Do hospitals tell patients about charity care options? Study finds room for improvement

October 28, 2015
Credit: Anne Lowe/public domain

If you don't have health insurance, or your insurance coverage still leaves you with big bills, hospitals are supposed to let you know if you qualify for free or reduced-price care, and to charge you fairly even if you don't.

That is, if they want to keep their tax-free nonprofit status under the Affordable Care Act's new Section 501(r) rules.

But a new study from the University of Michigan Institute for Healthcare Policy and Innovation finds many nonprofit hospitals have room to improve.

Writing in the October 29 issue of the New England Journal of Medicine, the researchers report results from their review of Internal Revenue Service forms submitted by more than 1,800 nonprofit hospitals nationally. They looked at records for 2012, the first year hospitals had to comply with the ACA's requirements and the most recent year for which data were available.

A mixed bag of findings

IHPI post-doctoral fellow Sayeh Nikpay, Ph.D., MPH and IHPI director John Z. Ayanian, M.D., MPP, call hospitals' performance "far from perfect". Their key findings:

  • Nearly all of the hospitals reported having a written charity care and emergency care policies, to guide them on deciding which patients could get free or reduced-price care. Though the ACA doesn't tell hospitals which patients to offer discounts to, or how generous to be, it does say they must have such policies and make them known.
  • Only 29 percent of the hospitals reported they had begun charging uninsured and under-insured patients the same rate that they charged private insurers and the Medicare systems. Such rates are often far lower than the "chargemaster" rates hospitals set as the starting point for negotiating with insurers about how much they will actually accept.
  • Only 42 percent of the hospitals reported they were notifying patients about their potential eligibility for charity care before attempting to collect unpaid . The ACA requires such notifications to give patients a chance to explore their options, and apply to get some or all of their costs written off.
  • One in five hospitals had not yet stopped using extraordinary debt-collection steps when patients failed to pay their medical bills. Such steps, such as reporting patients to credit agencies in ways that can damage their credit scores, placing liens on their property or garnishing their wages, are now banned.
  • Hospitals in states that have not expanded Medicaid reported having less generous charity care policies, and were less likely to have a policy about notifying patients of charity care options before they left the hospital. In general, patients have to be poorer to get free or discounted care in these states than in states that have expanded Medicaid.
  • Only 11 percent of hospitals reported having conducted a community health needs assessment in the past three years as of 2012. Such assessments, to identify pressing health issues in the population they serve, don't necessarily affect charity care.

Playing by the rules?

Nonprofit hospitals are exempt from paying most taxes, which was valued at $24.6 billion in 2011. In return, they must justify their nonprofit status to the IRS each year by showing how much care they write off for those who cannot pay.

When Congress wrote the ACA, they sought to use the tax tools available to them to reduce hospitals' use of aggressive methods to pursue payment, and perhaps to prevent individual bankruptcies or credit score damage caused by medical bills.

Though hospitals had to report for tax year 2012, the federal government did not issue final language about exactly how to comply and penalties for non-compliance until 2014. Nikpay and Ayanian will continue to study the issue as new IRS data become available. They are already working on 2013 data.

"Hospitals are generally complying with the part of the rules that require they establish charity care policies and publicize them, but this may not impact the amount of charity care they provide," says Nikpay, who is also a visiting scholar at the University of California, Berkeley. "So far, it appears many aren't complying with the part of the rules that could increase their charity care."

Ayanian, a professor at the U-M Medical School with joint appointments in public policy and public health, says physicians and patients should familiarize themselves with policies at their hospitals.

"Financial protection for patients is an under-recognized component of the ACA, and it's important that hospitals are required to have policies, that they disclose these policies, and that they enable people apply for help in a timely way," he says. "This will be most important for living in states that have not expanded Medicaid to cover people with lower incomes. Hospitals in those states will likely experience additional demand for charity care because they now need to publicize their charity care policies and comply with other IRS provisions."

With these added requirements, hospitals may start to pull back on how generous they make their charity care policies - and section 501(r) of the ACA does not set standards for that, Nikpay notes.

As more Americans enroll in insurance plans that have high deductibles, they may find they need to ask for financial relief after a stay. Even a single person earning $40,000 a year, or a family of four with an income around $80,000, might qualify for discounted care from hospitals.

Explore further: Not-for-profit hospitals may not trump for-profits in providing uncompensated care

More information: New England Journal of Medicine, DOI: 10.1056/NEJMp1508605

Related Stories

Not-for-profit hospitals may not trump for-profits in providing uncompensated care

August 3, 2015
While not-for-profit hospitals receive substantial tax benefits, some do not provide free or subsidized care for a higher percentage of patients living in poverty than their for-profit counterparts, according to a study of ...

IRS rules to protect patients from health care financial burdens are inadequate, need legal reform

August 17, 2015
Recently issued new Internal Revenue Service (IRS) rules for tax-exempt, typically nonprofit, hospitals designed to help protect patients from health care financial burdens are inadequate and need further legal reform, Georgia ...

Expanding state Medicaid stems growth of uncompensated care

July 8, 2015
On the heels of the recent U.S. Supreme Court decision that upheld a key part of the Affordable Care Act, new research from the University of Michigan Institute for Healthcare Policy and Innovation offers the first comprehensive ...

Hospitals in states that refuse Medicaid expansion shoulder billions in uncompensated care costs

June 23, 2015
Twenty-one states have opted not to expand Medicaid under the Affordable Care Act (ACA), arguing that the expansion would be too expensive. But according to new research, the cost to hospitals from uncompensated care in those ...

Value of nonprofit hospital tax exemption nearly doubled over nine years, reaching $24.6 billion in 2011

June 17, 2015
The value of the tax exemption provided to non-profit private hospitals in return for 'charity care and community benefit' nearly doubled over a nine-year period, climbing from an estimated $12.6 billion in 2002 to $24.6 ...

Many hospitals being penalized for 30-day readmissions

August 7, 2015
(HealthDay)—About half of the nation's hospitals are being penalized by Medicare for having patients return within a month of discharge, losing a combined $420 million, according to a report published by Kaiser Health.

Recommended for you

Motorcycle crashes cause five times as many deaths as car accidents, six times the health costs

November 20, 2017
Motorcycle accidents are costly in terms of lives and health care costs. Compared with car accidents, motorcycle accidents cause 3 times the injuries, 6 times the medical costs and 5 times the deaths, found new research in ...

New shoe makes running 4 percent easier, 2-hour marathon possible, study shows

November 17, 2017
Eleven days after Boulder-born Shalane Flanagan won the New York City Marathon in new state-of-the-art racing flats known as "4%s," University of Colorado Boulder researchers have published the study that inspired the shoes' ...

Vaping while pregnant could cause craniofacial birth defects, study shows

November 16, 2017
Using e-cigarettes during pregnancy could cause birth defects of the oral cavity and face, according to a recent Virginia Commonwealth University study.

Study: For older women, every movement matters

November 16, 2017
Folding your laundry or doing the dishes might not be the most enjoyable parts of your day. But simple activities like these may help prolong your life, according to the findings of a new study in older women led by the University ...

When vegetables are closer in price to chips, people eat healthier, study finds

November 16, 2017
When healthier food, like vegetables and dairy products, is pricier compared to unhealthy items, like salty snacks and sugary sweets, Americans are significantly less likely to have a high-quality diet, a new Drexel University ...

Children's exposure to secondhand smoke may be vastly underestimated by parents

November 15, 2017
Four out of 10 children in the US are exposed to secondhand smoke, according to the American Heart Association. A new Tel Aviv University study suggests that parents who smoke mistakenly rely on their own physical senses ...

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.