Nonprofit Hospitals’ Charity Care Policies Draw Criticism in N.C.

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April 23, 2012; Source: Charlotte Observer

Ames Alexander and his crack team at the Charlotte Observer have generated the first three parts of a five-part series on the approach North Carolina’s nonprofit hospitals take to charity care and to charity patients. It’s not pretty, nor particularly charitable. According to the articles, some North Carolina hospitals aggressively chase and sue indigent patients for large hospital bills despite some patients’ understanding that their care would be covered by the hospitals’ charity care funds. Joyce Jones is apparently one of 40,000 patients that the hospitals have been suing for unpaid hospital bills between 2005 and 2010. She incurred a hefty $34,000 bill with the Carolinas Medical Center-Mercy for her two weeks of pancreatitis treatment but she says a hospital social worker indicated that she would be helped by the hospital’s charity fund. To her surprise, she was sued by the hospital, which put a lien on her home. The Carolina HealthCare System that owns CMC-Mercy, a tax-exempt entity, has earned “profits,” according to the Observer, of over $300 million a year, on average, for the past three years.

More than 24,000 of the 40,000 suits were filed by two tax-exempt entities: Carolinas HealthCare and Wilkes Regional Medical Center. Carolinas HealthCare manages the latter. The Observer team doesn’t have information on what proportion of the 40,000 were truly indigent versus those with some assets, but Carolinas was nothing if not aggressive in chasing people for payments. Its strategy is to place a lien on the patients’ homes so that none are displaced, but if they want to sell or transfer the property, it goes to the hospital. As a result of the lien, Joyce Jones cannot transfer her property title to a family member if she were to want to leave. Carolinas/Wilkes will sue patients for as little as $750, a higher threshold than the $300 they used to chase, but as Mark Rukavina, head of the Access Project says, “Suing people is not a charitable act, especially when you’re dealing with people of limited financial means.”

Not every hospital in North Carolina follows the Carolinas/Wilkes model, and other states do prevent hospital suits against indigent patients, but North Carolina has no such rule. The Observer team offers case after case of nonprofit North Carolina hospitals aggressively suing indigent patients, and the stories are quite moving. As the NPQ Newswire has frequently asked, exactly how nonprofit are nonprofit hospitals that earn tens if not hundreds of millions in profits and take a less than charitable posture toward patients who need—and should qualify for—charity care? The Observer team reports that North Carolina’s nonprofit hospitals are doing quite well in terms of profits and reserves, charging more than hospitals in other regions for drugs and procedures. Carolinas HealthCare System and Novant Health pay 19 top leaders seven-figure salaries.

What do the nonprofit hospitals really offer and deliver as charity care for indigent patients? The hospitals say that they are losing money by serving patients with Medicaid, requiring them to charge insured patients more for their treatment costs (and, perhaps implicitly, to go after non-payers with a vengeance). On average, North Carolina hospitals spend about three percent of their budgets on charity care, though for one-third of the state’s hospitals, largely in rural areas, it is more like two percent, according to the Observer.

Back in 2007, the Senate Finance Committee, under the leadership of Sen. Chuck Grassley (R-Iowa), called for hospitals to meet a five percent charity care requirement, but that was not adopted by the committee nor put into legislation. North Carolina requires no charity care by nonprofit hospitals, but that might be overcome by the implementation of national health insurance, which requires hospitals to clarify their charity care policies and inform patients clearly and accurately that charity care exists. But that doesn’t answer the question of how nonprofit hospitals can contemplate suing 40,000 non-payers. Remind us. Exactly what is so nonprofit about the North Carolina hospital establishment’s treatment of indigent patients?—Rick Cohen

  • Putnam Barber

    You write: “Remind us. Exactly what is so nonprofit about the North Carolina hospital establishment’s treatment of indigent patients?”

    OK, I will. Nothing. But “nonprofit” does not equal “charitable”. Confusing the two makes trouble throughout the debates and policy explorations affecting our field. It is not a helpful to colleagues across the field who have to deal with complex challenges to the public policy preferences that undergird many parts of our work.

    In the case of hospitals, the option of operating as a nonprofit has its roots in the idea that resources available for medical care should not be diverted to other worthy goals in the form of tax payments to local governments and other tax-based entities.

    You may agree or disagree with this principle. And you may feel, as I do, that even though it’s a wise principle it has been widely abused.

    It certainly sounds like the leaders of those two NC hospital outfits (or is it just one?) should have trouble sleeping at night — not to mention answering Chuck Grassley’s questions.

    I, and maybe others, would not like to see hospitals’ eligibility for favorable tax treatment based solely on their billing practices and “charity care.” I want hospitals to be centers for public health, contributing intellectually, organizationally, and ethically to the well-being of the people who look to them for skillful care in urgent situations and for leadership in creating the conditions in which safe and healthy lives are possible for everyone. Since we have converted health-care to a fee-for-service industry, we have to hold hospitals to a high standard of how they use any excess of revenues over direct costs. It doesn’t look to me like we’ve done a very good job of any part of meeting that challenge. But the job is not made easier by focusing attention on sentimental tales about harsh billing practices.