Physicians Pulling Back from Charity Care

Issue Brief No. 42, August 2001 -- Marie C. Reed, Peter J. Cunningham, Jeffrey Stoddard

Physicians have long provided care to the medically indigent for free or at reduced rates. However, findings from the Center for Studying Health System Change (HSC) showed that the share of physicians providing charity care dropped from 76 percent to 72 percent between 1997 and 1999. In the short term, most medically indigent people were still receiving care. But policy makers needed to take note that reduced physician participation in charity care would harm the poor if -- as projected -- growth in physician supply slowed and the number of uninsured rose alongside escalating health care costs. This Issue Brief discussed the extent of the decline in physician provision of charity care, the reasons for the decline and implications for the future of the safety net.

Decline Is Widespread

Physicians -- alongside hospitals, community health centers and free clinics -- form part of the country's safety net, and their continued commitment to delivering charity care matters greatly to the medically indigent and to policy makers. Between 1996-97 and 1998-99, the proportion of patient care physicians providing charity care fell from 76 percent to 72 percent, according to HSC's Community Tracking Study Physician Survey. Although the overall number of practicing patient care physicians grew, the number of those providing charity care did not change. The average amount of charity care delivered by physicians who did provide it held steady at about 11 hours per month.

While certain types of physicians -- for example, those working in staff or group-model health maintenance organizations (HMOs) and those who did not own their own practices -- were less likely to provide charity care than others, the decline in participation occurred across virtually all segments of the physician workforce. The decline was observed among physicians who owned their practices; employed physicians; primary care physicians and specialists; physicians in most sizes and types of practice settings; and physicians in practices receiving less than 60 percent of revenue from managed care, a group that included nearly 75 percent of all patient care physicians.

The data revealed notable declines across many practice settings. Charity care participation fell from 83 percent to 81 percent among solo or two-physician practices, from 82 percent to 79 percent in small groups of 3 to 10 physicians, from 68 percent to 61 percent in hospital-owned practices, and from 74 percent to 66 percent in medical school settings. By ownership status, participation dropped from 83 percent to 81 percent among practice owners and from 65 percent to 61 percent among employed physicians. Among physicians with no managed care revenue, participation fell from 67 percent to 61 percent, while those with 1 to 20 percent of revenue from managed care saw a decline from 81 percent to 75 percent.

The Changing Medical Marketplace

The decline in physicians providing charity care appeared related in part to shifts in the medical marketplace, including the expansion of managed care and the trend away from physician ownership of practices during the 1990s. Charity care was more common in solo or small group practices, among physicians who owned their practice and in practices with lower managed care revenue. Yet the percentage of physicians practicing in these types of arrangements declined between 1996-97 and 1998-99.

The distribution of physicians by practice type shifted over the period. Solo or two-physician practices declined from 41 percent to 38 percent of all physicians, and small groups dropped from 18 percent to 16 percent. Hospital-owned practices grew from 9 percent to 11 percent, and the share of physicians who were practice owners fell from 62 percent to 57 percent while non-owners rose from 38 percent to 43 percent.

A simulation of the expected proportion of physicians providing charity care indicated that recent changes in selected physician and practice characteristics accounted for approximately 25 percent of the decline in charity care participation.

Three underlying changes in the medical marketplace may explain why fewer physicians were providing charity care.

The first was that physicians were increasingly becoming employees rather than owners of their practices -- a trend that might reverse in the wake of hospitals divesting practices and the collapse of physician practice management companies in recent years. Employed physicians were less likely than owners to provide charity care. Moreover, from 1996-97 to 1998-99, the drop in charity care participation among employed physicians (from 65 percent to 61 percent) was twice as large as the drop among practice owners (from 83 percent to 81 percent). Employed physicians generally had less control over their time than owners. Because they were also more likely to work in environments where patients were insured and in health plans with lower copayments, employed physicians may have encountered fewer patients who could not pay for care.

The second factor that may have been undermining charity care was the financial strain facing many physician practices. Over the previous decade, health plan and employer efforts to contain costs had resulted in lower payment rates for physicians and, for some, losses from managed care risk-sharing contracts. These conditions may have constrained practices' willingness to provide care without charge.

The third factor that may have been causing physicians to reduce their participation in charity care was a lack of time. Many physicians reported increased time pressures from administrative burdens caused by utilization controls and dealing with multiple payers. Such pressures may have caused some physicians to stop providing charity care in order to have enough time for paying patients or for their personal and family lives.

Impact on the Uninsured

Because the reduction in the percentage of physicians providing charity care during the 1996-97 to 1998-99 period was offset by an increase in the overall number of physicians in practice, the effects on access to care for medically indigent patients, including the uninsured, were probably negligible. The number of uninsured persons did not change between 1996-97 and 1998-99. The average number of physician visits reported by the uninsured held steady at two per year -- about half as many as those with medical insurance -- according to findings from the HSC Household Survey.

Even so, policy makers had reason to be concerned about the decrease in the proportion of physicians providing charity care during a time when the overall supply of physicians continued to grow. Physicians in private practice supplied a large share of health care services to the medically indigent. Nearly two-thirds of the uninsured reported that a physician was their usual source of care, and approximately half received care in a physician's office. Recent estimates of physician supply indicated that the number of active physicians was growing at only about 1 percent per year -- a much lower rate of growth than the 3 percent experienced in the 1990s. As a result, increases in the number of active physicians might be insufficient to offset additional decreases in physician participation in charity care.

The safety net -- which included a variety of institutional providers as well as physicians in private practice -- remained fragile. Although it had been improving in some communities over the preceding few years, there were recent signs of strain. Widespread accounts of pressures on hospital emergency departments and academic medical centers indicated that some key parts of the safety net might be unable to serve the medically indigent to the extent they had in the past.

In addition, recent job layoffs and uncertainty about continued economic growth, coupled with reports of large increases in insurance premiums, deductibles and copayments, pointed to a likely increase in the number of people needing charity care in the following year or two. Unfortunately, this heightened need for charity care would come at a time of reduced safety net capacity, making it harder for underinsured and uninsured people to obtain health care.

Key Data: Provision of Charity Care by Patient Care Physicians

In 1996-97, 76 percent of the estimated 347,000 patient care physicians provided charity care, averaging 11.1 hours per month. By 1998-99, the proportion had fallen to 72 percent, with average hours dropping slightly to 10.6 per month. While the total number of patient care physicians rose by 16,000 to reach 363,000, the number actually providing charity care declined by 4,000 to an estimated 261,000. The physician survey population included all non-federal patient care physicians, excluding radiologists, anesthesiologists, pathologists, residents and fellows.

The decline in charity care participation was statistically significant across primary care physicians (from 73 percent to 69 percent) and specialists (from 79 percent to 75 percent). By the percentage of practice revenue derived from managed care, the sharpest declines occurred among physicians in the 1-to-20-percent range (from 81 percent to 75 percent) and the 21-to-40-percent range (from 80 percent to 77 percent).

Notes

1. The regression-based simulation model estimated the proportion of physicians in 1998-99 who would have provided charity care, assuming that physician and practice characteristics had not changed from 1996-97. The factors in the model included practice type, ownership of practice, practice revenue from managed care and physician specialty.

2. Mechanic, David, et al., "Are Patients' Office Visits with Physicians Getting Shorter?" New England Journal of Medicine, Vol. 34, No. 3 (January 18, 2001).

3. HSC Community Tracking Study Household Survey, 1996-97 and 1998-99.

4. Kletke, Philip, "The Projected Supply of Physicians, 1998 to 2020," Physician Characteristics and Distribution in the U.S., 2000 Edition, American Medical Association, Chicago (2000).

Sources and Further Reading

AHRQ — National Healthcare Quality and Disparities Report — Federal data on health care access and quality.

Kaiser Family Foundation — Uninsured — Data on uninsured populations and access barriers.

Census Bureau — Health Insurance Coverage — Population-level insurance coverage statistics.

Robert Wood Johnson Foundation — Health policy research and programs.

Commonwealth Fund — Research on health care access and equity.