Report: NC hospitals billing people who qualify for charity care
North Carolina’s nonprofit hospitals bill poor people in the state each year for millions of dollars in medical care that should be written off as charity costs covered by lucrative tax breaks, according to a new report the Office of the State Treasurer released Wednesday.
The billings are more common in North Carolina than other states, and a “lack of transparency obscures” how common they really are and “existing law offers little protection to patients and taxpayers,” the report says.
State Treasurer Dale Folwell, who oversees the State Health Plan for government employees—the largest health insurance plan in North Carolina—and a bipartisan quartet of state lawmakers plan to call for “greater accountability to ensure hospitals are providing sufficient charity care instead of billing low-income patients,” Folwell’s office said in a news release ahead of a Wednesday news conference.
The N.C. Healthcare Association, which represents hospitals in the state, pushed back against the report Wednesday, saying charity care doesn't account for all the community benefits hospitals provide, and a spokesman for UNC Health questioned the report's accuracy. The association accused Folwell of "demonizing hospitals while their exhausted employees are working 24/7 to meet a pandemic peak in hospitalizations."
The association also accused Folwell of grandstanding, calling it "distracting, disrespectful and potentially dangerous" and saying it, "could encourage acts of ill will against the very people who have taken oaths to protect and restore our health."
Folwell said he’s not blaming the health care workers in the hospitals, whom he praised for their work through the pandemic. "This is about the multimillion-dollar executives who run these multibillion-dollar corporations that disguise themselves as nonprofits," he said during the Wednesday news conference.
"From free mammogram testing in under-served communities to creating clinics that improve health equity and expand access for under-served populations, feeding the hungry (food as medicine), and partnering to provide affordable housing, North Carolina hospitals are anchors in their communities," the association said in a statement.
The report was put together by the State Health Plan with the National Academy of State Health Policy and reviewed by researchers at Rice University. It says that, in 2019, somewhere between 12 percent and 29 percent of bad debt on hospital books actually came from patients eligible for free or discounted charity care under hospital policies.
The report blamed loopholes in transparency requirements for the range of uncertainty and said initial indications from 2020 are that the numbers will be significantly higher.
The cost of this care is supposed to be offset by tax breaks that North Carolina’s nonprofit hospitals receive, which totaled $1.8 billion in 2020, the report says, but the Internal Revenue Service has “no explicit thresholds” for charity care, and state government doesn’t have an agency or official actively enforcing how nonprofit hospitals handle charity care.
The hospital association said the U.S. Treasury enforces financial rules hospitals have to comply with and that noncompliance can lead to revocation of a hospital's tax-exempt status. That has never happened in North Carolina, the group said. The group also said that, under IRS rules, patients have to provide financial information to qualify for charity care.
"Patients who decide not to work with hospitals through the application process to be considered for charity care cannot be given free care," the association said.
Most hospitals in the state receive tax benefits, and the state’s nonprofit hospitals are more profitable than the for-profit ones, according to the report.
“The majority of North Carolina’s nonprofit hospitals are failing their charitable mission, and poor patients are paying the price,” the report says.
The report follows a similar report the Treasurer’s Office released in October, which also found that these tax breaks far outstrip the charity care hospitals provide. Some hospitals pushed back at the time, arguing that hospitals provide a range of community benefits beyond charity care and often treat patients covered by Medicaid or Medicare—taxpayer-funded programs that pay lower prices—at losses in addition to charity care.
Folwell has jousted with hospitals in the state for several years now over billing transparency and other issues, and at times has pushed for legislation.
The new report says some hospitals in the state use technology to avoid billing patients who qualify for charity care. It also noted that WakeMed said all its uninsured patients are contacted by a financial counselor, and that WakeMed was the only large hospital system that publicly reported charity care costs in excess of its tax breaks.
Researchers also said their study “faced major limitations” because it relied on hospitals’ 990 tax filings and that, when hospitals are owned by state or local governments, state law doesn’t require them to provide as much information as other nonprofits. That creates a “failure in oversight that covers more than three in 10 nonprofit hospitals, including Atrium and UNC Health,” the report says.
UNC Health is owned by the state and connected to the university system. Atrium Health has 40 hospitals in four states but is organized under a local hospital board called The Charlotte-Mecklenburg Hospital Authority Board of Commissioners.
UNC Health said in a statement that if "Folwell, or his out-of-state researchers, contacted us to fact check this document, we could have provided them with accurate information. Instead, he continues to demonize us and all NC hospitals (with no basis in fact) during a global pandemic."
The hospital group said it has "one of the state’s most generous financial assistance policies" and that patients with incomes below 250 percent of federal poverty levels don't pay for most care.
"We work with everyone to try to help them figure out how they can participate and how they can be part of the financial process without doing them harm," Steve Lawler, chief executive of the North Carolina Healthcare Association, said in an interview. "We work with every patient that doesn't have insurance to help them qualify for a federal grant. If they don't qualify, we help set up financial plans based on their ability and means to pay."
Representatives for Atrium didn't respond to a request for comment.
The hospital association said in its statement that hospital affordability and billing are "as a whole broken."
"All the stakeholders should work together to improve it," the group said. "Government programs like Medicare and Medicaid pay hospitals less than the cost of caring for the beneficiaries; insurance companies negotiate deep discounts with hospitals, and many people who are uninsured pay little or nothing at all."
