that can be related to charity care often do not distinguish how the funds are distributed. For example, the Cleveland City )*"
Hospital, a predecessor of University Hospital, reported income derived from endowment earnings in its annual report, but did not report how much of that income was used for patient care.
It is important to ascertain whether the Cleveland community receives the appropriate benefits of charity health care services for the local population commensurate with the financial benefits that University Hospitals receives as a tax-exempt entity.
Moreover, this analysis has larger implications for the role of hospitals in health care. The
National Coalition on Health Care estimates that forty-four million Americans are uninsured.2 There is an ongoing debate at the federal and state level as to how this can be remedied. The recent prediction that the Medicare trust fund will be insolvent by 2017 indicates that there will be increasing pressure on hospital healthcare systems.3 It is important to document the historic trend of charitable care, which can illustrate and illuminate possible measures that can be taken to ensure health care access for all who need it.
The expectation that hospitals should be responsible for the treatment of those unable to pay for healthcare arises from one of three arguments. First, hospitals are charitable institutions and, as such, should be responsive to those in need of medical treatment.4 Historically, the humanitarian efforts of hospitals have been supported, at least in part, from church donations, philanthropic gifts and bequests, and/or voluntary contributions of labor and other resources.5 This has allowed these institutions to build
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 2 DeNavas-Walt, C.B. Proctor, and J. Smith. Income, Poverty, and Health Insurance Coverage in the United States: 2007. U.S. Census Bureau., August 2008. 3 Medicare Payment Advisory Commission. Report to the Congress: Reforming the Delivery System. June 2008. 4 Tuckman, Howard P. and Cyril F. Chang. “A Proposal to Redistribute the Cost of Hospital Charity Care.” The Millbank Quarterly, Vol. 69, No. 1 (1991), pp. 115. 5 Ibid, 115. ))" endowment funds that continue to grow through investments and ongoing contributions.
Over time, the expectation has developed that these resources will continue to finance a portion of the charitable services that hospitals provide.
Second, it can be argued that the obligation to provide charity care stems from an
“implicit contract” between hospitals and society.6 Society expects hospitals to finance charity care in return for the right that it grants them to dispense health services. A third argument has been made that, as recipients of many forms of public support, such as federal funding of expansion, hospitals should earn the special treatment they receive.
Hospital financial support of charity care demonstrates to society that subsidies are used for socially desirable purposes and relieves the public sector of some costs that it would otherwise bear.7
The central tension in the development of the hospital has been the conflict between its role as an institution of community service and its behavior as an income- maximizing business organization. Usually, the hospital is viewed as a community resource. As community institutions, hospitals have had the mission of serving all those who seek care regardless of their ability to pay for health services. In this idealized role, hospitals operate primarily to provide for the healthcare needs to the community, for which the hospitals receive significant benefits, such as tax exempt status. Therefore, the hospital can be seen as a reflection of the society that created it; the hospital both shapes and is shaped by the community.
In its “pure” form, charity care includes all the costs and write-offs associated with services rendered to individuals determined, prior to service delivery, to be unable to
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 6 Ibid, 116. 7 Ibid, 116. )+" pay.8 The Catholic Health Association (CHA), which has taken an active role in determining how community benefits should be accounted for, defined charity care as:
Free or discounted health and health-related services to persons who cannot afford to pay; care to uninsured, low income patients who are not expected to pay all or part of a bill, or who are able to pay only a portion using an income- related fee schedule; the unreimbursed cost to the health system for providing free or discounted care to persons who cannot afford to pay and not eligible for public programs. Charity care does not include bad debt. [emphasis added]9
The intent is to identify those funds that are earmarked for the health care of the truly needy. Thus, in order to establish a full understanding of the term charity care, two other important related terms must be defined: uncompensated care and indigent care.
Uncompensated care is defined as the combined cost of charity care and the cost of bad debt. In this case, bad debt relates to charges that the hospitals have not collected from patients who are otherwise able to pay.10 Uncollected debt and debts that result from defaults or criminal behavior are a reflection of poor administration rather than the designation of services to charitable care. Society would not benefit if hospitals were rewarded for allowing bad debt to increase.
Indigent care constitutes services provided to uninsured or underinsured individuals who are not expected to pay for those services.11
Physicians are instructed to admit all worthy cases without regard for the ability to pay, but to receive board from those who have money, though it be but a trifling sum weekly. This preserves the self-respect of the patient, and even the slenderest of purse may thus increase the means of continuing the charity work for which the Hospital was especially established.12 """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 8 Sanders, Susan M. “Measuring Charitable Contributions: Implications for Hospital’s Tax-Exempt Status.” Hospital and Health Services Administration 38.3 (1993): 401-418. 9 Missouri Foundation for Health, “Hospital Charity Care in the United States,” Summer 2005. 10 Gaskin, Darrell J. “Altruism or Moral Hazard: The Impact of Hospital Uncompensated Care Pools.” Journal of Health Economics 16 (1997): 397-416. 11 Community Benefit Reporting. St. Louis: The catholic health association of the United States, 2005. 12 First Annual Report of the Trustees of Lakeside Hospital, Cleveland, 1872. )!"
This statement by the first President of Lakeside Hospital, Jacob Perkins, defines the mission of the institution, but also acknowledges the need for paying patients to support its charitable efforts.
The institutional care of the sick originated from the incidental medical facilities that provided care for inmates of almshouses, jails, or, as in Cleveland, military posts.13
The first "hospital" was little more than a temporary barracks at Fort Huntington, situated on the Cuyahoga River on Lake Erie. After this makeshift hospital closed in 1815, no other institution aided the sick until 1826, when the township erected a poorhouse adjacent to the Erie Street Cemetery.14 In 1837, the poorhouse became the City
Hospital.15
In the second phase of their nineteenth century development, hospitals evolved as medical institutions, but continued to limit their services to persons who could not afford the cost of treatment and convalescence in their homes. The opening of the U.S. Marine
Hospital and St. Joseph Hospital in 1852 marked the beginning of this period in
Cleveland. The U.S. Marine Hospital, financed and managed by the federal government, cared for merchant sailors and their families and for civilian and military personnel of the government.16 St. Joseph Hospital, operated by the Sisters of Charity of St. Augustine, briefly served a growing community of Irish laborers in the city, as well as members of the lower class. During this period, the city and state governments reorganized their medical facilities for the poor. The City of Cleveland tore down City Hospital in 1851
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 13 Encyclopedia of Cleveland History. Hospitals and Health Planning, November 6, 1999, http://ech.case.edu/ech-cgi/article.pl?id=HHP. 14 Ibid. 15 Ibid. 16 Mark Gottlieb, The Lives of University Hospitals of Cleveland: The 125-Year Evolution of an Academic Medical Center (Cleveland: Wilson Street Press, 1991), 35-42. )#" and erected a new building, the City Infirmary, in 1855.17 Despite these improvements, most people still viewed hospitals as refuges for the poor. With prevailing low standards of medical care, the hospitals of mid-nineteenth century Cleveland were little better than the dreaded "pesthouses" of the past.18
Throughout much of the nineteenth century, the home had been the primary site of medical care. The hospital was viewed an institution of charity that served the medical and social needs of the urban poor.19 The early hospitals of Cleveland, including St.
Joseph’s Hospital and the U.S. Marine Hospital, epitomized the idea of a hospital as the health care provider of last resort for the indigent population. Physicians cared for hospital patients without charge, out of a tradition of social obligation as well as professional self-interest.20 As an institution built on the prevailing emphasis on social responsibility and personal contact, the hospital reflected the close connection between medicine and morality during this period.
During the late nineteenth century, a variety of changes occurred in our understanding of illness which transformed the hospital from hospice relegated to custodial care to a facility where individuals, including those with the ability to pay, went for care and cure. The discovery of the germ theory of disease, the development of laboratory science, and the promise of safe, aseptic surgery helped transform the hospital into an institution where medical science and rational treatment superseded earlier moral
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 17 Mark Gottlieb, The Lives of University Hospitals of Cleveland: The 125-Year Evolution of an Academic Medical Center (Cleveland: Wilson Street Press, 1991), 55. 18 Encyclopedia of Cleveland History. Hospitals and Health Planning, November 6, 1999, http://ech.case.edu/ech-cgi/article.pl?id=HHP. 19 Charles E. Rosenberg. The Care of Strangers : The Rise of America's Hospital System. (New York: Johns Hopkins University Press, 1995), 22. 20 Ibid, 35. )$" constructs of disease.21 As medical experts increasingly discounted a moral understanding of illness, they predicted the future evolution of medical practice by saying, “the germ theory would be built into a changing structure of technical qualification, laboratory findings, and professional status”.22 Physicians, as well as hospital administrators, began to subscribe to the “promise of healing” that this new conception of medicine would bring. Though the perception of hospitals changed, the various facilities remained community-oriented institutions that primarily served the health needs of the poor.
With this goal in mind, the Cleveland City Hospital Society made a down- payment of $1,000 toward the total purchase price of a two-story frame house on the lakefront.23 Located on 83 Wilson Street, the former residence would serve as the first home of the city’s newest hospital. The total cost of the Wilson Street house was $9,000, far less than the amount needed to erect a new building. Refurbishing the house and equipping it as a hospital required further expenditures, so to minimize actual cash outlays the newly appointed Wilson Street Hospital Association, combined its continuing efforts to raise an endowment with requests for donations of furniture, bedding, kitchen utensils, and foodstuffs.24 A “Board of Managers,” composed almost entirely of the women members of the Wilson Street Hospital Association, was created to pursue such donations, as well as to oversee maintenance of the building and grounds.25
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 21 Ibid, 141. 22 Ibid 141. 23 Leathers, Shirlee J., The First 100 Years: A Centennial History of University Hospitals of Cleveland, University Hospitals of Cleveland, 1965. 24 Ibid. 25 Mark Gottlieb, The Lives of University Hospitals of Cleveland: The 125-Year Evolution of an Academic Medical Center (Cleveland: Wilson Street Press, 1991), 30. )%"
On July 23, 1868, Wilson Street Hospital opened. The hospital admitted more than a hundred patients in its first year of operation. The house accommodated twenty cases at a time, with multiple-bed “wards” in the larger rooms and single-bed private quarters for paying patients.26 Within a year the hospital was closed when conflict between the homeopathic and allopathic physicians could not be resolved.27 Only the efforts of hospital president Hinman Hurlbut prevented the facility from closing permanently. He used his personal fortune to purchase the property and equipment, which he donated entirely to the Wilson Street Hospital Association.28 While admissions rose, an unintended consequence of the departure of the homeopathic physicians was the loss of paying patients. This would not be the last time that there would be a conflict between charitable obligations and the need for paying patients.
Table 1 Annual Patient Admission Data from Wilson Street Hospital (1872-1874)
1872 1873 1874 Total Number of Patients 100 173 163 Number of Charity Patients 52 119 110 Number of Paying Patients 48 54 53 % Charity Care 52 69 67
Table 1 shows annual admission data from the Wilson Street Hospital from 1872 to 1874. It records the total number of patients admitted each year and the number of
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 26 Brown, Kent L., ed., Medicine in Cleveland and Cuyahoga County: 1810 – 1976, Academy of Medicine of Cleveland, 1977. 27 Mark Gottlieb, The Lives of University Hospitals of Cleveland: The 125-Year Evolution of an Academic Medical Center (Cleveland: Wilson Street Press, 1991), 32. The purpose of homeopathy is the restoration of the body to homeostasis, or healthy balance, which is considered its natural state. The symptoms of a disease are regarded as the body's own defensive attempt to correct its imbalance, rather than as enemies to be defeated. Because a homeopath regards symptoms as positive evidence of the body's inner intelligence, he or she will prescribe a remedy designed to stimulate this internal curative process rather than suppress the symptoms. The term allopathy was meant to contrast the homeopathic approach with those conventional medical treatments that are different from or which directly counter a patient's symptoms; hence the terms allopathic and antipathic. This applies to a more biomedical approach to medical practice. 28 Ibid, 34. )&" patients who were identified as charity patients or paying patients. The fraction of patients who were given charitable care ranged from 52% to 69%, with an average over the three year period of 64%. The spike in charitable care in 1873 is likely secondary to the economic crisis. The Panic of 1873 began with the failure of a large Philadelphia banking firm and quickly spread to Wall Street. It is estimated that 18,000 businesses closed between 1873 and 1875 and unemployment peaked at fourteen percent in 1876.29
Therefore, the increase in charitable care beginning in 1873 is likely a reflection of the prevailing economic conditions. Unfortunately, the annual reports from this period do not state how charity care was defined. Thus, there is no way to determine if the number of patients receiving charitable care included partial-paying patients, or if these patients were classified as paying patients. This distinction is important, although it is clear from the data that the hospital devoted much of its resources and personnel to providing care for the indigent.
Table 2 Revenue Sources and Expenditures for Wilson Street Hospital (1872-1874)
1872 1873 1874 Income derived from donations $2,851.00 $2,991.00 $4,994.00 Income derived from Paying Patients* $841.00 NA $941.00 Annual Expenditures NA $6,774.00 $6,554.00 % Charity Care ** NA 44 76 *This includes both funding from the Federal Government for the care of sailors as well as paying patients. **Defined as the income derived from donations divided by the annual expenditures.
The extent and nature of charitable care can also be measured through an analysis of revenue and expenses. Table 2 identifies the revenue sources and disbursements from
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 29 Mayer, Harold M. and Richard C. Wade. Chicago: Growth of a Metropolis. Chicago: University of Chicago Press, 1969, pp. 124. )'"
1872 to 1874. The first row indicates the income derived from donations, which includes donations made on behalf of specific beds for individuals and/or their families as well as general charitable contributions. The inclusion of donations made to specific beds was important for the ability of the hospital to function in its role as a charitable community institution, because the money received from individuals who were not admitted to the hospital that year was used directly to finance charity care.30 Other donations made by individuals or organizations permitted the hospital to operate on a daily basis. The next row identifies the main source of revenue for the hospital that did not come from charitable donations: the amount paid by patients. The third row records annual expenditures, which typically includes nursing and staff salaries, medical and surgical supply costs, food and linen, and other incidental costs associated with patient care.31 The last line indicates the percent charity care provided by the hospital in that year, which was calculated using the portion of money from donations that covered the annual expenditures of the hospital. This ranged from 44% to 76%, with an average of 60%. This is consistent with the estimation of charitable care identified in Table 1. The large amount of charity care provided during this period is consistent with the mission of the hospital, as echoed by the superintendent of Lakeside Hospital, who stated that, “The leading inspiration of our institution from the start has been the care of the sick and destitute poor, and we hold this before us as the chief objective of our labor.”32
By 1876, the patient care needs exceeded the capacity of the Wilson Street
Hospital and the equipment and resources were moved to the Marine Hospital Facility at
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 30 Annual Reports. 31 Ibid. 32 Ibid. )("
East Ninth and Lakeside Avenue.33 It was renamed Cleveland City Hospital. The twenty year lease with the federal government required the hospital to care for American sailors and merchant seamen, as long as they did not have an infectious disease. The contracted rate for care was sixty-four cents a day.34 This may well represent the first record of federal subsidization of healthcare in Cleveland. The former Marine Hospital required significant renovation, but ultimately increased bed capacity to seventy. It opened for care on December 8, 1875.
Table 3 Annual Patient Admission Data from Cleveland City Hospital (1876-1888)
1876 1877 1880 1881 1882 1883 1886 1887 1888 Total Number of 240 370 438 594 593 535 583 778 783 Patients Number of Charity 152 152 201 227 193 138 149 172 140 Patients Number of Paying 31 38 81 182 199 238 233 335 345 Patients Number of Sailors 57 180 156 185 201 159 201 271 298 % Charity Care 63 41 45 38 32 26 26 22 18 *There was no data for the number of patients treated during the years 1884 and 1885.
Table 3 shows annual admission data from the Cleveland City Hospital from 1876 to 1888. It classifies patients into three categories: (1) charity patients (2) paying patients and (3) sailors. The latter represents a new category, patients who have their care paid for by a third party, in this circumstance, the United States government. The fraction of patients who were given charitable care ranged from 18% to 63%, with an average over the nine year period of 35%. However, the fraction of patients who receive charitable care drops significantly over this time period. The sailors represent an important
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 33 Ibid. 34 Cleveland Live, Inc, University Circle, January 1, 1998, www.cleveland.com/universitycircle/index.ssf?/community/more/history/uhhs.html. +*" component of hospital care during this period. The absolute number increased to 298 in
1888 from 57 in 1876. The government started providing funding but the Cleveland City
Hospital claimed that the contracted rate was insufficient to cover the expenses for each sailor that was admitted for care. By 1876, the hospital calculated that its average cost per patient was $1.20 per day, which was about half of its contracted rate with the United
States government.35 However, the care rendered to sailors provided the hospital with a steady revenue source that indigent charity care did not offer. The hospital attempted to offset the contractual obligation by admitting a greater number of paying patients. Note that the rise in the number of paying patients from 31 in 1876 to 345 in 1888, a greater than ten-fold increase in less than a decade. In his statement in the annual report of 1886, the president of the hospital stated, “The conclusion is forced upon us that the more pay patients we have the poorer we become, and that while we are an institution for charity, we are taking from our charitable funds to support other patients.”36 The result was a steady decline in the amount of charity care provided by the hospital.
The hospital began recording the total number of days of patient treatment beginning with the annual report of 1881. This is a useful adjunct because it represents yet another way to quantify the amount of charity care provided by hospitals. For example, it is possible that charitable care patients require longer hospitalization than paying patients, which annual patient admission data would underestimate. Table 4 displays this data for Cleveland City Hospital from 1881 to 1887, exclusive of 1884 and
1885, for which no information was released in the annual report.
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 35 Mark Gottlieb, The Lives of University Hospitals of Cleveland: The 125-Year Evolution of an Academic Medical Center (Cleveland: Wilson Street Press, 1991), 43. 36 Annual Reports of Lakeside Hosptial. +)"
Table 4 Number of Days of Treatment Data for Cleveland City Hospital (1881-1887)
1881 1882 1883 1886 1887 1888 Total Days of Treatment 15,322 14,812 15,073 14,979 18,255 18,746 Days of Charity Patients 6,467 6,304 5,541 5,207 5,227 4,354 Days of Paying Patients 3,698 3,998 5,240 5,528 7,959 8,469 Days of Sailors 5,157 4,510 4,292 4,244 5,069 5,923 % Charity Care 42 43 37 35 29 23 *There was no data for number of days of treatment for the years 1884 and 1885.
The fraction of days of treatment dedicated to charitable care ranged from 23% to
42%, with an average during this time period of 35%. It is noteworthy that this is the same average that was calculated using annual patient admission data. There is also a similar decline in the delivery of charity care from 1881 to 1888, as was noted in the annual patient admission data from table 3.
Another useful method for assessing the level of charity care is to examine the amount of income derived from donations as a function of total expenditures. This is displayed in tables 5a and 5b.
Table 5a Revenue Sources and Expenditures for Cleveland City Hospital (1881-1883)
1881 1882 1883 Income Derived From Donations $4,144.00 $5,074.00 $5,877.00 Paying Patients $4,933.00 $6,171.00 $7,372.00 U.S. Government Payment $3,300.00 $2,887.00 $2,747.00 City of Cleveland - - - Expenditures $14,669.00 $15,354.00 $17,154.00 % Charity Care 28 33 34 ++"
Table 5b Revenue Sources and Expenditures for Cleveland City Hospital (1884-1888)
1884 1886 1887 1888 Income Derived From Donations $7,254.00 $7,164.00 $11,408.00 $6,426.00 Paying Patients $6,957.00 $6,865.00 $8,446.00 $8,937.00 U.S. Government Payment $2,740.00 $2,717.00 $3,258.00 $3,446.00 City of Cleveland $1,002.00 $546.00 $2,165.00 $1,445.00 Expenditures $16,874.00 $19,548.00 $29,903.00 $21,117.00 % Charity Care 43 37 38 30
The percent of charity care during this period, exclusive of 1885 when no annual report was issued, ranged from 28% to 43%. The average was 35%, supporting the findings of the annual patient admissions and number of days of treatment analyses.
Unlike the data from table 3 and 4, however, the amount of charity care remained constant. However, the income derived from charitable donations rises steadily from
1881 to 1888, otherwise the percent of charity care would comprise eighteen to nineteen percent of care.
When the City of Cleveland decided to build its own hospital (City Hospital) in
1888, the name of Cleveland City Hospital was changed to Lakeside Hospital to avoid confusion. A voluntary Board of Managers oversaw its daily operations and management in conjunction with a full-time matron and staff. In 1899, Samuel Mather began a long tenure (1899-1931) as president and chairman of the Board of Trustees at Lakeside
Hospital.
+!"
Table 6 Annual Patient Admission Data from Lakeside Hospital (1889-1899)
1889 1890 1891 1892 1893 1894 1895 Total Number of Patients 883 1035 900 934 807 860 823 Number of Charity Patients 173 228 177 210 190 290 227 Number of Paying Patients 386 395 365 333 306 254 256 Number of Sailors 324 412 358 391 311 316 340 % Charity Care 20 22 20 22 24 34 28
Table 6 shows annual admission data from the Cleveland City Hospital from 1889 to 1895. It continues the classification system that began in 1876. The fraction of patients who were given charitable care ranged from 18% to 34%, with an average over the nine year period of 23%. The continuing decline in charity care is interrupted by a sudden increase in 1894 and 1895. The number of days of treatment illustrates the percent of charity care during this period. It also reflects the increase in charitable care beginning in
1893. As occurred in 1873, this increase is likely the result of the Panic of 1893, fifteen thousand companies went bankrupt and unemployment reached twenty-five percent.37
The unemployment rate among Ohio industrial workers reached fifty percent and remained elevated until the economic recovery in 1897.38
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 37 Hoffman, Charles. The Depression of the Nineties: An Economic History. Westport, CT: Greenwood Publishing, 1970, pp. 109. 38 Ibid. +#"
Table 7 Number of Days of Treatment Data for Lakeside Hospital (1888-1895)
1889 1890 1891 1892 1893 1894 1895 Total Days of Treatment 22,942 27,549 27,905 28,125 24,761 23,675 21,243 Charity Patients 6,105 7,164 8,349 8,146 8,061 8,562 7,556 Pay Patients 9,618 3,539 2,507 2,003 2,682 2,677 2,278 Room Patients NA NA 1,927 2,754 2,211 1,926 2,115 Railroad Patients NA NA 1,489 3,124 2,034 603 416 City of Cleveland Patients NA NA 557 314 185 48 24 % Charity Care 27 26 30 29 33 36 36
In addition, this table shows a steady decline in the number of City of Cleveland patients who were cared for from 1889 to 1895. This correlates directly with the opening of the new City Hospital of Cleveland in 1888. This may help to explain why there is a moderate increase in charitable care from 1891 to 1892.
Table 8a Revenue Sources and Expenditures for Cleveland City Hospital (1889-1891)
1889 1890 1891 Income Derived From Donations $7,567.00 $5,868.00 $6,650.00 Paying Patients $10,163.00 $10,049.00 $9,099.00 U.S. Government Payment $4,437.00 $7,107.00 $8,388.00 City of Cleveland $2,907.00 $1,560.00 $1,401.00 Expenditures $23,538.00 $30,706.00 $31,056.00 % Charity Care 32 19 21
Table 8b Revenue Sources and Expenditures for Cleveland City Hospital (1892-1895)
1892 1893 1894 1895 Income Derived From Donations $8,474.00* $9,832.00* $9,668.00* $7,361.00* Paying Patients $10,636.00 $10,886.00 $8,096.00 $7,734.00 U.S. Government Payment $7,414.00 $5,853.00 $6,423.00 $5,594.00 City of Cleveland $387.00 - - - Expenditures $30,068.00 $29,135.00 $29,103.00 $25,212.00 % Charity Care 28 (17) 34 (22) 33 (21) 29 (16) *Interest on W.P. Southworth, Mrs. James F. Clark, and John Huntington Gifts +$"
Tables 8a and 8b reflect the amount of charity care provided by Lakeside Hospital as a function of total expenditures. For the years 1892 to 1895, the income derived from donations includes interest on W.P. Southworth, Mrs. James F. Clark, and John
Huntington gifts. The annual report does not specify that the interest from these gifts was earmarked for charity care, however, it is included in the calculation of percent of charity care. The number in parentheses reflects the amount of charity care if the interest is removed. This is comparable to the amount of charity care delivered in 1890 and 1891. If one accepts the former, the percent charity care ranges from 19% to 32%, averaging 28%.
If the latter is accepted, the range is 16% to 32%, averaging 21%. This data supports the contention that there was an ongoing decline in hospital support of charitable care.
Following the recession that began in 1893, there was a significant decline in income and donations, which required postponement of the construction of a new facility.39
The trustees were compelled to erect a new building upon expiration of the lease in 1896. The overall layout of the hospital was dictated by the new appreciation of the role that germs played in disease, with isolation and ventilation the most important features of the new hospital plan. Central administrative, kitchen, and laundry services were housed in separate buildings connected to wards, surgical buildings, and dispensary and nurses' quarters by long corridors.40 However, the application of modern scientific principles was not the only significant change that the proposed hospital would embrace.
Of all the changes, improvements, and modernizations embodied in the new Lakeside, by far the most radical departure from the standard set by the Wilson Street and Marine Hospital buildings was the provision for an entire pavilion designed solely for the use of paying patients. """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 39 Report of the President of Lakeside Hospital, 1891. 40 Encyclopedia of Cleveland History. Hospitals and Health Planning, November 6, 1999, http://ech.case.edu/ech-cgi/article.pl?id=HHP. +%"
With fifty-two private rooms – no long, dormitory-style open floors as on the common wards – the private pavilion would be the exclusive preserve of those patients who could not only afford to pay for their care but who could afford a daily rate far greater than that to be charged the paying ward patients – from two to seven times as great, depending on the room’s location.41
This is a tangible acknowledgement by the Lakeside Hospital leadership that paying patients would assume a focal role in the newly constructed hospital.
At the turn of the century, Lakeside Hospital began classifying its patients differently than in years past. The annual reports from 1900 to 1901 classify patients into three categories: (1) patients treated in private wards, which are all paying patients (2) patients treated in the open ward who paid for treatment and (3) patients treated in the open ward who received free care. The annual report of 1900 states that of the total number of patients treated was 2,154, of which 1,043 were classified as receiving free treatment in open wards, or 48%. The annual report of 1901 indicates that the total number of patients treated was 2,475, including 1,227 open ward patients receiving free treatment, or 49%. Table 9 examines the total days of treatment and categorizes patients in similar fashion to the total number of patient data. The percent of charitable patient care ranges from 43% to 57%, with an average of 49%.
Table 9 Number of Days of Treatment Data for Lakeside Hospital (1898-1901)
1898 1899 1900 1901 Total Days of Treatment 27,079 37,047 49,372 53,188 Days of Treatment in Private Wards 3,555 6,046 11,966 12,055 Days of Treatment in Open Wards (Pay) 8,035 12,092 14,626 18,367 Days of Treatment in Open Wards (Free) 15,489 18,909 22,780 22,766 % Charity Care 57 51 46 43
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 41 Mark Gottlieb, The Lives of University Hospitals of Cleveland: The 125-Year Evolution of an Academic Medical Center (Cleveland: Wilson Street Press, 1991), 72. +&"
It is not clear from this analysis whether the increase in charitable care is an artifact of this new reporting structure, or, indeed a reflection of a renewed commitment to charity care. It is instructive to examine the financial data from 1898 to 1913, particularly because, after 1901, the annual reports discontinued reporting the number of patients admitted each year. These statistics would not be reported again until 1914.
The format for financial reporting that begins in 1898 changes as well. The annual reports continue to report charitable donations, but also include two other charity income sources: special donations and the guaranty fund. The former was intended to liquidate the substantial operating deficit that had accumulated since the hospital opened its doors.
The guaranty fund was comprised of individual pledges that were intended to provide annual income until sufficient returns from the endowment fund could meet annual expenditures.42 There is a line item for earnings from the endowment fund, but the report does not explain how this revenue was distributed.
The Forty-Fourth Annual report of The Lakeside Hospital in 1910 provides a snapshot illustration of the finances that were typical for a hospital in this era. The
Receipt and Disbursement ledger indicates that philanthropic support exceeded patient revenue.43 The total income from sources other than patient revenue was $134, 284, which included $37,500 from special donations from individuals to liquidate old indebtedness, $16,000 from special donations for current expenses, and $80,784 from income generated by the endowment fund. The endowment fund had a total value of
$1,390,727, which had increased from 1909 by $39,395.44 Therefore, sixty-seven percent
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 42 Report of the Treasurer, 1898. 43 The Forty-Fourth Annual Report of the Trustees of Lakeside Hospital, Cleveland, 1910. 44 Ibid, 35. +'" of non-patient revenue would be derived from dividend and interest earned, if all of the income from the endowment were allocated to direct charitable patient care.
The ledger reported that total hospital receipts were $97,073, of which $90,048 came from ward patients, while the remainder came from non-patient sources. Another way to grasp the extent of charitable care is to calculate the gap between total expenses and patient revenue. The Comparative Statement of Disbursements indicates that total expenditures in 1910 were $198,446. The shortfall of $101,375, or fifty-one percent of the total must come from donations, endowed funds, or bank loans. Thus, it is evident, by several measures, that the majority of health care delivered by Lakeside Hospital was charitable.
The annual report does not distinguish income derived from private versus ward patients. However, the report states that “The combined total of days of free [emphasis added] treatment in the wards of the hospital and dispensary this year was 74,678 days”.45
At the time of publication, the hospital had 63 private rooms and an open ward of 207 beds, that is 75% of its capacity was dedicated to indigent care.46
Table 10 and 11 are a compilation of the financial sources of revenue, expenditures, and the growth of the endowment fund. Since the allocation of donations, guaranty funds, and endowment earnings to charitable care is not identified in the annual report, the percent of charity care is calculated using paying patient data. The income from all sources exceeds the total expenditures, so clearly some portion of the revenue is being used to reduce debt, rather than for patient care. The rationale for using the gap
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 45 Ibid. 46 Ibid. +(" between paying patient data and annual expenditures is that it represents that maximum amount of financial resources that could be directed to charitable care.
The percent of funds dedicated to charitable care decreases despite an increase in endowment earnings, which presumably, was intended to provide for the care of indigent patients at Lakeside Hospital. Of course, it is possible that the absolute number of charitable patients increased during this time, but this data is not recorded in the annual reports. It may be possible to acquire such data using hospital admission reports. This assumes that the admission record records the demographic data that distinguishes between paying patients and charitable care patients. This is necessary because some ward patients may still be paying patients, thus one cannot assume the status on the basis of where the patient is admitted. For example, the 1906 annual report states that free treatment in open wards accounted for 28,403 patient days, which comprised 57% of all open ward patients admitted. Therefore, 43% of the ward patients were paying patients.
The report states that there was a total of 64,413 days of treatment. Thus, a 44% of the days of treatment recorded in 1906 were for charity care. Table 11 calculated that 53% of funds were designated for charity care, suggesting that using the patient revenue to annual expenditure ratio is an imperfect approximation of charity care at Lakeside
Hospital.
!*"
Table 10a Revenue Sources and Expenditures for Cleveland City Hospital (1898-1900)
1898 1899 1900 Income Derived from Donations $6,650.00 $11,426.00 $31,472.00 Income Derived from Special Donations - - - Income Derived from Guaranty Funds $29,900.00 $34,900.00 $35,450.00 Endowment $93,039.00 $178,550.00 $354,950.00 Income Derived from Endowment Earnings - $8,563.00 $15,473.00 Income Derived from Paying Patients $17,240.00 $29,482.00 $43,913.00 Annual Expenditures $68,304.00 $108,791.00 $119,466.00 Percent Funds to Charity Care* 75 73 63 *100(1 – Income Derived From Paying Patients / Annual Expenditures)
Table 10b Revenue Sources and Expenditures for Cleveland City Hospital (1901-1905)
1901 1902 1904 1905 Income Derived from $8,240.00 $7,231.00 $24,322.00 $14,154.00 Donations Income Derived from Special $42,683.00 - $15,560.00 $5,000.00 Donations Income Derived from $37,050.00 $38,025.00 $29,975.00 $27,850.00 Guaranty Funds Endowment $386,901.00 $632,607.00 $630,602.00 $632,022.00 Income Derived from $20,869.00 $30,473.00 $35,599.00 $38,199.00 Endowment Earnings Income Derived from Paying $49,587.00 $63,275.00 $58,365.00 $67,852.00 Patients Annual Expenditures $128,235.00 $136,994.00 $138,390.00 $139,292.00 Percent Funds to Charity 61 54 59 51 Care* *100(1 – Income Derived From Paying Patients / Annual Expenditures)
!)"
Table 11a Revenue Sources and Expenditures for Cleveland City Hospital (1906-1908)
1906 1907 1908 Income Derived from Donations $9,308.00 $6,902.00 $16,338.00 Income Derived from Special Donations - - - Income Derived from Guaranty Funds $21,575.00 $18,975.00 $14,300.00 Endowment $905,806.00 $952,891.00 $953,928.00 Income Derived from Endowment Earnings $48,944.00 $58,311.00 $54,438.00 Income Derived from Paying Patients $67,748.00 $76,124.00 $81,794.00 Annual Expenditures $144,524.00 $152,799.00 $173,196.00 Percent Funds to Charity Care* 53 50 53 *100(1 – Income Derived From Paying Patients / Annual Expenditures)
Table 11b Revenue Sources and Expenditures for Cleveland City Hospital (1909-1913)
1909 1910 1912 1913 Income Derived from $10,237.00 $11,220.00 $21,021.00 $31,275.00 Donations Income Derived from - $16,000.00 - - Special Donations Income Derived from $9,300.00 - - - Guaranty Funds Endowment $1,351,332.00 $1,390,727.00 $1,571,733.00 $1,600,142.00 Income Derived from $68,080.00 $80,784.00 $84,074.00 $86,883.00 Endowment Earnings Income Derived from $91,204.00 $97,073.00 $117,132.00 $137,797.00 Paying Patients Annual Expenditures $182,949.00 $198,448.00 $221,227.00 $247,716.00 Percent Funds to 50 51 47 44 Charity Care* *100(1 – Income Derived From Paying Patients / Annual Expenditures)
Despite the drawback of using the paying patient to annual expenditure as a measure of charity care, it does indicate a decline in resources dedicated to health care for the poor. Although it may be argued that increasing patient revenue would create the appearance of a decline in charitable care where none existed. However, Lakeside leadership argued that increasing the number of paying patients would allow more charitable care to be rendered. If this was the case, then the annual expenditures should !+" rise at a faster pace, reflecting the increased costs associated with charity care. These tables show clearly, that this was not the case. The annual reports stop disclosing guaranty fund income in 1910. As described above, guaranty funds were solicited from donors to bridge the gap between revenue and expenditures each year. These donations may have stopped or may have been included in endowment contributions. Access to hospital reports would indicate that disposition of the guaranty funds, but this information was not available to the author.
Beginning in 1914, the annual reports explicitly states the classification of its patients. The House Physician’s Report for 1914 states: “patients are classified as ‘pay’ if they paid a rate equal or above the actual cost of their care, ‘part pay’ if they paid a rate less than the cost of their care, and ‘free’ if they paid nothing at all.” In addition, in 1915, the hospital also reorganized the way in which it counted patients from its affiliated institutions, such as the Benjamin Rose Institute, which initially provided care to children. The annual report for 1915 states,
“This year for the first time, the children of the Benjamin Rose Institute were classified in our records differently. Each child accepted by the Institute is now classified as a pay case; each has an individual ledger sheet, and all services are charged as would be done for any pay patient; and these bills are presented for payment monthly. The amounts charged for each service is cost; the children are therefore properly pay patients. Formerly these children were carried free, as a sum of money for this care annually paid the Treasurer of the Hospital by the Institute. This change affects the number of “free and “pay” patients admitted and the number of days of treatment.”47
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 47 House Physician’s Report, 1915. !!"
Table 12a Annual Patient Admission Data from Lakeside Hospital (1914-1918)
1914 1915 1916 1917 1918 Total Number of Patients 5,049 5,386 5,765 5,376 5,585 Pay Patients (Private) 1,023 1,166 1,263 1,118 1,121 Part-Pay Patients 1,968 2,252 2,844 2,814 2,826 Charity Patients 2,058 1,968 1,658 1,444 1,638 % Charity Care 41 37 29 27 29
Table 12b Annual Patient Admission Data from Lakeside Hospital (1919-1924)
1919 1920 1921 1922 1923 1924 Total Number of Patients 6,624 7,334 7,371 6,205 6,796 7,152 Pay Patients (Private) 1,362 1,680 1,570 1,456 1,445 1,245 Part-Pay Patients 3,350 4,086 3,561 3,146 3,865 4,322 Charity Patients 1,912 1,568 2,240 1,603 1,486 1,585 % Charity Care 29 21 30 26 22 22
The fraction of patients who were given charitable care ranged from 26% to 41%, with an average over the nine year period of 30%. There was a significant decline during this period with a slight increase in 1918, most likely attributed to the worldwide influenza epidemic. Although the number of private paying patients remains relatively constant, there is a significant increase in the number of part-pay patients beginning in 1920. This is accompanied by an overall decline in the number of charity patients from 1921 to
1924.
!#"
Table 13a Number of Days of Treatment Data for Lakeside Hospital (1914-1918)
1914 1915 1916 1917 1918 Total Days of Treatment 86,708 90,850 95,632 83,216 87,293 Pay patient days treatment 15,489 22,244 18,859 13,475 12,177 Part-pay patient days treatment 30,876 28,515 43,161 43,623 43,946 Free treatment days 40,343 40,091 33,612 26,118 31,170 % Charity Care 47 44 35 31 36
Table 13b Number of Days of Treatment Data for Lakeside Hospital (1919-1924)
1919 1920 1921 1922 1923 1924 Total Days of Treatment 95,721 97,772 101,346 90,241 89,284 81,189 Pay patient days treatment 19,878 18,847 18,386 15,308 15,544 12,274 Part-pay patient days treatment 43,049 52,298 45,809 40,106 47,853 43,005 Free treatment days 32,794 26,627 37,151 34,827 25,887 25,910 % Charity Care 34 27 37 39 29 32
This corroborates the findings in table 13, with a consistent decline in charity care provided by the hospital, with the exception of the increase in 1918. This can be attributed to the greater quantity of partial pay patient days of treatment.
!$"
Table 14a Revenue Sources and Expenditures for Cleveland City Hospital (1914-1917)
1914 1915 1916 1917 Income Derived from $27,185.00 $7,707.00 $4,128.00 $2,175.00 Donations Income Derived from $28,500.00 - $3,481.00 $30,083.00 Special Donations Income Derived from - - - - Guaranty Funds Endowment $1,614,394.00 $1,690,819.00 $1,755,383.00 $2,204,428.00 Income Derived from $84,760.00 $72,705.00 $96,194.00 $103,672.00 Endowment Earnings Income Derived from $143,393.00 $161,717.00 $200,871.00 $169,007.00 Paying Patients Welfare Federation of - - - - Cleveland Annual Expenditures $252,679.00 $248,460.00 $304,426.00 $315,043.00 Percent Funds to 44 35 34 54 Charity Care* *100(1 – Income Derived From Paying Patients / Annual Expenditures)
Table 14b Revenue Sources and Expenditures for Cleveland City Hospital (1918-1922)
1918 1920 1921 1922 Income Derived from $2,000.00 - - - Donations Income Derived from $57,000.00 $62,763.00 $73,933.00 $44,382.00 Special Donations Income Derived from $79,427.00 - - - Guaranty Funds Endowment $3,278,502.00 $3,785,290.00 $3,921,727.00 - Income Derived from $103,385.00 $101,893.00 $103,512.00 $121,589.00 Endowment Earnings Income Derived from $164,484.00 $405,558.00 $428,504.00 $408,664.00 Paying Patients Welfare Federation of - $127,536.00 $116,373.00 $125,445.00 Cleveland Annual Expenditures $394,277.00 $706,335.00 $709,134.00 $745,493.00 Percent Funds to Charity 58 43 40 45 Care* *100(1 – Income Derived From Paying Patients / Annual Expenditures)
!%"
These tables are important because they trend similarly to tables 12a, 12b and 13, i.e. there is a decline in charity care from 1914 until the 1918 pandemic. This is followed by a significant decline in 1920 through 1922. This suggests that the approach is a valid substitute for the time period of 1895 to 1914 that was analyzed previously, when no patient care data regarding the number of charitable care patients or charitable care days was published.
The second noteworthy aspect is the appearance of income from the Welfare
Federation of Cleveland. The Cleveland Community Fund, the historical predecessor of the modern United Way, oversaw the collection of funds, raised to assist in the operation of local charitable organizations, including Lakeside Hospital. The Welfare Federation was responsible for distribution of these funds.48 As it became a significant source of hospital revenue, it began to exert more control over the hospital. For example, following a survey of hospital operating costs, Lakeside Hospital was castigated for its “excessively high charges.”49 This is the first evidence of third party payers exerting pressure on the hospital to reduce its cost structure.
Table 15 Annual Patient Admission Data from Lakeside Hospital (1925-1930)
1925 1926 1927 1928 1929 1930 Total Number of Patients 6,644 6,809 6,879 6,815 7,071 6,934 Pay Patients (Private) 1,210 1,269 1,330 1,268 1,517 1,393 Part-Pay Patients 3,642 3,306 2,755 2,490 2,474 2,052 Charity Patients 1,792 2,234 2,794 3,057 3,080 3,489 % Charity Care 27 33 41 45 44 50
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 48 Encyclopedia of Cleveland History. United Way Services. July 23, 1997. http://ech.case.edu/ech- cgi/article.pl?id=UWS 49 Mark Gottlieb, The Lives of University Hospitals of Cleveland: The 125-Year Evolution of an Academic Medical Center (Cleveland: Wilson Street Press, 1991), 178. !&"
Table 15 shows annual admission data from the Lakeside Hospital from 1925 to
1930. It continues the classification from the 1914 to 1922 Annual reports. The fraction of patients who were given charitable care ranged from 22% to 50%, with an average over the eight year period of 36%. This trend is confirmed by the number of days of free treatment recorded in table 16. Unfortunately, the hospital dispensed with the publication of annual reports after 1930 as a result of the Great Depression.
Table 16 Number of Days of Treatment Data for Lakeside Hospital (1925-1930)
1925 1926 1927 1928 1929 1930 Total Days of Treatment 80,269 74,236 76,072 77,616 82,174 82,084 Pay patient days treatment 10,354 11,959 11,489 11,587 12,299 12,158 Part-pay patient days treatment 39,819 33,894 31,535 28,596 25,009 20,535 Free treatment days 30,096 28,343 33,048 37,433 44,936 49,391 % Charity Care 37 38 43 48 55 60
The region's first multi-hospital system, University Hospitals of Cleveland was formally established in 1925 under the leadership of Dr. Robert H. Bishop, of Western
Reserve Medical School, which incorporated Lakeside Hospital, Maternity Hospital, and
Babies and Children’s Hospital.50 Maternity Hospital was incorporated in 1891 and served patients in a house on 58 Huron Street. It moved location on several occasions, finally settling at 3735 Cedar Avenue in 1912. Its mission and financial resources were quite similar to Lakeside Hospital
Like Lakeside, Maternity Hospital depended on private donations, subscriptions, and philanthropy. It accepted both indigent and pay patients although, in practice, there were few paying patients as most women who could afford to do so
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 50 Encyclopedia of Cleveland History. Hospitals and Health Planning, November 6, 1999, http://ech.case.edu/ech-cgi/article.pl?id=HHP. !'"
preferred to deliver their babies at home.51
Babies and Children’s Hospital began at the Infants’ Clinic in 1906 and incorporate in
1907 as the Babies’ Dispensary and Hospital. The Babies’ Dispensary became the first such institution in the country to provide medical advice to parents as well as children.52
Visiting nurses fanned out into the slum neighborhoods of Cleveland, instructing immigrant mothers on the proper ways to feed and handle their babies. This type of preventative medicine allowed physicians and other medical professionals to expand their influence throughout the city of Cleveland. In 1910, an elaborate fund-raising campaign, had exhorted citizens to “Save the Babies” by conjuring up images of grief-stricken mothers and “little empty cradles,” in order to expand the number of beds available within the Babies’ Dispensary and Hospital.53 After another fundraising drive instated in the early 1920s, Babies Dispensary and Hospital (now Babies and Children's Hospital) merged with Maternity Hospital and relocated to University Circle.54 The formal merger of these institutions into University Hospitals of Cleveland in 1925 was accompanied by the building of many facilities in University Circle, including new hospitals and a new
School of Medicine and Institute of Pathology.55 Thus, the modern University Hospital system of Cleveland had been developed.
By the turn of the century, many hospitals in Cleveland attracted a more affluent class of patients. Some hospitals actively courted paying patients by offering comfortable, if not luxurious, accommodations. By the 1920’s, with the rise in the
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 51 Cleveland Live, Inc, University Circle, January 1, 1998, www.cleveland.com/universitycircle/index.ssf?/community/more/history/uhhs.html. 52 Mark Gottlieb, The Lives of University Hospitals of Cleveland: The 125-Year Evolution of an Academic Medical Center (Cleveland: Wilson Street Press, 1991), 170-185. 53 Ibid. 54 Ibid. 55 Ibid. !(" number of private patients seeking healthcare at the hospital, the popular view held that medical care was becoming a commodity to be purchased.56 While no Cleveland hospitals abandoned their original charitable obligations, the poor increasingly patronized out-patient dispensaries operated by the medical departments of Western Reserve
University. Maternity Hospital had established a system of charity clinics by 1907 and obstetric services offered home delivery to charity patients under the control of Lakeside
Hospital and the School of Medicine.57 By 1911, Babies and Children’s Hospital had established branch clinics for well-child care.58
The harsh economic conditions of the Great Depression compelled the hospital to reconsider its charitable mission. In 1931, it shuttered entire floors in all hospital components, including the Maternity and Babies and Children’s facilities. Personnel costs were reduced through wage cuts and attrition. Finally, the hospital administration sought to minimize its exposure to uncompensated care.
Free care would be provided only to those individuals living on relief payments from the Community Fund, to emergency patients, or to cases of “great scientific or teaching interest”…For the first time a running tally of the actual costs of free services would be maintained. After reaching the annual limit of the funds provided to the hospital for such care by the Community Fund, no further free cases would be accepted…All outpatient charity admissions would be prescreened by “financial interviewers,” who would establish each individuals eligibility for services.59
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 56 Rosemary Stevens. In Sickness and in Wealth : American Hospitals in the Twentieth Century. New York: Johns Hopkins University Press, 1999, 105. 57 Encyclopedia of Cleveland History. Hospitals and Health Planning, November 6, 1999, http://ech.case.edu/ech-cgi/article.pl?id=HHP. 58 Ibid. 59 Mark Gottlieb, The Lives of University Hospitals of Cleveland: The 125-Year Evolution of an Academic Medical Center (Cleveland: Wilson Street Press, 1991), 196. #*"
As hospitalization became an accepted consumer good, hospital services came to be in increasing demand. Voluntary hospitals and physicians needed to devise a plan for providing access to these advances in healthcare via an acceptable means of purchase.
The development of pre-payment plans gave voluntary hospitals a strategic response to the expanding market for health care, by advocating a mixed approach: out-of-pocket payments by relatively wealthy patients, voluntary group hospitalization for middle-class patients, and tax support for the indigent groups of patients.60 This group medical insurance plan became known as Blue Cross.
Under early versions of Blue Cross, first instituted in Dallas, TX, in 1929, individual hospitals developed contracts with subscribing groups to provide hospitalization in return for a set annual fee.61 Benefits were designed to give members access to private care, with reimbursement to hospitals providing a similar operating margin to that of self-pay private patients, thus avoiding the stigma that Blue Cross was simply a charitable organization in a different guise.62
In Cleveland, no single hospital plan took hold. Instead, in 1934 the Cleveland
Hospital Council initiated a city-wide plan, through which cooperating hospitals agreed to provide service on a prepaid basis. Subscribers made monthly payments to create a general medical fund that was used to cover the expenses of any participant who required admission to the member hospitals.63 This union strengthened the finances of the participating institutions. In 1940, more than one-fifth of the income of member """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 60 Rosemary Stevens. In Sickness and in Wealth : American Hospitals in the Twentieth Century. New York: Johns Hopkins University Press, 1999. 61 Encyclopedia of Cleveland History. Hospitals and Health Planning, November 6, 1999, http://ech.case.edu/ech-cgi/article.pl?id=HHP. 62 Rosemary Stevens. In Sickness and in Wealth : American Hospitals in the Twentieth Century. New York: Johns Hopkins University Press, 1999, 271. 63 Mark Gottlieb, The Lives of University Hospitals of Cleveland: The 125-Year Evolution of an Academic Medical Center (Cleveland: Wilson Street Press, 1991), 205. #)" hospitals, including University Hospitals, came from group hospitalization.64 By this arrangement, the Cleveland Hospital Service Association (CHSA) enabled voluntary hospital participants in Cleveland to maintain a steady level of bed occupancy while also preventing competition for patients among member hospitals. However, it displaced charitable care and patients who were uninsured and poor were unable to access high quality health care.
The creation of prepaid health companies, such as Cleveland Hospital Service
Association, made hospitalization available to millions of middle-income consumers and created the new category of "semi-private" patient. Significantly, Stevens views Blue
Cross and subsequent other third party private insurance programs as representing the failure of voluntarism. Blue Cross, according to Stevens, was fundamentally conservative, since it preserved the status quo and did not address the fundamental inequities in the health care system that still left millions of Americans from having proper access to affordable health care.65 She states, “Blue Cross plans were designed to alleviate workers’ budgets at times of sickness and to produce more paying patients, not to provide hospital access to everyone”.66 It also had the unintended consequence of crowding out private and charitable care. Robert Bishop, in his report the hospital trustees, states:
Extensive enrollment growth in the Cleveland Hospital Service Association insurance plan in 1942 had resulted in an increase in hospital earnings from that source of about $150,000 over figures for 1940. The CHSA boasted some 500,000 subscribers, an enormous group that accounted for nearly sixty-five percent of all paid care in the medical
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 64 Rosemary Stevens. In Sickness and in Wealth : American Hospitals in the Twentieth Century. New York: Johns Hopkins University Press, 1999, 182. 65 Ibid. 66 Ibid, 186. #+"
center’s hospital. This increase was accompanied, however, by a drop of some $50,000 in earnings from full-paying, uninsured private patients. And because CHSA reimbursement covered only the actual costs of care provided, the hospital could not recover the approximately $2-a-day profit it normally derived from the full-pay patients, a margin that was used to subsidize the cost of providing unreimbursed care.67
Since all hospital tests and procedures were prepaid, that is there was not personal access costs for utilizing health care resources, Blue Cross stimulated an inexorable increase in the use of tests and technology, thereby feeding and perpetuating a seemingly endless cycle of skyrocketing health care costs. To put this in perspective, we can compare the costs of hospitalization before and after the implementation of Blue Cross insurance plans. In 1934, the Cleveland Hospital Service Association, the predecessor to
Blue Cross of Northeast Ohio, was asked to cover the expenses of seven patients at
University Hospitals. The average daily payment made to the hospitals was $4.50.68 In
1961, there were more than thirteen thousand Blue Cross inpatients at the medical center, at a daily cost of $42.68.69 With the development of insurance programs, hospitals assumed a new social role. Hospitals were now vendors of services, moreover, not to the clients themselves or even to their local governments, but, rather, to organizational abstractions; i.e. other third parties. This distancing of responsibility weakened the idea of charity care in and by hospitals.
The introduction of the insurance pre-payment systems in the 1930’s were all predicated on leaving undisturbed, preexisting relationships among hospitals and between
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 67 Mark Gottlieb, The Lives of University Hospitals of Cleveland: The 125-Year Evolution of an Academic Medical Center (Cleveland: Wilson Street Press, 1991), 215. 68 Mark Gottlieb, The Lives of University Hospitals of Cleveland: The 125-Year Evolution of an Academic Medical Center (Cleveland: Wilson Street Press, 1991), 286. 69 Ibid. #!" hospitals and the larger community. None of these programs imposed planning constraints on hospitals, limitations on cost, and no effective obligation to care for the poor. As such, the hospital, while presenting an image as responsive to the community needs, became part of a larger system of financial profitability. Stevens sums up the new image of the voluntary hospital, stating, “This new climate gave the voluntary hospitals the go-ahead to do what they wished: that is, to continue to expand in services and equipment, to present an ultramodern image, to be seen as emblems of American success, to exclude unprofitable patients and services wherever possible, and to oppose government regulation”.70
There are several events that occur after World War II that warrant further investigation. The Hospital Survey and Construction Act, also known as the Hill-Burton
Act, after Senator Harold Burton of Ohio and Senator Lister Hill of Alabama, was passed in 1946.71 This act was designed to provide federal grants and guaranteed loans to improve the physical plant of the nation’s hospital system.72 The Hill-Burton Act of 1946 provided government grants to non-profit hospitals, with the stipulation that these institutions would provide charity or discounted care to the indigent poor.73 Facilities that received funding were required to provide a “reasonable volume” of free care each year for those residents in the facility’s area who needed care but could not afford to pay.
Hospitals were initially required to provide uncompensated care for 20 years after receiving funding. The reality, however, did not nearly meet the written requirement of the law. For the first 20 years of the act’s existence, there was no regulation in place to
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 70 Rosemary Stevens. In Sickness and in Wealth : American Hospitals in the Twentieth Century. New York: Johns Hopkins University Press, 1999, 315. 71 Paul Starr. The Social Transformation of American Medicine. New York: Basic Books, 1982. 72 Ibid. 73 Missouri Foundation for Health, “Hospital Charity Care in the United States,” Summer 2005, 3. ##" define what constituted a "reasonable volume" or to ensure that hospitals were providing any free care at all.74 This did not improve until the early 1970s, when lawyers representing poor people began suing hospitals for not abiding by the law. Hill-Burton was set to expire in June 1973, but it was extended for one year in the last hour. In 1975, the Act was amended and became Title XVI of the Public Health Service Act.75
However, this effort did little to concretely define what constituted charity care. The number of beds in general medical-surgical and maternity hospitals in Cuyahoga County grew 20% between 1952-1960 (from 5,197 to 6,636) and 30% between 1960-1975 (from
6,636 to 9,666).76 University Hospitals also engaged in the creation of intensive care units, premature nurseries, special respiratory units, and units dealing with postoperative care after open-heart surgery and neurosurgery.77
By 1960, almost two-thirds of all nongovernment expenditures on hospital services were met by Blue Cross plans or by other insurance companies.78 Blue Cross plans faced increasing scrutiny regarding the rising costs of medical care. If their coverage expanded, additional hospital services were made available and thus hospital expenditures went up. Thus Blue Cross was viewed as the cause of rising hospital expenditures. In turn, as hospital rates rose, insurance plans paid out more benefits and sought ever-higher rates from their customers. This resulted in an increased price of a pre-payment plan.79 Thus, the hospital needed to find new ways to fund the rising cost of
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 74 Paul Starr. The Social Transformation of American Medicine. New York: Basic Books, 1982. 75 Ibid. 76 Encyclopedia of Cleveland History. Hospitals and Health Planning, November 6, 1999, http://ech.case.edu/ech-cgi/article.pl?id=HHP. 77 Mark Gottlieb, The Lives of University Hospitals of Cleveland: The 125-Year Evolution of an Academic Medical Center (Cleveland: Wilson Street Press, 1991), 288. 78 Rosemary Stevens. In Sickness and in Wealth : American Hospitals in the Twentieth Century. New York: Johns Hopkins University Press, 1999, 258. 79 Ibid. #$" medical care, which they sought through government programs. Many believed that relief would come in the form of Medicare and Medicaid.
By federal regulation, Medicare would now pay hospitals the “reasonable cost” of providing services on behalf of virtually everyone in the United States sixty-five years of age or older.80 It was originally signed into law on July 30, 1965, by President Lyndon B.
Johnson, as amendments to Social Security legislation.81 Medicaid was also part of this legislation. Medicaid is a program for individuals and families with low incomes and resources. It is jointly funded by the states and federal government, but is managed by the states. Among the groups of peopled served by Medicaid are low-income parents, children, seniors, and people with disabilities.82 Stanley Ferguson, executive director of
University Hospitals during the enactment of the Medicare program, stated, “The
Medicare program will surely benefit the needs of the hospital and the patient. However, no simple or easy solutions will solve all our problems and we must continue to exert every effort which will provide service at the lowest possible cost. University Hospitals must continue to apply all accepted means of controlling costs consistent with community standards of quality”83
The introduction of the Blue Cross pre-payment systems in the 1930’s were all predicated on leaving, undisturbed, preexisting relationships among hospitals and between hospitals and the larger community. None of these programs imposed planning constraints on hospitals, limitations on cost, and no effective obligation to care for the poor. As such, the hospital, while presenting an image as responsive to the community
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 80 Ibid. 81 Ibid. 82 Ibid. 83 Executive Director’s Annual Report of University Hospitals, 1966. Report in Western Reserve Historical Society, Folder 26, Container 1. #%" needs, only became part of a larger system of financial abuse. Stevens sums up the new image of the voluntary hospital, stating, “This new climate gave the voluntary hospitals the go-ahead to do what they wished: that is, to continue to expand in services and equipment, to present an ultramodern image, to be seen as emblems of American success, to exclude unprofitable patients and services wherever possible, and to oppose government regulation”.84
By 1980 Medicare and Medicaid constituted 41% of hospital patient revenues in
Cleveland and 38% in the suburban sections of the county.85 At the same time that hospitals underwent physical expansion, population growth slowed and then declined in
Cleveland and the vicinity. Between 1960-1970, population in Cuyahoga County grew only 4% (from 1,647,895 to 1,721,300), then declined 7% between 1970-1980 (from
1,721,300 to 1,499,167).86 The net result was that the county, and especially the City of
Cleveland, had a surplus of hospital beds, which often fell below the 85% occupancy rate considered optimal for voluntary hospitals. Low occupancy, together with the financial burden of construction or renovation and the cost of maintaining specialized services, led to a steady increase in per diem hospital costs to patients or their insurers.87 The average cost per patient day in Cleveland hospitals rose from $28.40 in 1957 to $268 in 1980.88
The ethical imperative to provide health care treatment without regard to the ability to pay is strikingly different than most other types of services that are provided for a fee. For example, automobile dealers and grocery stores are not obligated to give away
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 84 Rosemary Stevens. In Sickness and in Wealth : American Hospitals in the Twentieth Century. New York: Johns Hopkins University Press, 1999, 315. 85 Encyclopedia of Cleveland History. Hospitals and Health Planning, November 6, 1999, http://ech.case.edu/ech-cgi/article.pl?id=HHP. 86 Ibid. 87 Ibid. 88 Ibid. #&" their products to the poor. Perhaps, public education is a better analogy, reflecting the societal consensus that all children deserve access to education. In education, however, unlike medicine, we collectively support this norm by providing public funds to accomplish this goal rather than relying on the private market or a third-party system.
Kronick argues that “Medicare and Medicaid eroded the ethic that treatment should be available without regard to the ability to pay by reducing physician willingness to provide charity care and by reducing the resources available to hospitals in providing care to the poor.”89 However, hospitals are granted non-profit, tax exempt status with the supposition that they will use the financial resources to provide charity care. One area for future research and investigation would be an examination of the impact of the Medicare and
Medicaid programs on charity care in the University Hospital Health System.
In 1989, The Internal Revenue Service (IRS) revised the definition of charitable services for non-profit hospitals that eliminated the free or discounted care requirement, except for hospitals that treat patients in an emergency room setting.90 The IRS also expanded the definition of community benefit to include the promotion of health care and the advancement of medical education.91 Non-profit hospitals have used these changes to obfuscate how much charity care they provide by including uncompensated care, i.e. bad debt, and unreimbursed care in their calculation of charity care. In addition, hospitals include other community programs with perceived educational value and the cost to train medical students and residents. This is an additional study that should be performed to determine the impact that these IRS standards have had on actual charity care.
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 89 Richard Kronick, “Valuing Charity,” Journal of Health, Politics, and Policy Law 26 (2001): 993-1001. 90 University Hospitals Community Reports from 2006-2008. These can be accessed through the University Hospitals website or through the University Hospitals archives. http://www.uhgiving.org/NetCommunity/Page.aspx?pid=252&srcid=497 91 Ibid. #'"
It is clear from the evidence presented that one difficulty in making sense of these numbers lies in the ways that healthcare statistics are reported. Matt Carroll, director of
Cleveland’s department of public health, says, “One of the biggest challenges for the community is how charity care – or the free care hospitals are expected to provide – is reported. MetroHealth, University Hospitals, and Cleveland Clinic all use different calculations and standards, making it difficult to compare their services.”92 However, despite the ambiguity in the amount of charity care provided by University Hospitals, there is clearly a difference in the amount of charity care since the opening of the Wilson
Street Hospital in 1868. This paper clearly demonstrates the negative impact that third party insurance entities have had on the ability of hospitals to provide adequate care to the indigent population. Hospital leaders have lost sight of their original aim to provide care to all those that come through their doors, regardless of their ability to pay. There are a variety of solutions that have been presented which could help reestablish the hospital as primary provider for the health care needs of the indigent poor. For example,
Republican Senator Chuck Grassley of Iowa has proposed that nonprofit hospitals spend at least five percent of annual patient operating expenses or revenues, whichever is greater, on charity care.93
Future research regarding the specific case study of University Hospitals could be expanded to include a more elaborate discussion on how competition with other hospitals, such as the Cleveland Clinic, contributes to the ability, or even the obligation, to provide indigent care. In order to accomplish this, it will be necessary to have access to complete financial reports, including specific breakdown of revenue sources and """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 92 Ahmad Wasim, “Critics want Clinic, University Hospitals to prove their charity care,” Cleveland blog website, December 9, 2007, blog.cleveland.com/medical/2007/12/critics_want_clinic_university/print.html. 93 Ibid. #(" expenditures for charitable care, which detail each institution’s community commitment throughout its history. It will also be necessary to examine the history of philanthropic contributions, the growth and use of endowment funds, and the issuance and use of tax- exempt bonds.
$*"
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$)"
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