Health Reform May Drive Nonprofit Hospital Charity Care Shift

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Stephen Mahar /

July 16, 2012; Source: St. Louis Beacon

While greatly reducing the ranks of those without health insurance coverage, the Patient Protection and Affordable Care Act of 2010 (PPACA), sometimes called “Obamacare,” will still leave approximately 23 million Americans without healthcare coverage, according to a report by the Robert Woods Johnson Foundation (view a PDF of the report here). Those uninsured healthcare consumers will likely continue to rely on “charity care” from nonprofit hospitals, but the PPACA will likely shift the ground underneath charity care efforts somewhat by imposing new reporting requirements. The Internal Revenue Service (IRS) has amended Schedule H of Form 990 to comply with new PPACA requirements for more detailed data to support hospitals’ ongoing claims for tax-exemption. Under the new law, hospitals must, inter alia, disclose their requirements for patients’ charity care eligibility, undertake a triennial community needs survey and explain community outreach programs designed to improve health and safety.

However, the controversial law, recently upheld in large part by the Supreme Court, does not shed much light on specific charity care requirements hospitals need to meet for continued tax exemption. Echoing a common complaint among those who find some nonprofit hospitals’ degree of charity care not particularly charitable, Karen Roth, research director at the St. Louis Area Business Health Coalition, regrets that the extensive new law does not set a target share of revenues that must be devoted to charity care to earn federal tax exemption. Still, Roth acknowledges the basic salutary effects of the IRS Revenue Code changes: “There is now more transparency, more information available to consumers under IRS Form 990, which hospitals must file.”

Roth also notes that the law will limit what hospitals can charge the uninsured: “They [uninsured consumers] couldn’t be charged, for instance, the gross charge amount, which is like the list price. It’s far more than anybody else pays.” In addition, as NPQ has previously reported, collection liens and lawsuits must be deferred until a determination is made as to whether patients qualify for financial assistance. The IRS can levy a $50,000 fine if a hospital doesn’t comply with the new PPACA provisions; Roth says that’s “a pretty big fine” for smaller hospitals but not for major urban healthcare facilities.

No policy wonk can prophesize all outcomes for the 2,400-page Leviathan of a law that President Obama staked his reputation on, and yet one hopes that it will help diminish the need for charity care and that the new rules for outreach and preventive care will also cure some of the costly and cumbersome weaknesses of the American healthcare system. –Louis Altman

  • notmd

    Various studies contacted by Kaiser has shown that 30% of the uninsured people who could be enrolled today in medicaid are not. These same patients land up as charity care. This could grow even larger as employees/employers opt out of insurance coverage. The threat of penalities to a person who has an income level to be covered under medicaid is non-existent. One of the major recommendations within the ACA is the empowerment of hospitals to delcare presumptive eligibility with proof through the access of that states eligibility system. By having the patient in front of them , the enrollee is motivated to complete the process and not have to visit state sites at some future date. The benefits are multi-fold. Patients are assigned a PCP, they reduce their emergency room visits and hospitals absorb less losses due to lower charity care write offs. There must be a change in the mindset of our political leaders..Charity care is not good for the patient..rather than pushing for more charity care ,let’s take this recommendation seriously.

  • rick cohen

    Good point, but then the next step is also to get states to accept, not to reject the ACA-offered expansion of Medicaid coverage to people with incomes of up to 133 percent of the federal poverty level.

  • cheryl

    I posted this article to answer a friends question. One of her nurse friends said this is a lie. Can you please give me the reference you used to compile this article so I can enlighten her. Thank you!