Patients & Visitors  

How Banner Classifies Financial Assistance



On May 25, 2005, Senator Charles Grassley (R-Iowa), as Chairman of the United States Senate Committee on Finance, sent a lengthy set of questions to ten nonprofit hospital systems throughout the country. These questions covered a wide variety of topics relating generally to charity care provided by these hospital systems, billing and collection practices of these systems, particularly as they apply to uninsured individuals, pricing, government reimbursement of hospitals, nonprofit status, and joint ventures.  The questions touched on a number of important policy issues regarding health care systems in the United States and, more importantly, the urgent question of providing access to quality health care to the millions of uninsured and underinsured persons in this county.

Banner Health was one of the ten nonprofit hospital systems that received the May 25, 2005 letter. Banner responded to the questions on July 15, 2005.  Because of the breadth of the questions and the complex and technical policy issues raised by the questions, Banner's response consisted of several hundred pages to text and accompanying documents. In a worthwhile effort to disseminate the essential points of the responses submitted by the ten responding hospital systems, the Senate Finance Committee staff has summarized the answers in a matrix format.  Because we believe that the committee's summaries are helpful to understanding the complex issues raised by the original May 25, 2005 letter, and Banner's position on these issues, we have taken the committee's summary of Banner's responses, expanded and modified it to clarify the response and eliminate some of the technical references, and have posted the modified summary below.

Summary of Responses to May 25, 2005 Questions
A.  Charity Care and Community Benefit
1. How does your organization define charity care?
Medical care provided without charge or at reduced charge to uninsured and underinsured individuals who are determined to be unable to pay. Charges are classified as charity care when the individual responsible for the account applies for financial assistance and is determined to be eligible for charity care under Banner policies.  Unreimbursed care provided to individuals who do not apply for financial assistance or who do not qualify for financial assistance is reported as bad debt.  Collection is not pursued for charity care amounts.

What types of activities or programs does your organization include in its definition or determination of charity care?
Banner only includes in the definition of charity care the charges for medical care provided without cost or at reduced cost to uninsured and underinsured individuals. As provided in the policy, which is posted on Banner's Web site(,  Keyword: "Financial Information"), medically necessary inpatient and outpatient services are covered.

Which of these activities or programs would your organization not incur, at all or to the same extent, if you were organized and operated as a for-profit hospital?
Banner has never undertaken an analysis as to which of its activities, policies, programs and community benefit activities it would discontinue if it were a for-profit organization.

Does your organization maintain a charity policy?

If so, please describe the policy or provide a copy of such policy.
Copies of Banner's financial assistance policies are posted on Banner's Web site,

Does this policy require that certain types and amounts of charity care be provided?

2. What are the 10 largest categories of charity care expenditures incurred by your hospital for the past five years?
Within the definition of charity care used by Banner, it is not possible to retrieve data corresponding to the types of financial accommodations accorded to uninsured versus underinsured individuals.

How does this differ from 10 years ago?
Banner is the result of the acquisition of Samaritan Health System by Lutheran Health Systems in 1999. Prior to that date, the two companies either recorded charity care inconsistently or did not report the amount. Hence, it is not possible to provide meaningful information.

3. What percentages of your patients for your most recent fiscal year were?
(a) Uninsured (self pay):   7%

(b) Covered by Medicare:   27%

(c) Covered by Medicaid or other state or other governmental program providing medical care benefits for low income individuals:   18%

(d) Otherwise covered by private insurance:   49%

4. Does your hospital ever agree to waive its fees immediately upon admission of a patient? If so, under what circumstances?
Fees are waived immediately upon admission only if a patient has pre-qualified for financial assistance, receives an Emergency Rating under the Colorado Indigent Care Program, or if the patient is readmitted and Risk Management or Patient Services Department has directed the fees be waived in connection with care being provided to rectify a prior mistake or service error.

5. What effect, if any, has the increase in patient co-payments and deductibles had on patient bad debt write-offs of your hospital over the past five years?

Banner has experienced a steady increase in bad debt levels over the past five years. In 2004, approximately 40% of co-payments and deductibles for patients covered by private insurance were uncollectible.

6. Has your hospital or other members of your hospital system group entered into joint ventures with other non-profit, tax-exempt hospitals to provide charity care or health care services? If so, please describe the nature of such joint ventures.

Yes. Banner is a 50% member of City of Hope Samaritan, LLC, having City of Hope National Medical Center, nonprofit tax-exempt organization based in Duarte, California, as the other member. The joint venture makes advanced bone marrow transplant treatment for cancer available in the Phoenix area.

7. Has your hospital or other members of your hospital system group entered into joint ventures with physicians or other for-profit companies or investors to conduct unrelated trade or business activities? If so, please describe the nature of such joint ventures.
Banner has reported taxable unrelated trade and business income derived from various joint ventures with physicians and other for-profit companies, including a clinical reference laboratory, ambulatory surgery centers and an ambulatory medical campus that provides outpatient surgery, imaging, MRI and endoscopy.

8. Has your hospital or other members of your hospital system group entered into joint ventures with physicians or other for-profit companies or investors to conduct health care activities you consider to be substantially related to your core charitable mission? If so, please describe the nature of such joint ventures.
Banner considers its participation in the ambulatory surgery centers, one of the radiology centers (dissolved in 2004), risk-based joint contracting with commercial payers, and some of the clinical laboratory services provided by its laboratory joint venture to be substantially related to its core charitable mission.

9. Do any of your hospital or hospital system joint ventures have charity care policies that require certain types or amounts of charity care to be provided? If so, please describe such policies, and how they are similar to or different from your hospital's charity care policy.
Banner's role in requiring and enforcing charity care policies to be adopted and implemented varies depending upon the type of joint venture, the degree of control over the activities, the nature of the activities of the joint venture, and whether the activity would be exempt if owned entirely by Banner.  However, Banner has exercised a role in applying and enforcing charity care policies for the ambulatory surgery centers that Banner owns, controls or exercises at least 50% of the governing powers.

Also explain the role your hospital has in assuring that the charity care policy of the joint venture is enforced.
Banner Surgery Centers, LLC, which is controlled by Banner, has adopted a charity care policy consistent with Banner's exempt mission and purposes, for the ambulatory surgery centers that it owns or in which it participates as the controlling general partner.

If your organization does not track charity care expenses by such categories, please explain why not, and provide a narrative response that explains whether there are certain categories of care for which charity care is more important or is not relevant.
Banner Surgery Center, LLC' facilities perform elective outpatient surgery. This type of service is provided far less frequently on a charitable basis than traditional inpatient hospital care.

10. Please respond to the following assertion: Many nonprofit, tax-exempt hospitals engage in joint ventures that shift the most profitable and valuable procedures, practices, and income streams to the joint ventures so that the greater profits and value may be shared with physicians and other for-profit persons.

The statement describes a market dynamic that threatens the financial viability of the safety net provided by the nonprofit hospitals, but misstates the motivation of most hospital systems. The situation is a result of the interplay of a government reimbursement system that provides relatively high margin reimbursement for certain types of procedures, and a statutory structure that authorizes physician ownership in many of these high-margin lines of business. This "cherry-picking" scenario has been documented repeatedly. Such joint ventures are nearly always entered into as defensive responses to the threat of physician-owned specialty provider competition.

11. How do you assure that your joint ventures with others do not deplete your hospital's resources that otherwise would be available for charity care, such as by tying up cash and other liquid assets in the investments in the joint venture.

Banner's investments in joint ventures are considered to be capital expenditures. Hence, there is no diversion from the operating budget that would be used to fund charity care.

12. Please provide a charity care breakdown for each entity that is a member of your hospital system group.

All of Banner's hospitals and facilities, except joint ventures, are operated by a single entity, Banner Health, an Arizona nonprofit corporation. The following amounts of charity care were reported by Banner Health in 2002, 2003 and 2004:

  • 2002:  $53,511,499
  • 2003: $52,140,939
  • 2004: $48,269,761

In your opinion, should charity care be measured on an aggregate group basis or on an organization-by-organization basis?
IRS guidance permits the community benefit assessment of an exempt organizations activities to be assessed on an aggregate basis. Banner believes that this is the correct approach.

13. In your judgment, should Federal tax law require each joint venture in which a tax exempt hospital participates to have a charity care requirement?

Banner does not believe that Federal tax law should require that each joint venture in which Banner participates must have a charity care requirement because: 
1) the IRS community benefit standard for tax-exemption for hospitals does not mandate a charity care requirement;
2) the nature of the business conducted by the joint venture may constitute taxable activity that is not eligible for tax exemption treatment, and the IRS does not prohibit exempt organizations from conducting limited amounts of taxable unrelated trade and business; and
3) the opportunity for exempt hospital organizations to have a controlling interest sufficient to impose a charity care requirement upon joint ventures may not exist where hospitals are participating in physician-driven joint ventures for defensive reasons.

If so, should the amount of the requirement differ depending upon the extent of ownership by exempt hospitals in the joint venture?
If Federal tax law were to require each such joint venture to have a charity care requirement, Banner believes that the amount of the requirement should differ depending upon the extent of ownership by exempt hospitals in the joint venture.

14. How does your hospital account for charity care provided by a joint venture in which the hospital participates? For example, if your hospital is a 50% owner of a joint venture, and the joint venture provides $100 of charity care, do you count $0, $50, $100, or some other amount, as charity care provided directly by your hospital?

The accounting for charity care will be driven by the accounting treatment accorded to Banner's interest in the joint venture. If accounted for under the equity method under GAAP, then none of the charity provided will be reported. If the joint venture is accounted for on a consolidated basis, then all of the charity care would be reported.

15. What types of research and teaching are performed by your hospital as a charitable or educational activity?

Education - Financial and administrative support of medical residency and fellowship programs; provide teaching facilities, faculty members, and supervised patient care for medical and nursing students; several educational assistance and scholarship programs for nursing and allied health professionals; funding of psychiatric resident rotation.

Research - Nursing and therapy studies; medical education research including projects that contribute to the body of toxicology and poison control information; alternative therapy research including music therapy, aroma therapy, acupuncture, energy healing; community and public health projects to contribute to large health organization databases working toward improved health care services. Support of cell and isolet research, PET imaging studies and analysis as part of the Alzheimer's Disease Institute.

16. Please describe any fund-raising activities conducted by your hospital in an attempt to supplement fees for services and other revenues. Specifically, provide for the last three years the amount of charitable donations received by your hospital.

Activities include special events, planned giving, and direct solicitation. Donations support construction and equipping of new facilities and services, nursing and other healthcare professional education, and specific clinical activities and services.
The following are the amount of philanthropic donations received in the last three years:

  • 2002:  $3,839,474
  • 2003: $4,935,817
  • 2004:  $6,435,810

Does your organization ever conduct fund-raising activities which commit the donations raised by the activity to be used to provide medical care to low-income or uninsured individuals or families?
Among the activities committing donations to be used to provide medical care to low-income or uninsured individuals or families are the following:
(1) support received to provide free mammograms to low-income minority women;
(2) fundraising obtained to support nineteen school-based clinics funded and staffed by Banner which provide health care for low income students at over 100 schools; and
(3) financial assistance for children and adolescents at Banner Behavioral Health Hospital to enable patients to complete treatment.

17. In general, does partnering with for-profits in a joint venture arrangement have implications on the provision of charity care and the satisfaction of the community benefit standard by the joint venture or by the overall hospital system that participates in the joint venture?
Generally, partnering with for-profits in a joint venture arrangement does not have implications on the provision of charity care and the satisfaction of the community benefit standard. The answer will depend upon the manner in which joint ventures are organized and operated, the nature of the activity conducted, and the extent of the exempt organization's control.

18. Do your compensation arrangements with physicians and other professionals in any way encourage or discourage the provision of charity care by your hospital or hospital system? If so, how?
Generally, no. Most physicians who practice in Banner hospitals are independent community physicians who are not compensated by Banner. However, hospital based physicians who are given exclusive contracts, e.g., radiologists, are required to provide care to all patients who require their services. Banner also guarantees payment for emergency department coverage by a number of specialists who provide care for all non-assigned patients, including uninsured patients, in the emergency departments of many Banner hospitals.

19. Please provide a breakdown of your charity care expenditures, across emergency room services, urgent care services, intensive care services, rehabilitation, maternity care, mental health care, cosmetic surgery, chemical dependency and outreach, and any other categories you consider to be appropriate.

Most persons receiving charity care do so via emergency departments. Banner cannot break down its charity care activity in a manner requested except by means of a manual examination of each of the thousands of patient accounts.

20. What kinds of community outreach and education activities does your hospital conduct, and how much is expended on such activities (in absolute dollars and as a percent of your budget)?

Banner's response to this question included ten pages of activities. Among the activities listed were the call center/helpline, poison control center, prenatal program, HomeBase Youth Services (outreach service and guidance to 5,000 runaway homeless youth), Junior Achievement, Pediatric Therapy Program, Prescription Assistance program, American Cancer Society, several Komen Race for the Cure, American Heart Association. Banner does not keep a consolidated record of the cost of the staff time devoted to these activities, which constitute by far the largest component of the support given, nor does Banner have a method for consistently or precisely tracking the other incidental expenses for these activities.

21. Please explain how the amount of charity care you provide differs in magnitude and kind for that provided by your for-profit competitors.
Banner does not have the information available to it to provide a meaningful comparison with for-profit hospitals. 

22. How much does your hospital spend on free or below-cost infant and child care programs, such as childhood immunization programs?
Banner engages in numerous programs for infants and children; however, Banner does not track its community benefit expenditures on this basis.

23. Does your organization conduct clinical trial programs, and if so, how does your organization treat such programs for purposes of determining charity care?
Banner does conduct clinical trial programs. However, Banner's participation in clinical trial programs is not included in any determination of the amount of charity care provided by Banner.

24. How do you allocate expenses (direct labor and materials, indirect labor and materials, management, general and administrative, fund-raising, investment, and other) for purposes of determining the amounts you consider to have been expended on your charity care programs? Does this allocation include costs incurred pursuant to a cost sharing arrangement with other members of your hospital system group? Is this allocation mechanism dictated by internal policy, Federal or State regulatory requirements, financial accounting principles, or other standards?

Our internal cost allocation methodologies rely on allocating costs on an average basis to the elements of care that are charged to patients, e.g., lab tests, supply items. Because these cost estimates are imprecise on a patient-by-patient basis, the reported costs of Banner's charity care are simply Banner's best estimates.  Except for centralized costs noted, the allocation of costs to our patients at a given hospital does not include costs incurred by other hospitals within the system. Banner's allocation method is not dictated by any statute or regulations. It is the result of study and research, consultation with other healthcare professionals and systems and the application of general principles of cost accounting to each particular element of cost. Banner's internal allocation of cost of services provided to charity care patients is consistent with how Banner allocates cost to non-charity care patients.

25. Please provide a statistical breakdown of the hospital's average cost per patient and the average length of stay of your patients. Feel free to provide as much detail as you consider to be appropriate to demonstrate the range of costs and stays across different types of treatment.

In 2004, the average cost of treating an inpatient  was $6,790 (range $2,377 - $79,506), and the average length of stay was 4 days (range 2.74 - 21 days).

B.  Payments/Charges/Debt Collection/Tax-Exempt Status and Other Issues 

1. Please explain what is the average mark-up of charges over costs.
For 2004: 2.78 (gross patient revenue to total expenses).

What is the average private pay contractual allowance (charges to payments) weighted by payer?

The purpose of the chargemaster is to set the framework for the overall pricing structure of a hospital, not to establish a fixed relationship between charges and costs. The average private pay contractual allowance for our hospital volumes only is 61 %, weighted by payer. The contractual allowance weighted by payer is not readily available for our non-hospital services due to the disparate contracting and billing systems employed in these service lines.

2. Please explain the reason for charging "chargemaster" rates to uninsured individuals particularly in light of the Secretary of Health and Human Services' letter of February 19, 2004 to the President of the American Hospital Association and also in light of your not for-profit and tax-exempt status.

This question overlooks the basic purpose of the chargemaster. This question also appears to assume that there exists a federal or status statute, regulation or guidance that prescribes or limits the charges that an exempt nonprofit hospital may charge to persons who do not have health insurance. Banner is unaware of any such authority. Banner has a generous charity care policy, and makes care available to persons having household incomes of $125,000 or less at rates generally comparable to those paid by commercial payers.

3. Please explain how fairness or reasonableness of charges to the uninsured can be assured even in instances where you offer discounts where those discounts are discounts from the already high chargemaster rate? 

What is your discount policy?
See response to A.1 for Banner's policies for providing services at no charge or reduced charge. The chargemaster charges are in fact the common denominator for our hospitals' pricing structure. None of those commercial payer contracts provides for discounts as great as the discounts provided to lower income uninsured persons under Banner's charity care policies.

What is the collection rate for self-pay?
The collection rate, expressed as a percentage of charges, from uninsured patients was 9.69% in 2003 and 12.65% in 2004, and a significant number of uninsured patients do not make any payments at all.

4. If government programs pay for hospital services for its enrollees without regard to the chargemaster rate and commercial insurance carriers throughout the country likewise pay not based on the chargemaster rate, please explain why the uninsured continue to be charged the chargemaster rate.

 Many of Banner's commercial insurance payers do reimburse Banner on the basis of percentages of the chargemaster rates. Banner believes that its policy of offering its hospital services at rates comparable to those paid by commercial payers to persons who have an annual income of less than $125,000 draws a reasonable distinction among categories of uninsured, including those who could afford health insurance but choose not to purchase it.

5. Please explain what is the economic benefit to your hospital of charging uninsureds the high chargemaster rate when uninsured people generally have less of an ability to pay hospital charges and do, in fact, generally pay only a fraction of what has been charged? Does this benefit justify your action, particularly in light of your not-for-profit tax-exempt status?

Net revenue collected from self-pay accounts accounted for 0.58% of revenue in 2003 and 0.91 % in 2004. It should be evident that Banner is not setting prices to the uninsured on the basis that there would be an economic benefit to Banner.

6. The Committee has heard statements from individuals that have gone to many not-for-profit, tax-exempt hospitals in the very recent past and have seen no evidence of the fact that they make their tax-exempt and charitable missions known to patients via signs in patient access areas, brochures, booklets and the like. Please comment on what your hospital does to provide such visible information on the subject.
The mission is displayed prominently in various public areas in Banner facilities, and is communicated in brochures, media advertising, and other public communication. Community benefit is made known through Banner's annual Form 990. Banner advises patients of its financial assistance and charity care policies through a variety of methods, focusing on the points at which self-pay patients most often enter Banner hospitals, including emergency department waiting and registration areas stocked with bilingual materials regarding financial assistance and staffed with trained financial counselors, and colorful inserts included in billing statements.

7. Please identify what steps your hospital has taken to insure that lower level staff, who are actually the front-line staff, are aware of your not-for-profit status and charitable mission and have been instructed to implement the same in their treatment of uninsured patients. Please produce any documents conveying such information to your staff.
Banner's staff members are expected to treat all patients in the same compassionate, caring, competent and professional manner, irrespective of whether they are insured. Banner's registration and patient financial accounting personnel are trained in Banner's financial assistance policies and procedures for implementing those policies. Banner does not provide specific instruction to its staff as to Banner's nonprofit status and charitable mission, although Banner is confident that its nonprofit status is well known to its staff.

8. If your hospital believes that Medicare rules created roadblocks to providing discounts to the uninsured, as is evidenced by the President of the American Hospital Association's (AHA) December 2003 letter to the Department of Health and Human Services, why did our hospital, or your hospital through the AHA not raise the same with the Department at an earlier date? In considering this question it is noteworthy that in December of 2002, Trevor Fetter, the CEO of Tenet Healthcare, stated in an investor conference call "I would like to turn to an issue that has bothered me for years. I mentioned earlier that Medicare requires hospitals to set charges the same for everyone. This means that the uninsured or underinsured patient receives a bill of gross charges. In other words, the entire hospital industry renders its highest bills to the customers who are least able or likely to pay.
These questions are argumentative and incorporate a number of unstated assumptions that may not be accurate. Banner has traditionally not been active in national advocacy activities involving CMS or HHS. As a number of federal and state courts have recently held in dismissing cases filed as part of the current wave of putative class actions filed, there is no law that prohibits hospitals from negotiating rates with commercial health insurance payers that are lower than (or tied in any manner to) the rates charged to self-pay patients. The courts likewise have confirmed that nonprofit tax status does not depend on the prices charged to any particular payer class.

In addition, please state whether your organization ever grossed up their charges on the Medicare cost report because they had a lower OPD fee schedule.
Banner did, some years ago, gross up charges in the surgery area to account for its lower ambulatory surgery rates. This occurred several years ago, and it was not possible to investigate the details within the deadline established for this response.

Please state your views on whether it is allowable or acceptable for hospitals to lower their charges for the insured and not the uninsured.
Banner's position is reflected in the answers to other questions See Banner's response to question B.2, acknowledging that it is acceptable to lower the charges for the uninsured. Also, see Banner's response to question A.1. regarding Banner's policy, showing Banner does lower the charges for uninsured.

9. It has been suggested that one of the reasons that a hospital may have maintained these high chargemaster rates is that it allows the hospital to obtain more in the way of Medicare outlier payments thus further costing the government additional money for the care of the uninsured. Please explain why your hospital, as a tax-exempt not-for-profit hospital, feels that this is appropriate or inappropriate. What was the growth rate in your Medicare outlier payments from 1998 to 2002?
The relationship of charges to Medicare outlier payments is irrelevant to a hospital's tax status. The amount of outlier payments received by Banner declined by 22.1 % from 1998 to 2002; expressed as a percentage of the DRG/capital reimbursement payments received by Banner from 1998 to 2002, the outlier payments declined by 38.5%.

10. Secretary Thompson, in his letter mentioned above, noted that "Medicare and Medicaid have a long history of doing their part to help the uninsured that includes paying hospitals $22 billion each year through the disproportionate share hospitals' provision to help hospitals bear the cost of caring for the poor and uninsured." In light of the fact that you are a tax-exempt not-for-profit hospital, please comment on whether or not you believe it is appropriate for your hospital to receive such aid from the government.

Banner believes that disproportionate share payments are a critical component of financial support to assist all hospitals, both nonprofit and for-profit, in dealing with the substantial portion of our country's population that is not insured, and for complying with federal mandates requiring the provision of emergency medical screening and stabilization without regard to ability to pay.

Please list your payments under disproportionate share (DSH) for the past three years as compared to uncompensated care, separating out bad debt.

  • 2002: DSH $21,678,701, Charity Care $53,511,499, Bad Debt $134,628,606
  • 2003: DSH $27,895,116, Charity Care $52,140,939, Bad Debt $145,912,802
  • 2004: DSH $35,542,700, Charity Care $48,269,761, Bad Debt $212,830,299.

11. Do you agree that the chargemaster method of charging uninsureds should be discontinued? In answering, I would ask that you consider the statement of Mr. Jack Bovender, the Chairman and CEO of Hospitals Corporation of America, one of the largest for-profit hospitals in the country. Mr. Bovender has stated, "the chargemaster system on which hospitals rely to set pricing and billing codes have a 40 year history of changes that have distorted the relationship between price and cost. It grew out of a time when decreasing Medicare reimbursement prompted cost shifting to the private sector and this was exacerbated in the 90's by aggressive managed care discounting. I am not here to try to justify this and it really needs to be fixed."
Banner notes that the comments relating to the long history of the chargemaster system is consistent with Banner's statements that the roots of the chargemaster system have nothing to do with motivation for pricing to the uninsured. Banner has moved away from its usual and customary charges to a percentage of expected Medicare DRG reimbursement in determining the amount to be paid by patients qualifying for financial assistance. However, Banner will continue to base its financial assistance programs for outpatient services on a percentage of its chargemaster charges because the Medicare outpatient reimbursement methodology is too complicated to be modeled within Banner's current billing systems.

12. At the hearing of the Oversight Investigation Subcommittee of the House Energy and Commerce Committee on hospital billing dated June 24, 2004, Mr. Bovender stated that he "was told by both inside and outside legal counsel. . . [in late 2002] that we had to get clearance [for discounting to the uninsured] through CMS." Please identify whether your hospital has received such legal advice and if so, please provide any written documentation of that advice.

To the extent that this question calls for waiver of the attorney-client privilege, Banner respectfully declines to respond to this question.

13. Please provide all documents related to your hospital's consideration of medical charges for billing practices, charity or indigent care, discounts or write-offs to uninsured patients.
Banner provided the documents requested by the Committee.

14. Please provide all documents relating to your charity care policy, community benefit reports, community benefit assessment, community benefit strategy and/or charity care audits for the time period of January 1, 1998 through the present. In providing the same, please identify specifically where those documents consider your hospital's treatment of the uninsured.

Banner provided the documents requested by the Committee.

15. Please provide any community needs assessment done by you or on your behalf during the time period of January 1, 1998 through the present. In providing the same, please identify specifically where your hospital considered its treatment of the uninsured in its community needs assessment.
Banner does not have any community needs assessments responsive to the Committee's request.

16. Please identify how many lawsuits you have filed against uninsured patients for the current year and the preceding five calendar years and please identify whether or not you are compelled by law to file such lawsuits in order to collect from these individuals.

It is not possible to determine precisely the number of lawsuits against uninsured persons because the databases of some of the collection agencies that file lawsuits are unable to distinguish lawsuits against uninsured individuals from lawsuits against individuals with insurance for collection of the patient's portion of the account. Also, one of the collection agencies could not provide complete information. The following is the best information Banner has been able to pull together. California - no lawsuits. Alaska - 2,914 lawsuits 1/1/2000 - 5/31/2005. Arizona - 11 lawsuits since 2000, and none since 2003. Colorado, Wyoming, Nebraska - 8,744 lawsuits 1/1/2000 - 5/31/2005.Banner does not believe that it is compelled by law to file claims against patients, except in Alaska, where a lawsuit is required by state law in order to garnish payments owed to patients by the Alaska Premenate Fund Dividend.

Please identify the amount of debt that was at issue in each suit.
The amount at issue in each of the lawsuits was disclosed in the schedules attached to the original response to the Committee.

Please identify any times you have sold debt owed to the hospital from uninsured patients to other companies for collection.

Banner entered into an agreement involving the potential sale of accounts receivable for services rendered to patients in Banner's Colorado burn unit in circumstances where it appeared that a third party was at fault for the patient's injuries. No accounts have actually been sold, and this arrangement will be allowed to expire on July 14, 2005.

Please state the amount the debt(s) was sold for, and the terms under which such private collection accounts were sold. In particular, please estimate the volume and value of accounts sold to private companies in the past five years, and whether those sales were made after your hospital rigorously pursued the patient on its own, and whether or not the hospital also claimed those same accounts for purposes of collecting the 70% bad debt payments made available to hospitals that despite best efforts, fail to recover aged patient accounts.
No accounts have ever actually been sold.

Please explain how the sale of private accounts for recovery, and a concomitant claim to Medicare for payments on the same debts, is not "double dipping."
Not applicable.

Please provide copies of your contracts, if any, with collection agencies.
Banner provided the documents requested by the Committee.

 Please identify whether this collection agency is a for-profit or nonprofit subsidiary of your organization.
Banner has contracts with several collection agencies. No collection agency is a subsidiary of Banner.

Please discuss any financial relationship with a bank or credit card company that patients use to help finance their debt.

Banner has an agreement with an Alaskan bank, pursuant to which patients at Fairbanks Memorial Hospital  may apply to the bank for loans up to $25,000 to fund payment of their accounts, and Banner guarantees payment of the bank's loan. Patients are required to fill out a loan application, which is subject to acceptance by the bank. The maximum terms of the loans are 5 years, and the interest rate is based on the banks "New Car Rate".

Please explain if you differentiate between Medicare and Non Medicare patients in regard to debt.
Banner does not differentiate between Medicare and non-Medicare patients with respect to debt.

If you sell debt, what is your policy on when that debt is sold, particularly in terms of the age of the debt?
No debt has been sold.

17. Please identify any money or investments that your hospital or related organization (including supporting organization or private foundation) has in off-shore banks. Identify the amounts in these accounts. Please explain why your organization has taken this action.
Banner has established a wholly owned, captive insurance company, Samaritan Insurance Funding Ltd. (SIFL), domiciled in the Cayman Islands. This company provides the primary layers of self-insurance for general and professional liability coverage, as well as certain other insurance coverage. Use of SIFL provides a cost-effective and flexible method to finance risk exposure. No Banner funds are diverted or somehow sheltered offshore through ownership and financial relationship with SIFL or otherwise. SIFL has a call account off shore at Bank of Butterfield and maintains a balance of approximately $200,000 in that account. Banner deposits premiums into the account and SIFL pays administrative expenses and insurance losses from the account. Excess funds are routinely transferred from the Butterfield account to an on-shore, domestic set of accounts at Northern Trust, as Investment Trustee. As of June 28, Northern Trust reported total funds for SIFL of $1,306,609.

18. Please provide an organization chart including Type I and Type II supporting organizations. The chart should identify ownership interest and the type of organization (nonprofit, for profit, partnership, etc.)
Banner provided the documents requested by the Committee.

19. Some hospitals have taken the position that the provision of health care, no matter the cost to the patient, is inherently charitable. Do you agree that the provision of health care to uninsureds is charitable, even if there is a high charge associated with it? If so, please explain.
Banner does not have a position on the proposition advanced in the question.

20. Some hospitals have stated that all patients, insured and uninsured alike, are charged the same amount for services. It seems that this is a response based on semantics as it is my understanding that all insureds and government payers ultimately are expected to pay less than the chargemaster rate while uninsured patients are expected to pay the full amount. Please respond and in your response identify the net effective discount to all patient groups based on contractual or other allowances with those groups and identify the discount offered to uninsured patients as well.

The private pay contractual allowance is 61 % for Banner as a whole. Under the Basic Financial Assistance Program (for uninsured patients with household incomes up to $125,000), patients in Arizona pay 150% of expected Medicare DRG reimbursement for inpatient services and 28% of chargemaster charges for outpatient services; patients in other states pay 225% of Medicare reimbursement for inpatient services, and  75% of chargemaster charges for outpatient services.  Under the Enhanced Financial Assistance Program, persons will receive free care if household income 150% or less of the federal poverty level (FPL). If household income is 150% - 500% of FPL, in Arizona, patients pay from 25% to 125% of expected Medicare reimbursement for inpatient services, and from 6% to 24% of chargemaster charges for outpatient services; and in other states, patients pay from 25% to 160% of expected Medicare reimbursement for inpatient services, and from 15% to 55% of chargemaster charges for outpatient services.

Please explain what your policies are for providing elective procedures, (examples:  breast biopsies, mammograms, colonoscopies, physicals, etc.) to the uninsured.
Except for physicals, the other procedures are, if medically necessary, not considered to be elective and are, therefore, covered by Banner's financial assistance program.

21. Please provide for the last three years a detailed breakdown of travel of your five top salaried employees: for trips over $1000 please provide receipts for hotel; meals; airfare and all other reimbursed items as well as the purpose of the trip.

Banner provided most of the requested documents. Banner was unable to locate expense reports for a small number of the reimbursed trips taken in 2002, and was unable to determine travel reimbursement or locate expense reports from 2002 for Mr. Craig Broman, a former Banner executive who was based in Fargo and left the company in 2002. Banner believes these records were misplaced during the consolidation of Banner's corporate headquarters from Fargo, North Dakota to Phoenix, Arizona.

Please provide all salaries and other benefits provided to these five individuals for the last three years from any organization identified in question 18.
Banner provided the documents requested by the Committee. (Note: the salary and benefits are disclosed in Banner's Form 990, which is available to examination on Banner's website and upon request.)

Finally, please detail any payments or reimbursements made to employees for country clubs.

  • 2002: President/CEO-Banner Health $7,314; President/CEO-Banner Health Foundation $4,499.
  • 2003: President/CEO-Banner Health $17,345; President/CEO-Banner Health Foundation $5,247.
  • 2004: President/CEO-Banner Health $1,680; President/CEO – Banner Health Foundation $5,857.


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