Nonprofit hospitals with healthiest finances offer little charity care

(Reuters Health) – Among nonprofit hospitals, those with the highest net incomes tend to devote the smallest proportion of their earnings to providing free care to uninsured patients and low-income people who struggle to pay their bills, a U.S. study suggests.

Overall in 2017, the study found, nonprofit hospitals nationwide generated $47.9 billion in net income, provided $9.7 billion in charity care to uninsured patients and spent another $4.5 billion in charity care for people with insurance who couldn’t afford their bills.

For every $100 of net income, the top earning hospitals devoted just $11.50 to charity care for the uninsured and $5.10 to free care for other low-income individuals.

By contrast, the lowest-earning hospitals – most of which had net losses – dedicated $72.30 of every $100 of net income to charity care for the uninsured and another $40.90 to free care for other low-income patients.

“Patients’ socioeconomic background and insurance status influence the hospital’s charity care provision, but hospitals still have substantial discretion in determining how much charity care to provide, and more charity care will make a dent in their bottom line,” said lead study author Ge Bai of the Johns Hopkins Carey Business School and the Johns Hopkins Bloomberg School of Public Health in Baltimore.

“I don’t think we should say that hospitals with the best finances provided the least charity care,” Bai said by email. “Instead, we can say that hospitals with the best finances provided disproportionally low charity care.”

Hospitals qualify for nonprofit status – which exempts them from paying income, property and sales taxes – in exchange for providing charity care and other community services.

The study results suggest that many hospitals may be in a financial position to provide more free care, the researchers conclude in JAMA Internal Medicine.

With charity care, patients don’t receive any bills. With other forms of discounts or financial assistance – which hospitals may classify on their balance sheets as so-called uncompensated care or bad debt – patients may still receive bills and have unpaid bills sent to collections.

“Uninsured and underinsured patients facing financial difficulty should check the hospital’s financial assistance policy to understand if they are eligible for charity care,” Bai said. “Most nonprofit hospitals, based on their own policy, can write off the full or partial amount of the out-of-pocket expenditure for uninsured and underinsured patients.”

To assess hospitals’ spending on charity care, researchers examined Medicare cost reports. These reports aren’t audited, however, and may not offer a complete picture of hospital finances, the study team notes.

It’s also not clear from the study whether differences in the patient populations at individual hospitals – or the level of affluence in communities they serve – might impact how much charity care is needed or provided, said Dr. Anupam Jena, a researcher at Harvard Medical School in Boston who wasn’t involved in the study.

For example, if fewer patients need charity care in higher net income hospitals, that fact alone could explain the findings, rather than less generosity on the part of these hospitals, Jena said by email.

“This might have been addressed by accounting for variables like the percent of the hospital’s patient population on Medicaid, average income, average education, average unemployment, i.e., factors that could help answer whether the observed behavior in hospitals with higher net income reflects differences in generosity vs differences in the patients that are treated,” Jena said.

SOURCE: bit.ly/2HtfdpB JAMA Internal Medicine, online February 17, 2020.