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Posted: Sunday, Apr. 22, 2012

How a hospital profits on a charity case

By Joseph Neff
Published in: Prognosis: Profits
  • Prognosis: Profits

    A five-part series examining how N.C. hospitals profit at the expense of patients.

    Sunday: Nonprofits very profitable

    Monday: Charity care lacking

    Tuesday: Suing the needy

    Wednesday: Staying strong in Raleigh

    Thursday: Policies that could help

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    Johnnika Pyles, a 19-year-old student, had no insurance when she was discharged in June 2009 from Person Memorial Hospital, north of Durham. When a collection agency called trying to collect the $5,486 emergency room bill, Pyles’ mother, Sheila, called the hospital to ask whether her daughter might qualify for charity care.

    Chief financial officer James Leis encouraged Pyles to file and mailed her a four-page charity care application and a written agreement called a promissory note. If Pyles paid off half of her debt, the promissory note said, the hospital would write off the other half.

    But this arrangement was not charity. It was profit.

    Medicare cost reports show that Person Memorial’s emergency room costs are about 21 percent of the charges billed. This means Pyles’ care likely cost Person Memorial about $1,100, so if she paid $2,743, the hospital would make a profit of more than 50 percent.

    And the terms were onerous: If she fell behind on payments, the note would require Pyles to pay the full amount, plus any collection and legal fees.

    Pyles, who was treated in the emergency room after an accident, did not sign the promissory note. She received no charity care, and a collection agency is still trying to collect the bill.

    Chad Brown, the new CEO of Person Memorial, said the hospital should be making its charity care policy known and that Pyles’ experience “is not our practice.” He added that he did not know how many promissory notes were held by the hospital, but he said he thinks there are only a few. “I don’t know if it is acceptable,” he said. Joseph Neff

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