November 7, 2024

Two new reports throw light on the level of charity care actually provided by nonprofit hospitals in the US.

As noted in US Nonprofit Hospitals Have Widely Varying Criteria To Decide Who Qualifies For Free And Discounted Charity Care (Luke Messac, Alexander T. Janke, Lisa Herrup Rogers, Imani Fonfield, Jared Walker, Elijah Rushbanks, Nora V. Becker, and Ge Bai, US Nonprofit Hospitals Have Widely Varying Criteria To Decide Who Qualifies For Free And Discounted Charity Care, Health Affairs 2024 43:11, 1569-1577):

“Hospital charity care is the provision of free or discounted services to low-income patients.⁵ Historically, a large part of the justification for nonprofit hospitals’ tax-exempt status rests on their provision of charity care to low-income patients. The Affordable Care Act required nonprofit hospitals to have a written and publicly available financial assistance policy but did not specify how much charity care a hospital must provide, or what the eligibility policy should be.”

The amount of care provided varies as does the manner in which such care is defined by hospital systems. According to the authors, “In this nationwide analysis of private nonprofit hospitals’ charity care policies, we found that in the absence of any federal regulations specifying charity care eligibility criteria, hospitals have chosen numerous and widely varying criteria to decide who qualifies for free and discounted charity care. This large variation results in disparities in access to charity care and warrants attention from state and federal policy makers interested in improving both nonprofit hospitals’ accountability to taxpayers and low-income patients’ access to charity care.”

Among their findings:

“We found that a majority of hospitals (54 percent) investigated assets in determining eligibility for charity care. Some hospitals did take steps to mitigate potential harm from this requirement by excluding necessities such as primary residence, retirement savings, and vehicles used for basic transportation when measuring assets.

“Most hospitals also reported significant documentation requirements. Such requirements are likely part of the reason why, in a survey of 1,600 patients, Dollar For found that roughly one-quarter of patients who had applied for charity care believed the application to be “somewhat hard” or “very hard.”¹⁹ Patients convalescing from hospitalizations are particularly vulnerable to administrative burdens such as documentation, which still must often be submitted in hard copy through the mail or by using a fax machine.

“A sizable minority of hospitals reported residency requirements and restrictions on charity care for insured patients. Although hospitals did generally allow charity care in cases of hardship, this criterion tended to be rather strict. The median hospital required a bill to amount to 20 percent of the patient’s income before consideration was granted on this basis.”

A new report from Rice University’s Baker Institute for Public Policy examines nonprofit hospitals and charity care in the state of Texas. As noted in Nonprofit Hospitals and Medical Debt in Texas (Derek Jenkins, Nonprofit Hospitals and Medical Debt in Texas, October 31, 2024, Baker Institute for Public Policy), “In Texas, hospitals typically offer free care to families earning 200–300% of the FPL and discounted care to those earning between 400–500% of the FPL. While the eligibility requirements are set by hospitals, the IRS also requires that these eligibility requirements are readily available to patients. These requirements are usually posted on the hospital’s website. In most cases, hospitals require eligible patients to apply for financial assistance.”

Unfortunately, it’s difficult to determine the actual level of so-called bad debt attributable to patients who qualify for charity care. According to the report:

“IRS Form 990 federal tax filings are completed at the employer identification number (EIN) level. Some hospitals file as a system or a group, while others file independently. As a result, occasionally bad debt data is not available for individual hospitals, although charity care and profit margins are always presented at the hospital level. 

“The share of total bad debt expense that Texas hospitals estimated was attributable to patients qualifying for charity care ranged from 0% to as much as 84.9% in 2019. This represents $127 million dollars in total bad debt for patients who should have received such assistance. This figure likely underestimates the situation. Of the 111 nonprofit hospitals in our sample, only 32 reported any amount (greater than $0) for bad debt tied to patients eligible for charity care on their filings. Thirty-five hospitals reported $0, and for 44, we were unable to identify any such data. For hospitals that reported more than $0, the bad debt for these patients represents 14.7% percent of all bad debt. If we include hospitals that estimated $0, this share falls to 5.4%.

“Beyond the lack of reporting on bad debts, there is also uncertainty about how these estimates are calculated. Hospitals are required to report their estimation methods, but many simply estimate a percentage of bad debt attributable to patients eligible for charity care. Baptist Hospitals of Southeast Texas, which includes Baptist Beaumont (Table 1), estimates that 25% of bad debt is attributable to eligible patients, and explains the estimation process as follows: ‘The business office estimates the percentage of patients that would qualify for assistance based on conversations with those patients that do not complete the application.'”

The report concludes:

“Data availability was a significant limitation of this study. Reporting of bad debt attributable to patients eligible for charity care is sporadic and unreliable. The IRS allows hospitals to use multiple methods to estimate bad debt and charity spending, which makes comparisons difficult.

“• Although Texas hospitals provide relatively high levels of charity care compared to the rest of the country, patients who should have been eligible for charity care accounted for 5.4% to 14.7% of total bad debt.

“• Many Texas hospitals left the charity care field blank on their IRS Form 990 federal tax filings. Even when hospitals did report estimates, most claimed that no patients eligible under their policies received a bill.

“• Hospitals report their methods for estimating bad debt attributable to patients eligible for charity care on their Form 990 tax filings.

“• Many hospitals that report $0 in this field seem to assume that all patients eligible must have applied for financial assistance, because financial assistance policies are posted near registration areas and available online.”

World Health Systems Facts is a project of the Real Reporting Foundation. We provide reliable statistics and other data from authoritative sources regarding health systems and policies in the US and sixteen other OECD member nations.

Page last updated November 7, 2024 by Doug McVay, Editor.