An Age-Old Concept Offers a Fresh Solution for a Hospital’s Debt Woes

A handout was the last thing the man sitting in Richard Batt’s office wanted.

The man, who was in his early 70s, had enjoyed a career as an accomplished and prize-winning writer. But the royalties had dried up, and he lacked health insurance to pay some hospital bills for his teenage son.

“He broke down in tears,” recalls Mr. Batt, president of Franklin Memorial Hospital, a 70-bed nonprofit facility in Farmington, Me. “He was embarrassed. He didn’t want to go the charity-care route.”

The man, out of options, finally agreed to enroll in the hospital’s charitable program and receive free care. But as their conversation shifted away from the man’s financial problems, Mr. Batt noted that the hospital had some writing needs for brochures and marketing materials. He asked the man if he might want to help out as a volunteer.

“His mood instantly changed,” Mr. Batt says. “I had just mentioned it because we were in need of some volunteer help, but he immediately viewed it as an exchange of services for the medical care. He figured he could offer us something he was good at. It removed the embarrassment of the situation.”

That encounter in 1996 planted the seed for a program that would ultimately go a long way toward solving two problems that had vexed the hospital for years: debt from patients unable or unwilling to pay their hospital bills and the need for more volunteers to work at the hospital.

That solution — a barter of services in return for medical care — is one that could be adapted successfully for a wide range of charities facing tight budgets and shortages of staff members and volunteers, says Mr. Batt.

A Community Commitment

In 1998, when Franklin Memorial officials brainstormed possible answers to the problem posed by uninsured patients, Mr. Batt brought up the encounter with the writer. Why, he suggested, couldn’t the hospital establish a systematic way in which patients or their families could work off outstanding hospital bills?

Today, that program, Contract for Care, involves more than 150 participants annually. It has reduced the hospital’s debt load, provided it with services that would have been costly, and facilitated good will in the hospital’s hometown and surrounding towns.

“An unexpected but phenomenal benefit of the program has been if you come through this area and mention Franklin Memorial Hospital, within the first three or four sentences people will mention the Contract for Care program,” Mr. Batt says. “People around here see our organization as phenomenally committed to this community. We are one of the poorest communities in Maine, yet we get unbelievable public support.”

Mr. Batt floated the Contract for Care idea in the wake of a health-care survey conducted in the Franklin Memorial Hospital region in 1997. The hospital had joined with other health and social-service organizations to compile specific information about the health-care needs of people who live in the towns served by the hospital. They interviewed scores of families that had neither private health insurance nor Medicare or Medicaid coverage. The most surprising finding was that the lack of health insurance had become so embedded in their lives, they had long ago stopped worrying about it.

“It wasn’t even on their radar screens,” Mr. Batt says. “These were some folks with such meager means that health insurance had become an irrelevant concept.”

That realization, he says, told him and other local health-care officials that they needed to develop more practical responses to the health-care problem instead of chasing the dream of insurance coverage for all. Instead, they needed to find ways to help people who would probably never have the means to pay their bills.

At the Franklin Memorial Hospital brainstorming session, Mr. Batt says, “I told the story of how that man had seen it as a noble thing to have a trade for services, and the folks at the table thought it was a terrific idea. Then the CFO and senior team had 5,000 reasons why this thing wouldn’t work.”

‘A Smile and a Handshake’

Indeed, such a program did face challenges. Foremost among them were tax concerns. The hospital was advised by lawyers that a barter of services would subject patients and their families who participated to federal taxes. The prospect of taxation would probably deter participants and create an oversight and accounting headache for the hospital.

The hospital found a solution by tapping into its existing volunteer system. Franklin’s lawyers determined that if both parties agreed that the work was being done on a volunteer basis, the tax obligation would be averted. This solution had the added advantage of allowing the hospital to use the resources of the already established volunteerism program, thus minimizing the cost of administering Contract for Care.

The barter program does not substitute for charity care given to low-income patients who are eligible for free services. Rather, it substitutes for the balance that some patients owe the hospital. “The participants agree to do the work, but we write off the bill completely no matter what,” Mr. Batt says. In other words, the participants agree on good faith to fulfill the agreement established by Contract for Care, but they are technically not required to complete the work. Yet, to date, nearly all the participants have honored their commitments.

“It’s kind of a smile and a handshake agreement,” says Jan Hannaford, the hospital’s director of volunteers. “By the time they walk through my door they are interested in giving back to the hospital for the services and care they received. These are not deadbeats. They want to know how they can help.”

Another initial concern the hospital faced was whether existing employees would see the program as a threat to their jobs. Hospital officials moved quickly to allay any concerns and answer questions.

“When we announced the program we assured everyone that no employee would be displaced and we would not use anyone in the program to cover work otherwise done by employees,” Mr. Batt says. “It was a nonissue. Everyone saw the program for what it was — a way to help the hospital and help people feel ennobled.”

Restored Dignity

Ms. Hannaford’s job is to determine what work the Contract for Care participants will do. She tries to match their interests and skills with the needs of the hospital. Participants have planted flowers and helped maintain the landscaped beds on the hospital grounds. Others have painted rooms. One participant with experience in automobile body work made repairs to some of the vehicles in the hospital’s small fleet.

The work can range from routine to remarkably creative. One woman painstakingly stitched a patchwork quilt that ended up hanging in the hospital’s pediatric-care unit.

“This was a quilt that would probably sell for about $2,000 on the market,” Ms. Hannaford says. “It was just beautiful, and the woman was really committed to doing it. It gave her the opportunity to feel like she was giving something back.”

Patty Jandreau entered the program last year to pay off her bills for testing and treatment related to a lung condition. The hospital reduced her original bill by 40 percent and then had Jandreau agree to volunteer to work off the rest of the bill. Ms. Jandreau is unable to work full time at age 51 because of her condition and has no health insurance. At the hospital, she agreed to work part time: in the mailroom, filing medical records, and clerking in the hospital gift shop.

“I view it as a win-win,” says Ms. Jandreau. “It gives you back some of your dignity to be able to work off your expenses. And it takes a lot of worry off your mind. You don’t have that bill hanging over your head. The hospital’s winning by getting all of that volunteer help.”

Although she openly discusses her involvement in Contract for Care, Ms. Jandreau appreciates the fact that the program is completely confidential. That way, she says, participants are treated just like any volunteer and are more apt to sign up. And once the agreement is made, hospital staff members don’t pressure participants. “I’ve found that money is never discussed. It is not like they are looking over your shoulder saying you owe such and such,” she says. “They really run it on the honor system.”

Financial Rewards

The program has taken a sizable bite out of the hospital’s debt load, says Mr. Batt. Through Contract for Care, bills that in the past may never have been paid can be written off the ledgers. The hospital also saves time and money by avoiding the often difficult and contentious bill-collection process.

Taking into account both skilled and unskilled labor, Mr. Batt says the hospital roughly estimates the average value of the work at $35 per hour. The figure, he says, is intended to enable participants to work off their bills in a reasonable amount of time. He hasn’t calculated the total benefit in donated services to date, but says it is considerable. Besides, Mr. Batt says, it is hard to put a price on the value of a grateful volunteer who reads to hospitalized children in the pediatrics unit for several hours each week.

Another benefit that is difficult to measure, he says, is the positive public relations the program has spawned. “We ran a capital campaign a few years back — it started right before September 11, 2001 — and we had a $2-million goal,” he says. “We weren’t sure what was going to happen, but we topped out at $2.3-million. We have phenomenal good will in this community, and I’m certain Contract for Care contributes to that.”

He says he is confident that the program — or a variation of it — could be successful in a wide range of nonprofit organizations that offer health-care or social services

“A program like this resonates,” Mr. Batt says. “It harkens back to a simpler time. This type of idea isn’t new — it’s centuries old. If you can’t pay cash, you pay with something else you can do.”