Healthcare Reform - Charitable Hospitals Can Do Better

February 16, 2023

Feb 16, 2023

Good Day Healthcare Advocates

I am so thankful for all of you and for the actions you take to move us towards a universal healthcare system. Some of the topics in work are:

The current state of healthcare providers and the potential impact of Universal Healthcare on them
How Universal Healthcare affects the insurance industry (it’s not what you think)
Rural healthcare challenges
Hospice Fraud revisited - this is worse than was reported

Please send topics to me via the chat button and I will research and report. If you need assistance in other ways, lectures, presentations, etc. Just let me know, I’m happy to help.

Current State - Hospitals Tax Exempt Status

There are several different classifications of hospitals in the US. according to the Journal of the American Medical Society (JAMA). The 6000 or so hospitals are broken into the following categories. There are about 200 federal hospitals for the military and veterans and specific populations. There are about 400 non-federal psychiatric hospitals. There are a few non-federal long-term care facilities and then there are Community (Acute) hospitals (approx 5139). Let’s focus on those. BTW acute means short term care. The community acute hospitals can be divided into for profit (1/3) and non-profit(2/3).

Well it turns out that on average, for profit hospitals donate 3.8% of their earnings to charity, while non profits average 2.3% a part of those percentages is to cover bills for those who cannot pay . And this really does get worse. In order to be a tax-exempt business you must satisfy a variety of IRS regulations and state regulations. As part of the Affordable Care Act hospitals were given additional regulations with which to comply (link). Part of those regulations include proving that you are providing benefit to the community.

Back to Hospitals

Many hospitals accumulate tremendous wealth. They often become the largest and richest employer in their community. About $25B each year in taxes is forgiven to non profit hospitals at the federal and local levels.

Remember that code of conduct, the community benefit standard the IRS put in place. It is regularly abused. Often hospitals will advertise their services to the public at press conferences on TV, radio, and billboard ads, as community benefits. They are using their advertising budget to do double duty as public good. They can and do use their surplus funds to build new facilities in wealthy neighborhoods. They are serving the community but are they leaving others behind in poor health?

They are required to use surplus funds to advance medical training, education, and research. But those activities should be required to align with long-term community goals. In a rural hospital that might mean focusing more on advances in primary care delivery rather than other areas.

They are required to set billing and collection limits. That’s a start and some of the most egregious collection actions are restricted, like seizure of assets. It would be far better if they set billing and collection limits that were not punitive. There should be no collections until there has been an assessment for financial assistance. Right now that’s not in the mix.

Moreover, right now they are merely required to have documentation on financial assistance on their website. It would be better if it were readily available at the point of service provided by counselors who can actually help. That’s in the ER/hospital helping immediately, not leaving it up to the patient to try and figure out, if they think of it at all.

Personally, I have been handed a bill (copay) for many thousands and paid it. A friend at the hospital later told me that all I had to do was call the billing office and say it was too high and let them figure something out. How do you know this kind of stuff?

It would also be a good idea for hospitals to demonstrate that they spend some of their surplus funds in the community addressing social determinants of health. That means in the neighborhoods, at schools and workplaces in their community trying to improve the health of the residents. Investing to address poverty, homelessness and other causes of poor health can have a huge impact on the community.

Summary

The ACA tightened up the IRS regulations for tax exempt hospitals. But it is still a shameful situation that they can accumulate large surpluses and offer less help to the community than for profit hospitals. The IRS regulations need to be tightened up so that more of the surpluses are available to help those unable to pay making collections the last resort after considering charitable funds. The hospital must also align its research and education activities to help the community they are in and address the social determinants of health.

What You Can Do

You can cut and paste the text below into an email to the president and your senators and your representative or use it in phone calls. (feel free to personalize it) or use RESISTBOT to send an email to the president and your senators and your representative.

RESISTBOT Text “SIGN PURPJJ” to 50409

As your constituent I want you to know that nonprofit hospitals only provide about 2.3% of their surplus to the community. Part of the problem is that the IRS 501(c)3 standards for charitable hospitals are weak and need to be tightened up.

Many people wind up in debt or bankrupt because charitable funds from hospitals were not made available to patients and debts were sent to collection. 65% of all bankruptcies are medical. You can fix this by ensuring that hospitals evaluate the debt for charitable help before they sell the debt to collectors.

Hospitals often abuse the IRS Community Based Standards by using their advertising budget as an educational charitable outreach. That’s creative bookkeeping, not helping those that need it.

Hospitals need to align their educational and research activities to community goals and help address the social determinants of health in their neighborhoods. Make them do this and document it.

Thank you.