Hospitals and charity: Is there still a connection?

May 12, 2021 / By Steve Delaronde

Hospitals are established on a foundation of caring. They offer a setting to perform medical procedures, deliver babies and help patients recover from illness and injury. Their 19th century mission to primarily serve those who could not afford private medical care has been replaced with state-of-the-art medical facilities that treat highly complex conditions for all patients. As a result, 21st century hospitals are expensive. The anxiety and vulnerability that a patient may experience in a hospital can be overcome with professional competency and caring, only to be replaced by the financial trauma of the bill that follows.

More than half of the 5,000 community hospitals in the United States are considered not-for-profit. This compares to nearly one-quarter that are investor-owned (for-profit) while nearly 20 percent operate as government hospitals.  Different tax treatment means that government and non-profit hospitals have the greatest obligation to provide charity care to patients, and for-profit hospitals have the least. However, an April 2021 publication in Health Affairs found that non-profit hospitals spent only $2.3 of every $100 in total expenses incurred on charity care, compared to government ($4.1) and for-profit ($3.8) hospitals.

A KHN report published in October 2019 revealed that non-profit hospitals sent $2.7 billion in medical bills to patients who likely qualified for free or discounted care. The challenge faced by patients in navigating a hospital’s charity care policy is exemplified by one person’s story of helping pay for his father’s hospital stay after a heart attack.  The title of his narrative is a call to action for all providers – Charity Care Needs to Be Better Than This.

In January 2021, a viral TikTok video posted by the founder of DollarFor, a non-profit organization dedicated to helping families with overwhelming medical expenses, instructed viewers to go to a hospital’s website and search for their charity care policy. However, simply referencing the charity care policy on a hospital website is not sufficient for most patients to get the financial assistance they need.

A report from 2010 found that many hospitals that mentioned the availability of charity care on their website did not provide instructions in non-English languages, application forms or even qualification criteria for discounted or free care. This study published prior to full implementation of the Affordable Care Act (ACA) in 2014 demonstrated that providers were ill-prepared to follow charity care rules required by the ACA. Unfortunately, the problem persists.

The Internal Revenue Service requires non-profit hospitals to establish and widely publicize a financial assistance policy as a condition of their tax-exempt status. The quantitative requirements of the policy, as well as the methods used to publicize, identify, inform and assist financially disadvantaged patients, are left to the discretion of the hospital. This results in 45 percent of non-profit hospitals routinely sending medical bills to patients who qualify for charity care but don’t know it.

Modern hospitals exist so that patients can manage or overcome the pain, suffering and functional limitations associated with injury and disease. Shouldn’t hospitals that profess their commitment to delivering high-quality, patient-centered health care also be committed to finding a way to manage the stress, anxiety and financial devastation that can result from accepting their services?

Steve Delaronde is senior manager of product, population and payment solutions at 3M Health Information Systems.