Not-for-profit hospitals are supposed to help taxpayers by providing free or discounted care for those most in need—but that's not happening.
The top not-for-profit hospitals by quartile performance are providing disproportionately less charity care to the public than hospitals that perform worse financially, according an analysis of 2,563 of not-for-profit hospitals published in JAMA.
As reported by Modern Healthcare, the study found that hospitals exempt from income, property and sales taxes brought in $47.9 billion in net income in 2017. They provided charity care for the uninsured totaling $9.7 billion, and $4.5 billion for the insured who couldn't pay their bills and deductibles without help.
That amounted to $11.50 in charity care for the uninsured and $5.10 for the insured for every $100 of their overall net income from the top quartile of hospitals by financial performance, while the third quartile of hospitals, many of which recorded financial losses, substantially outdid them in charity care: they provided $72.30 for the uninsured and $40.90 for the insured for every $100 of their net income.
Ge Bai, lead author of the study and an associate professor of accounting and health policy and management at Johns Hopkins University, noted that not-for-profit hospitals are supposed to help taxpayers by providing free or discounted care for those most in need—but that's not happening.
"There is a corporatization of not-for-profit healthcare," said Bai. "Profit motives dominate their charitable mission in many cases."
And since the poor often end up on welfare because of inability to pay medical bills, that's actually increasing the load on taxpayers, she explained in the report, adding that this also contradicts the mission of not-for-profits.
The expansion of not-for-profit hospital systems is contributing to the problem as taxpayers and policymakers are putting more pressure on not-for-profit health systems "to do more to prove they are earning their tax exemptions," says the report.
Just 1.4 percent of their operating revenue in fiscal 2016 was devoted to charity care by the 20 largest health systems, which is about the same amount as in the prior year. And in 2015, uncompensated care—the total of outstanding bills and free or discounted care—as a percentage of total expenses dropped to a 25-year low, according to figures from the hospital lobbying organization American Hospital Association. AHA no longer tracks that metric.
AHA also says that the study is flawed, criticizing its lack of focus on Medicaid and Medicare underpayments, as well as failing to include community benefit spending, and cited its own analysis that reflects more positive benefits to communities than does the JAMA-published study.
In addition, executive salaries are on the rise, along with lawsuits by not-for-profit hospitals against patients for unpaid bills.
"We must make sure consolidation is not purely profit driven," said Bai. "Not-for-profits could have lowered their prices and adjusted their financial-assistance policies to provide more charity care instead of accumulating more hospitals, more profit and increasing prices."
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Marlene Satter
Marlene Y. Satter has worked in and written about the financial industry for decades.
