According to a study published in the journal Health Affairs, nonprofit hospitals are receiving substantial tax benefits but some are not offering free or subsidized care for more patients in need compared to their counterparts operating for profit.
Led by Renee Hsia, researchers assessed 264 hospitals, tracking non-reimbursed payments between 2011 and 2013 by looking at two kinds of uncompensated care. They examined different levels of charity care where medical care is offered to indigent patients without expectations of being paid. The researchers also looked at unpaid bills, or bad debt, for medical services. Hospitals in California were chose because the state is the only location where both for-profit and nonprofit hospitals are required to report expenditures associated with charity care.
Based on the results of the study, an average of 1.9 percent of total operating costs in nonprofit hospitals went into charity care. For for-profit institutions, average costs were at 1.4 percent of total spending. A significant portion of both types of hospitals though dedicated low funding for charity care, with over 30 percent of nonprofits and 40 percent of for-profits spending less than 0.9 percent on caring for those in need.
According to the researchers, nonprofit hospitals end up offering less care for those in need because tax-exempt statuses are ambiguous, with minimum requirements not set for financial assistance programs in hospitals.
"There are general guidelines that dictate that [nonprofit] hospitals must provide a benefit to the community but there is no minimum requirement," said Hsia, explaining that with hospitals setting their own policies, patients qualifying for charity care in one hospital may be considered as having bad debt in another.
The researchers added that data point to some nonprofit hospitals not pulling their weight in terms of uncompensated care. This is because not all nonprofits are subjected to the same conditions for tax exemption, leading to varied spending for uncompensated and charity care.
At the same times, hospitals allocating most of their budget for charity care may be dealing with a competitive disadvantage because they have less money to spend on improving facilities which can attract new patients who hold private insurance.
The researchers suggest that the government considering boosting reimbursement rates for hospitals caring for newly eligible patients on Medicaid and clarifying policies to distinguish between charity care and bad debt to make it easier to keep track of how hospitals are taking care of indigent patients.
Other authors for the study include Erica Valdovinos and Sidney Le.
Photo: Mark Hillary | Flickr
