Given that most Americans cannot afford an unexpected $500 bill without going into debt, having financial assistance available and easily accessible is key for reducing the burden of medical debt in the U.S.

Check out our community benefit policy tracker to see the latest on how states are tackling hospital accountability on this issue!

Trends in financial assistance spending

Unfortunately, several recent reports show that spending on financial assistance (also known as “charity care”) appears to be declining among hospitals overall. A Modern Healthcare analysis found that hospitals’ median financial assistance spending as a percentage of operating expenses declined from 1.21% to 0.99% from 2020 to 2022. Although one might have expected financial assistance spending to increase due to the great need for emergency care during Covid-19, hospitals’ expenses also increased greatly from labor and other costs. 

Another 2023 study in Health Affairs found that on average, nonprofit hospital income grew from 2012-2019, but financial assistance declined slightly; in comparison, for-profit hospital spending on financial assistance more than doubled during that time.  

Hospitals also differ widely in the amount of free and discounted care they provide. For example, health systems like NYC Health+Hospitals devoted 6.85% of their expenses to financial assistance in 2022, while Baystate Health in Massachusetts spent only 0.16%, according to Modern Healthcare.

I’d like a refund, please

In Washington state, where there are additional state requirements for nonprofit hospitals, the Attorney General has been investigating certain health systems for inappropriately billing patients who should have qualified for free care. Recently, PeaceHealth System agreed to pay $13.4 million in refunds to thousands of patients who should have were eligible for free or discounted care but were billed anyway. This includes $4.2 million in direct refunds for more than 4,500 patients and up to $9.2 million in refunds for approximately 11,000 additional patients if they validate their income for eligibility. 

Requiring hospitals to refund patients who were billed erroneously is a growing trend. In Oregon, recent legislation requires hospitals to refund patients who paid for care when they were eligible for assistance. And Maryland is refunding patients who were billed for hospitals services from 2017-2021 when they could have qualified for free care.

Hospital sued patients who should have gotten free care

Some hospitals go beyond billing patients, bringing lawsuits to those unable to pay. Louisville Public Media recently reported that Norton Healthcare filed thousands of lawsuits for unpaid medical bills, despite many of those patients qualifying for free or discounted care. In many cases, patients are unaware they may be eligible for free care, or they face administrative barriers to assistance. 

Despite the established regulations around community investment and charity care, the lack of enforcement has resulted in crippling medical debt for thousands of Americans. Let’s hope the recent pressure policymakers and media are putting on hospitals will be encourage them to give more free care, in pursuit of their social mission. 

The post Policymakers and media put pressure on hospitals to give more free care appeared first on Lown Institute.

What is the hospital community benefit standard and why is it getting so much attention? If you want to get up to date fast on this key health policy issue, we’ve got you covered. Here are some of the most important things you need to know about community benefits…

1. Community benefit standard is a requirement for tax-exempt hospitals

Most hospitals in the US are private nonprofit hospitals that are exempt from most federal, state, and local taxes. For big hospitals that bring in billions in revenue and own many properties, that’s a huge benefit. Overall, it’s estimated that the nonprofit tax exemption is worth nearly $30 billion a year for the industry.

As a condition for their tax-exempt status, nonprofit hospitals have to offer financial assistance (free or discounted care, also known as charity care) to low-income patients and engage in other activities to promote community health. They have to report spending on these activities on their tax form 990.

That sounds like a fair trade–communities invest their tax dollars in hospitals, which provide charitable care and other programs back to the community. But here’s the kicker…

2. There is no minimum amount hospitals have to spend on community benefits

Under the Affordable Care Act, hospitals have to report their community benefit spending, but there is technically no minimum amount they have to spend to maintain their tax exemption. As a result, the amount hospitals spend on community benefits is extremely variable. One study found that the top-spending hospitals devote $0.18 of every dollar in expenditures to community benefits, while the lowest-spending give less than $0.01. A 2020 report from the Government Accountability Office identified 30 hospitals that reported no spending at all. 

In a trial last year, a Sutter Health executive said the quiet part out loud when they testified that giving financial assistance was not a requirement for being a nonprofit hospital. Nonprofit hospitals must have a financial assistance policy that outlines which patients are eligible for assistance, and they have to make this policy widely available. However, the way that hospitals implement this policy is up to them. Hospitals can create very generous financial assistance policies that presume people are eligible and offer free care upfront, or they can choose not to mention financial assistance to patients or put up obstacles like burdensome applications.

Because these requirements are pretty lax, maybe it’s not so surprising that…

3. Nonprofit hospitals don’t give more charity care than for-profits

Given the significant tax benefits that nonprofit hospitals receive, one would expect that as a group, they outspend for-profit hospitals substantially. But research shows that isn’t the case. Several recent analyses of hospital spending on financial assistance using hospital cost reports show that overall, nonprofits don’t spend significantly more on financial assistance than for-profits do. In fact, two of these studies found that nonprofits spend slightly less than for-profits.

This may be because for-profit hospitals are located in areas with higher need for free care, or that hospitals that serve disproportionately more low-income patients are more likely to suffer financially and get bought by a for-profit system. Whatever the reason, it’s worth examining why for-profits appear to be outspending their nonprofit counterparts on charity care.

But there are more types of community benefit spending than just financial assistance, right? Let’s talk about that.

4. Not all community benefit categories are equally meaningful

When you imagine programs to improve community health, you might think of free immunizations, health fairs and educational classes, food pantries and other nutritional assistance, investments in affordable housing, healthcare for the homeless, etc. However, these types of programs actually make up only a small fraction of what hospitals report as community benefit spending.

The IRS 990 form includes eight types of community benefit spending hospitals can report. Some of these categories, such as community health improvement services, community building activities, and contributions to community groups, incorporate the types of programs one would expect to see hospitals undertaking to improve community health and social conditions. Of all the community benefit spending reported, less than 8% goes to these categories.

Where does the rest go? About 20% goes to financial assistance, or charity care. But the largest single proportion is reported as Medicaid shortfall, or the difference between what Medicaid pays hospitals and their cost of care. It’s incredibly important that hospitals care for patients with Medicaid, but the “shortfall” they report is not spending that goes into tangible community programs or the pockets of patients. Hospitals offer discounts on care to insurers all the time based on their negotiations, but these aren’t considered community benefits–why should Medicaid discounts be different? Most hospitals already make up this shortfall from public insurers by charging private insurers more than the cost of care.

Another large category of community benefit spending is health professions training and research. We are in a provider shortage and clearly training medical professionals is a public good. But hospitals’ spending on this training doesn’t necessarily align with community need. There’s no guarantee that the doctors and nurses training at a medical school will go on to work in underserved areas or specialties like primary care; in fact, most of them don’t. Medical research is also undoubtedly good for society, but hospitals already receive funding for research from the government and other sources. Even if this research is fully funded, hospitals can still report it as a community benefit.

(For more on the different categories of community benefit, check out our op-ed in Stat News.)

How can it be that so much reported community benefit spending isn’t directly related to community health needs? This issue stems from a key disconnect in the community benefit standard…

5) Community benefit spending does not have to be connected to community health needs

Under the Affordable Care Act, hospitals have to create a community health needs assessment (CHNA) every three years that identifies the most important health needs in their community. Hospitals spend a significant amount of time and resources to conduct the CHNA and understand what barriers are keeping their communities from living their healthiest lives.

Hospitals are then supposed to create an implementation plan that explains what measures they will take to address these health needs. But there is no requirement that hospitals spend a certain amount on these programs, or even report specifically how much they are spending on the implementation. In fact, one study found that 42% of hospital CHNAs don’t include any information on how their community benefit programs have impacted health needs thus far.

This disconnect can lead to situations like in Atlanta, where Wellstar Health System identified access to care as a key health need for the Atlanta area in their CHNA, then proceeded to close both of their Atlanta hospitals.

***

The hospital community benefit has enormous potential to make a difference in community health and financial well-being. If all hospitals invested heavily in financial assistance and community health programs, we would undoubtedly see less medical debt burden and improved outcomes. However, the current regulatory landscape gives hospitals little incentive to reach this potential. Clearly there needs to be more transparency and accountability on this issue, so we’re happy to see both federal and state policymakers stepping up and taking action.

For more on how states are addressing hospital community benefit spending, check out our Fair Share Spending event featuring health policy leaders from Oregon, Pennsylvania, California, and Colorado.

The post 5 things you need to know about hospital community benefit spending appeared first on Lown Institute.

Watch the Lown Institute’s discussion of the latest fair share data with state policymakers below! And view the full results on the Lown Hospitals Index website.

Fair Share Spending, 2023 from Lown Institute on Vimeo.

Meet the panelists

Vikas Saini, MD

President, Lown Institute

Vikas Saini, MD, president of the Lown Institute, is a clinical cardiologist trained by Dr. Bernard Lown at Harvard. He also serves as co-chair of the Right Care Alliance, a grassroots network of clinicians, patient activists, and community leaders organizing to put patients, not profits, at the heart of health care.

Dr. Saini is an expert on the optimal medical management of cardiologic conditions, medical overuse, hospital performance and evaluation, and health equity. He has spoken and presented research at professional meetings around the world, and has been quoted in numerous print media, radio, and television.

Naman Shah, MD, PhD

Director, Division of Medical and Dental Affairs, Los Angeles County Department of Public Health

Naman Shah is a family physician and epidemiologist at the Los Angeles County Department of Public Health. He leads the Division of Medical and Dental Affairs which supports innovative and just healthcare within the department and in LA County. Naman completed residency training at Contra Costa County Regional Medical Center and received his MD and PhD from the University of North Carolina at Chapel Hill.

Lisa Frank

Chief Operating and Administrative Officer, The City of Pittsburgh

As Chief Operating and Administrative Officer for the City of Pittsburgh under Mayor Ed Gainey, Lisa Frank is responsible for helping residents imagine, build and maintain a city where everyone can be safe and thrive. Prior to joining the Gainey Administration, Lisa served as Executive Vice President for Strategic Campaigns at SEIU Healthcare Pennsylvania, Pennsylvania’s largest union of healthcare workers. In recognition of her work in public health, Lisa was appointed by Governor Wolf to the Pennsylvania Health Care Cost Containment Council and the Health Policy Board of the Department of Health. She currently serves on the boards of the Pennsylvania Health Access Network and Pennsylvania United, and is a member of the Action Council of Planned Parenthood of Western Pennsylvania.

Steven Ranzoni, MPH

Hospital Policy Advisor, Oregon Health Authority

Steven Ranzoni is a hospital policy adviser and program manager of the hospital reporting program at the Oregon Health Authority. The hospital reporting program collects and reports on hospital financial, community benefit, and discharge data. Most recently, Steven has led the hospital reporting program in implementing Oregon’s new community benefit minimum spending floor program.

Nancy Dolson

Special Financing Division Director, Colorado Department of Health Care Policy and Financing

Nancy Dolson is the Director of the Special Financing Division at the Department of Health Care Policy and Financing and a member of the Department’s Executive Leadership Team. In her role, Ms. Dolson directs and oversees hospital incentive programs, hospital financial and community benefit reporting and analysis, The Primary Care Fund, Hospitals’ Discounted Care, the Colorado Dental Health Care Program for Low-Income Seniors, and additional Medicaid funding for local governments.

Ms. Dolson is a Colorado native and mother of two college students, holds a Bachelor of Arts from Colorado State University, and has served at the Department for 19 years.  

The post WATCH: Which hospitals are spending their fair share on communities? appeared first on Lown Institute.

Hospital board members do have a fiduciary responsibility to the organization, but their professional experience and knowledge will shape how they pursue their priorities. For example, hospitals lacking physician representation on their boards are associated with lower measures of quality of care. Simultaneously, having board members with medical occupational backgrounds in both for-profit and nonprofit hospitals correlates to higher community benefit spending, primarily uncompensated care. This is hugely impactful; our data at the Lown Institute shows that in 2019, nonprofit hospitals nationally had an $18.4 billion deficit between their community investments and the estimated value of their tax breaks. 

Professional training and experience of board members can shape how they prioritize their resource allocation. And when it comes down to profits or vulnerable patients, it has been shown time and time again that profits usually win. To change the choices a hospital board makes, it may be necessary to change the composition of the board.

Many physicians truly internalize their oath to do no harm; they continue to view the patient as the most important stakeholder in the healthcare business. Other clinical staff like nurses, who spend the majority of their time working directly with patients, have valuable unique insights and skills to bring to a hospital board. Including nurses on hospital boards could also have the beneficial side effect of demonstrating to the nursing workforce that their voices and insights are valued. 

The “People’s Hospital” – a past vision that deserves resurrection

In addition to healthcare professionals, another type of stakeholder is often missing from the decision-making – community members.

In July 1970, the activist group the Young Lords occupied Lincoln Hospital in the South Bronx in protest of the unsafe, overcrowded conditions (the hospital was locally known as the “butcher shop”). These young activists seized the building for 12 hours, making concrete demands that rippled out and became one of the first patient’s bill of rights. Their vision was a “People’s Hospital,” one that provided quality, accessible care with respect and dignity to all members of the community, including staff. Accountability to the community has paid off for Lincoln Medical Center; the hospital is one of the top-ranked hospitals for equity and inclusion on the Lown Hospitals Index.

That’s a vision we’re still working towards today. Consider Massachusetts General Brigham, one of the largest hospital systems in the country. On Thursday, residents and fellows announced their intent to unionize, with demands very similar to those of the Young Lords. Perhaps with more board-level representation, healthcare workers and community members can together change the priorities of our hospitals and healthcare system for the better.

The post <strong>Priorities on the Board: Board member backgrounds and hospital social responsibility</strong> appeared first on Lown Institute.

“If hospitals have to base their decisions on revenue rather than population health needs, then these are the results we get.”

– Dr. Vikas Saini, President of the Lown Institute

Nonprofit hospitals are exempt from most taxes, and in exchange are required to report their spending on financial assistance and other community investments. But how much do hospitals actually give back, and which ones give back the most? It’s not necessarily the ones you might think, Saini and Garber explain.   

“It’s often the hospitals with the least financial resources that are providing the most in terms of fair share spending,” said Garber. That’s partly because hospitals that are wealthy get that way by targeting privately insured patients, rather than patients with public insurance or no insurance. “These outcomes are the outcomes of the system as it was designed. Different people and different procedures have different dollar values,” said Saini.  

According to Lown Institute research, many of the largest hospital systems with plentiful financial resources fail to give back their fair share, leaving hundreds of millions in potential community investment unspent.  

Our experts offer 3 suggestions on how to remedy this:

1. Reporting needs to be useful. Right now, the IRS has so many categories and it’s difficult to track how spending corresponds with community health needs. To fix the system, we need to be able to understand what spending is already happening–or not.
2. States should step up and legislate community benefit spending. Oregon, for example, recently established a minimum level of spending and is calculating thresholds for each hospital. 
3. Return power to the community. All of this spending information should be aggregated and compared with the results of frequent community health needs assessments. There could be a separate entity of community members overseeing and ensuring that spending matches the needs of the community.

Listen to the entire podcast at Relentless Health Value.

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