Not-for-profit hospitals provided fewer services free of charge to financially disadvantaged patients than their government and for-profit counterparts, despite their tax-exempt status requiring community benefits and charity care, according to a study published in Health Affairs on Monday.
Charity care equaled 2.3% of total expenses in 2018, compared with 3.8% and 4.1% of for-profit and government-run hospitals’ expenses, respectively, according to researchers at John Hopkins University’s Carey Business School and Bloomberg School of Public Health. The study analyzed 2018 Medicare hospital cost reports to review 4,663 providers’ charity-care spending.
More than one-third of not-for-profit hospitals provided less than $1 per $100 of their total expenses on charity care, while 56% of government hospitals and 43% of for-profit hospitals were under that threshold.
Charity care is one of eight categories of community benefits for hospitals. Researchers argue it is the most tangible metric for evaluating who is taking advantage of their tax-exempt status.
“Charity care is objectively measured and fairly compared across hospitals,” said Ge Bai, associate professor of accounting and health policy and management at Johns Hopkins University, who co-authored the study.
Patients eligible for charity care are given uncompensated or discounted care for scheduled surgeries or emergency department visits. The criteria for this financial relief varies from hospital to hospital, though Bai says hospitals need to do a better job of making their financial assistance policies accessible to low-income patients.
“The demand for charity care has ticked up due to COVID,” Bai said. “Hospitals need to make patients aware of their explicit eligibility criteria and that it differs across hospitals… For many of these patients charity care is the last resort.”
According to a Modern Healthcare analysis, the top 15 not-for-profit health systems dedicated 1.4% of expenses in 2020 to charity care, a slight drop from 1.6% in 2019.
Since government hospitals are subsidized by tax revenue, they have “the explicit obligation to provide the care needed by financially disadvantaged patients as charity care,” the study said.
Researchers compared charity care to hospitals’ total expenses to measure the extent of that community benefit. The Internal Revenue Service uses the same approach.
There is no current regulation requiring hospitals to provide a benchmark amount of charity care to patients, and the IRS has a difficult time overseeing charity-care spending, according to Bai.
The researchers suggested creating a ranking system for hospitals’ charity-care spending, but were concerned that could deter patients from seeking free care or deter some hospitals from providing more care than the minimum requirement. Bai instead backed congressional intervention, saying lawmakers should revise tax exemption rules to push hospitals toward placing greater emphasis on providing charity care, even putting the possibility of revoking tax exemption status on the table.