For-profit hospitals, which are blaming unpaid medical bills for tamping down profits, are struggling with a simple question: Which patients have the ability to pay their hospital bills?

Driving that issue to the top of their financial agenda is the rising health care tab patients are being asked to shoulder by private health insurers, putting U.S. hospitals increasingly in the undesirable role of debt collector.

We are not good at collecting patient accounts, Kelly Curry, chief operating officer of Health Management Associates, told investors recently. That is just the reality.

Hospital officials and experts say a rising share of uncollected debt is coming from patients who have health insurance coverage. As these patients bear a greater share of their health care costs, it becomes more complex for hospitals to determine which patients can pay their bills, experts said.

The increase in patients' responsibility is putting hospitals in this unusual position of having to negotiate with patients who have insurance, said Maribeth Shannon, director of market and policy at the California Healthcare Foundation, a nonprofit research group.

HMA and LifePoint Hospitals are among the major chains that posted falling profits in the most recent quarter, largely citing difficulties in collecting unpaid patient bills.

Most chains' bad debt -- a key gauge of uncollected medical bills -- is rising and topped 10 percent as a slice of quarterly revenue.

Tenet Healthcare is the last of the major publicly traded hospitals to post results, expected on Tuesday.

Hospitals have for several years struggled with unpaid bills from the uninsured, whose numbers swelled to 45 million in 2005, up 13 percent from 2000.

But the average monthly health care bill for workers is up about 84 percent from five years ago, at $248 for family coverage, according to the nonprofit research group, the Kaiser Family Foundation.

I think a lot of providers have been caught off guard by this, said Debra Draper, associate director of the Center for Studying Health System Change, which conducts hospital site visits for marketplace reports. There is an increasing burden on them to have effective (collection) systems in place.


One critical issue for hospitals is that the line for when they should give up entirely on collecting bills is increasingly blurred.

So-called charity care is generally defined as free treatment for the indigent who lack the means to pay any costs. The industry's trade group, the American Hospital Association (AHA), recommends treating families of four making 100 percent of the poverty level - about $20,000 -- as charity care.

But this guideline is voluntary and experts say hospitals are all over the map on policies, especially in the grayer area of incomes above poverty.

Health Management, which posted an 85 percent plunge in second-quarter profit last week, citing rising bad debt, said it is struggling with when to write off bills as charity care, and when to try to collect even a tiny share of its costs.

Our operations people feel we have been writing off too many accounts -- accounts that are at 400, 500, 600, 700 percent of federal poverty -- that can pay something, Bob Fordham, HMA's chief financial officer, said on an investor call last week.

HMA, which owns 57 hospitals in 14 states, did not return a call seeking further comment.

Some analysts say hospitals should not be so quick to categorize some unpaid bills as charity so that they can hold out hope to collect on at least some of what is owed them.

If you book it as revenue and put it through a process, you may only get 10 cents on the dollar, but that is better than nothing, Stanford analyst Gary Lieberman said.

Yet while some Wall Street analysts bristled at providing free care for those making up to seven times the federal poverty level, others say medical costs are so steep that it's not as far-fetched as it may sound.

For some people making above $100,000, when they get a hospital bill for $100,000, they may not have the ability to pay, said Gerard Anderson, director of the Center for Hospital Finance and Management at the Johns Hopkins University public health school.

(Additional reporting by Lewis Krauskopf in New York)