Non-Profit Hospitals Deal with Financial Stress

Kaiser Health News reports on a Columbus, Ohio patient “Sued Over an $1800 Hospital Bill”.


Find this article at Kaiser Health News: http://www.kaiserhealthnews.org/Stories/2012/April/27/charity-care-nonprofit-hospitals-patient-debt.aspx.

Here is a story of a working family, “living paycheck to paycheck” and a debt collector for a local non-profit hospital demanding a minimum payment of $400 instead of the $20 the patient Lori Duff said she could afford to pay at the time.

KHN reports that “Duff was likely eligible for free care under the Mount Carmel Health System’s financial assistance policy, which offers medical care at no charge for patients earning less than 200 percent of the federal poverty level. But the debt collector kept calling and soon informed her that the hospital was planning to sue her for the money.”

Duff was one of nearly 1,600 people Mount Carmel sued in county court between 2009 and 2011. Most of them were patients like Duff who did not pay their medical bills. And apparently Duff was doing the right thing. When she became pregnant, she went straight to the local hospital to make sure mother and child were healthy and safe. “She assumed the care would be provided for free, either through an emergency Medicaid option offered to pregnant women or through the hospital’s financial assistance policy. But then, a few months after Henry was born, she started getting the letters and phone calls from the debt collector.”

Often, patients who have filled out financial assistance applications while at the hospital, assume their bills will be covered, and do not learn they owe money until collection agents begin calling.

So here’s the point of the article: Nonprofit hospitals, which pay no federal, state or local taxes (“giving them a competitive edge over their for-profit counterparts”) are “expected” to offer a free and discounted care for low-income patients. But even as more and more Americans need extra help after losing their jobs and health insurance in the recession, studies suggest that on average, nonprofits provide only slightly more free and reduced-cost care than for-profit hospitals.

Patient advocates argue the line dividing nonprofit hospitals and for-profit hospitals, which do not receive the tax exemption, has blurred.

The hospital in question doesn’t dispute its efforts to collect payments after services rendered. The health system's mission is to provide care to everyone, regardless of their ability to pay, explains the VP for patient financial services: "In order to provide charity in the community—and we provide a lot and do a lot of good – we have to collect payment from those who can afford to pay us."

The tax code requires nonprofits to provide a "community benefit" to maintain their federal tax exemption. An important part of that benefit is free and reduced cost care for the poor, though the requirement is not specific about how much is expected. The article cites a 2006 study by the Congressional Budget Office found that on average, nonprofits provide only slightly more uncompensated care than for-profit hospitals. On the other hand, the article also cites a separate study by the Internal Revenue Service of more than 500 nonprofit hospitals. That study suggests non-profits do more than their share: it found that 9 percent of hospitals provided 60 percent of all charity care.

Provisions in the 2010 health care law crafted by Sen. Chuck Grassley, R-Iowa and Sen. Max Baucus, D-Mont require non-profit hospitals to publicize their financial assistance policies and prohibits them from charging higher rates to uninsured patients or taking extreme collections efforts against patients who may qualify for free care.

Specifically, new rules that went into effect last year under the new health care law:

1) Prohibit non-profit hospitals from charging uninsured low-income patients higher rates that the lowest amounts billed to individuals with insurance

2) Require non-profits to have clearly written financial assistance policy describing who is eligible for free or reduced cost care (The policy must be widely publicized in the community served by the hospital.)

3) Prohibit non-profits from enforcing “extraordinary collections actions” against patients before determining whether the patient qualifies for financial assistance

4) Require non-profits to conduct assessments of the health needs of the community they serve and implement a strategy to meet those needs

The American Hospital Association says that non-profit hospitals support more transparency on these policies. The KHN reports that “the AHA estimates that nonprofit hospitals spend an average of 11 percent of their total expenses on benefits to their communities, though the calculation also includes bad debt, which they have tried and failed to collect, and shortfalls from the rates paid by Medicaid and Medicare, which hospitals say do not cover their costs.”

Given this, it’s worth considering a recent Moody’s report on the non-profit sector as well.

Reuters reports: “Nonprofit US hospitals to do more with less.” Find the article here: http://www.reuters.com/article/2012/05/09/us-usa-healthcare-nonprofits-idUSBRE84805520120509.

Here is the problem: “Nonprofit hospitals in the United States face a future of rising costs and dwindling funds as the healthcare reform is implemented and the Congress battles over the budget”.

Here is the solution: “To survive what the rating agency is calling a "transition period," the hospitals, which frequently provide free or discounted care for lower-income patients, will have to drastically cut spending.”

And the source of the problem, according to Moody’s: “At the heart of the matter lies Medicare, the health insurance program for seniors which currently serves 49 million beneficiaries. Last month, an annual federal report on the Medicare fund found it is headed for exhaustion in 2024. Costs for the $549 billion-a-year program will likely leap from about 3.7 percent of gross domestic product in 2011 to 5.7 percent by 2035. Moody's said some of the health reform law's changes to how Medicare pays for procedures will stress nonprofit hospitals' finances. The law, which the Supreme Court could overturn in coming months, has lowered annual increases to Medicare payment rates.”

The article is written by Jenny Gold of Kaiser Health News. Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a non-profit, non-partisan health policy research and communication organization not affiliated with Kaiser Permanente. The story was produced in collaboration with NPR, National Public Radio.