Fri. May 20th, 2022
non-profit hospitals
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According to a recent study led by NC State Treasurer Dale Folwell, some non-profit hospitals in North Carolina billed poor patients at a rate as much as three times the national average. Folwell held a press conference attended by a bi-partisan group of NC legislators who now demand accountability. The lawmakers who participated in the press conference with Folwell, a Republican, included Representative Ed Goodwin (R – Bertie), Representative Howard Hunter (D – Hertford), Senator Jay Chaudhuri (D-Wake), and Senator Jim Burgin (R – Johnston).

Treasurer Folwell asked the National Academy of State Health Policy researchers to extend their expert analysis of hospitals to North Carolina. They partnered with the North Carolina State Health Plan. Their research found that failures in charity care, extended to poor patients, resulted in medical debt. Dr. Vivian Ho, a James A. Baker Institute Chair in Health Economics at Rice University, peer-reviewed the study.

Dr. Ho summed up her analysis with this statement:

“Nonprofit hospitals are shielded from taxes with the expectation that they will direct their resources toward local community benefit. I am disturbed by how many North Carolina nonprofits are abusing that privilege to boost their profits at the expense of average citizens struggling to make a living.”

Dr. Vivian Ho, James A. Baker Institute Chair | Rice University

Some of NC’s non-profit hospitals billed as much as $149.2 million to poor patients who qualified for discounted or free care under the hospital’s guidelines during the 2019 fiscal year. But it gets worse–that number underestimates and accounts for only one out of six hospitals across the Tarheel State.

According to a chart published by the State Health Plan for Teachers and State Employees, Vidant Health Systems is a non-profit, charitable hospital with tax-exempt status. Folwell’s press release did not mention Vidant specifically.

Folwell Issued This Statement About Non-Profit Hospitals Overbilling Charity Care-Eligible Patients

Failures in charity care have real consequences for real patients – especially those with low or fixed incomes, who should be protected instead of punished. Only one in five hospitals’ charity care justified their tax breaks. Instead, some hospitals sent out bills to the most vulnerable residents of our state. These patients can’t afford these bills — and most couldn’t even find out what their bill was until it was too late.”

NC State Treasurer Dale Folwell

How Medical Collections Work

When patients ineligible for charity care cannot afford to pay their debt, hospitals begin collections proceedings. They turn patients over to credit bureaus, damaging their credit scores. Besides that, tactics include wage garnishments, lawsuits, or encouraging them to sign up for high-interest medical credit cards to cover the bill. Also, hospitals refer some debt to aggressive collection agencies. If a hospital gives up on the debt, they write it off as bad debt.

Charity care should protect patients from these collections actions. However, the Internal Revenue Service does not regulate the threshold for charity care spending or eligibility.

In North Carolina, as much as 28.7 percent of bad hospital debt billed out to poor patients who were likely eligible for charity care during the fiscal year 2019. The report also noted a possible increase in billing poor patients during the pandemic.

This spike is disturbing because while consumer debt rose during the pandemic, some of the largest hospitals reaped rising profits due to federal bail-outs during the same period.

Folwell wants transparency on this, stating:

“When we tried to make health care more affordable for teachers, state and local employees and their families, hospitals justified overcharging patients and taxpayers by pointing to charity care,” said Treasurer Folwell. “We need to hold these multimillion-dollar executives and their multibillion-dollar nonprofits accountable for how they treat the invisible men and women of North Carolina.”

Dale Folwell, NC State Treasurer

Key Findings of the Study on NC Non-Profit Hospital Collections

Here are some of the critical components that have Folwell and the bi-partisan group of legislators raising their eyebrows.

North Carolina non-profit hospitals have very little accountability regarding bad debt and charity care:

  • Neither the State of North Carolina nor the federal government requires a minimum threshold for charity care eligibility or community benefit.
  • The IRS cannot show that it reviews hospitals’ community benefits consistently.

Instead of providing charity care to poor patients with their $1.8 billion in tax breaks, some health care systems are billing them:

  • NC non-profit hospitals should have provided 11.9 to 28.7 percent of their bad debt as charity care during the 2019 fiscal year. However, the rate is almost three times the 10 percent national average.
  • Some non-profit hospitals encouraged patients to obtain and place hospital debt on high-interest credit cards.
  • For patients who do not qualify for charity care, non-profit hospitals use aggressive collection tactics.
  • Eighteen non-profit hospitals billed up to $150 million to patients who should have been eligible to receive charity care under their policies. Also, note this is an underestimate. That is because only 16 percent of NC hospitals provided data. Indeed, some did not publish any data at all.

The pandemic will only exacerbate the growing hospital debt problem:

  • One out of every five families across North Carolina had medical debt collection in 2020, says the Urban Institute. The Urban Institute’s map reveals that the percentage of Bertie residents with medical debt is far higher–currently 45%.
  • Non-profit hospitals estimate that the bad debt eligible for charity care for fiscal year 2020 outpaces 2019. They believe it averages 31 to 48 percent of their bad debt. However, they keep little data.

The lines between for-profit and non-profit hospitals appear blurry

  • Without transparency, the lines between non-profit and for-profit hospitals become less distinguishable.
  • Only one out of five non-profit hospitals provided enough charity care to equal their total tax exemptions in the fiscal year 2019.
  • North Carolina’s hospitals reported profit more than three times than the national averages. However, they do not pass the savings down to their patients.
  • In addition, some non-profit hospitals billed as much as 80 percent of their bad debt to disadvantaged patients. However, they should have qualified for charity care.

How Non-Profit Hospitals Become More Accountable

Folwell and the North Carolina legislators who attended the press conference want to push for more accountability.

There is a template for this–other states that require hospitals to justify their tax exemptions with community benefits.

For example, UtahIllinoisOregon, and Nevada require a minimum threshold for community benefit spending. Moreover, Pennsylvania instituted defined standards while California mandated a more generous eligibility policy for charity care. 

Folwell called on the North Carolina General Assembly to follow the examples of those states and accountability for non-profit hospitals.

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