Opinion ID: 1788655
Heading Depth: 1
Heading Rank: 5

Heading: Amendment 68, Section 1as applied violation analysis.

Text: The Committee further contends that UAMS cannot determine the cost of an abortion, thereby preventing UAMS from accurately charging patients for the cost of the procedure. A corollary of this argument is that the state will effectively finance abortions in violation of Amendment 68 when actual charges remain unpaid by patients, or in the interim period where payment of charges is guaranteed by a third party. The Committee, as the challenger in this case, bears the burden of proving that UAMS cannot determine the cost of an abortion, or that the amount UAMS charged does not cover the actual cost of the procedure. Dr. Harry Ward, the chancellor of UAMS and a named defendant-appellee, testified that a separate line for indigent care in the appropriations bill for UAMS would not be used for the OB-GYN service because it was a self-supporting service. Likewise, there were no staff-members in the OB-GYN department who were there specifically to perform abortions. According to Dr. Ward, if this [abortion] program was closed tomorrow, there would be no change of staff or anything. Physician's salaries are calculated from a figure initially recommended by the dean of the College of Medicine, and are paid in part by the state and in part by the cash funds generated through the Medical College Physicians Group (MCPG). Likewise, there was no equipment specifically designated for use in abortions at UAMS. In other words, the equipment used for abortions was also used throughout the entire OB-GYN program. Regarding billing for services at UAMS, Dr. Ward explained that patients received two bills. One was from the hospital, and the other was from the physician. The physician's bill was prepared by and paid into the MCPG. In his deposition, Howard Rutenberg stated that various overhead and indirect factors were considered in arriving at the amount that the hospital charged for its services. Factors such as the cost of acquiring and servicing equipment, and the cost of supply items used in association with the equipment, and the costs of manpower were all figured in. When asked how UAMS charges compared with comparable charges in the community, Rutenberg answered that UAMS charges were generally higher, because UAMS was a teaching facility and as such had to cover education costs not existing at other hospitals. David Heron stated that the hospital covered its direct costs and then some. In fact, the UAMS campus needed the additional revenue to function, because the hospital generated 65 to 70 percent of the total revenue for the campus. Dr. Ward testified that UAMS, as well as all other hospitals, used an accounting system known as cost-transfer in determining the amount a patient is charged. When certain patients do not pay their bill in full, the deficit is made up by patients who are paying their full charges. Dr. Ward further testified that about sixty percent of patients in the abortion program fully paid, and that these full-paying patients provided UAMS with enough revenue to cover those patients who did not pay in full. [2] Richard Jones, the director of finance at University Hospital, testified that a number of costs incurred in running the hospital were not allocated directly to the hospital's budget. However, a cost report required by the Health Care Financing Administration was nonetheless prepared to provide a methodology for allocating those indirect costs to the hospital in order to justify reimbursement under the Medicare program. Jones said that he was not aware of any study done at UAMS to determine the cost of an abortion. Moreover, he testified that charges for some services may not cover the cost of those services, whereas charges for other services may exceed their cost. However, he also testified that when we establish our prices, we establish our prices for all items in total to cover our costs. Dr. Ward testified that on the physician side of billing, the amount charged for a procedure was figured on a number of different bases, one of which was the reasonable and customary charges that are approved charges through ... insurance companies, through ... third-party payers. Howard Rutenberg testified that on the hospital side of billing, We try to cover all of those costs [direct and indirect] in pricing our service. With regard to the specific charge a patient was billed for an abortion, Dr. Ward testified that the hospital fees were usually somewhere between $1,500 and $2,000. [3] We agree with the Committee that to the extent UAMS incurs actual costs in performing an abortion, and these costs go uncharged and unpaid, public funds are being used to pay for abortions. This conclusion is reflected in the trial court's holding that UAMS's method of cost transfer, where revenues from full-pay patients were used to cover the costs of those who did not make full payment, violated Amendment 68. However, in light of the above-recited evidence, it is plain that the Committee failed to meet its burden to prove that UAMS could not accurately determine the cost of an abortion. Rather, the weight of the evidence suggests that UAMS attempted to cover all of its direct and indirect costs in arriving at a charge for a procedure, both on the hospital and physician side of billing. In fact, it appears that the charges billed by UAMS far exceed costs, since full-pay patients cover the costs of those patients who do not pay. Moreover, the trial court ordered UAMS to take all steps reasonably necessary to guarantee that patients pay for their abortions, and that it maintain appropriate cost figures to ensure that amounts charged to patients cover the direct and indirect costs of an abortion, such cost figures to be a reasonable assessment based on all usual and customary calculations that would be made by a prudent individual making such cost assessment regarding the costs of any procedure to be performed in a hospital. Thus, to the extent that UAMS may not have included all of its direct and indirect costs in calculating their charge to a particular patient in the past, they must do so now under the express terms of the trial court's order and injunction. We cannot say that the trial court erred in finding that the direct and indirect costs of an abortion could be reasonably calculated, and ordering UAMS to take all steps reasonably necessary to ensure that its charge does in fact cover those calculated costs. The Committee next argues that under the chancellor's order and injunction the state will effectively finance abortions when actual charges go unpaid, or in the interim period where payment of charges is guaranteed by a third party. Although there is practically no empirical accounting or billing data in the record, the Committee highlights a letter from the office of the general counsel of the University of Arkansas detailing abortions performed at UAMS since the preliminary injunction (and thus under the court-ordered payment system) through June 1, 1992. The letter shows that during this time period, the hospital's initial charge, inclusive of physician services, was $2,500, even though it was later raised to $4,000. This data shows that ten abortions were performed, three being self-pay, and the rest paid either through Medicaid or Blue Cross/Blue Shield, or through some form of commercial insurance. Of the three self-pay abortions, only one patient had paid her balance in full. One self-pay patient reflected an outstanding balance of $721.05, and the other showed an outstanding balance of $4,484.55. Similarly, three of the patients covered by a third party showed an outstanding balance for their procedures. Again, we note that to the extent that actual costs of the abortion procedure, either direct or indirect, go unpaid by the patient or third-party provider, there is a violation of Amendment 68. That being said, we note that the Committee failed to obtain a specific ruling from the trial court whether UAMS had in fact violated the preliminary injunction. The evidence that is contained in the letter, that charges have gone unpaid, is not necessarily dispositive of the issue of whether those patients paid for the costs of their procedure. The charges in those cases may have in fact exceeded the cost of the procedure. On the record before us, these facts are simply unknown. Thus, to the extent that there might be evidence suggesting that actual charges have gone unpaid in the past, we decline to reverse the chancellor's order and injunction on that ground. Affirmed. BROWN and THORNTON, J.J., not participating. JOANN C. MAXEY, Special Justice, joins in the opinion.