A new JAMA study by Johns Hopkins researchers found that charity care provided by not-for-profit (NFP) hospitals is higher than what’s provided by their investor-owned peers.
The research team evaluated charity care practices at over 2,563 nonprofit hospitals and used public filings to compare their spending on charity care to others. 2017 highlights:
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US NFP hospitals generated $47.9 billion overall net income and provided $9.7 billion (29%) of charity care to uninsured patients and $4.5 billion of charity care to insured patients.
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The most profitable quartile of NFP hospitals spent $11 of every $100 of profit on charity care vs. $72 of every $100 of profit in NFP hospitals in the third quartile.
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The amounts of charity care relative to overall net income were smaller for NFP hospitals with larger overall net income. The top quartile of hospitals provided $11.5 (uninsured) and $5.1 (insured) charity care for every $100 of their overall net income; the third quartile of hospitals provided $72.3 (uninsured) and $40.9 (insured) for every $100 of their overall net income.
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Hospitals in states that expanded Medicaid provided substantially less total charity care than other hospitals—$12.0 vs $37.8 (uninsured) and $8.7 vs $11.0 (insured) for every $100 of overall net income.
MY TAKE
To industry insiders, these findings are no surprise but only part of a bigger, increasingly complicated story about exactly what “not for profit hospital” means in healthcare. It poses a particularly tricky situation for operators and their boards.
Hospitals that are eligible for nonprofit status are exempted from income, property, and sales taxes. In exchange, they provide charity care and other community services. Charity care differs from uncompensated care or bad debt because there is no expectation that patients will pay for the services.
Big not-for-profit health systems are flexing their muscles. According to the American Hospital Association, there are 2,937 Not-for-Profit (NFP) hospitals in the U.S. versus 1,296 classified as investor-owned or For-Profit (FP). But among NFPs, 82 large regional multi-hospital systems control more than a third of the total market. Among these, consolidation and diversification has eclipsed their for-profit competitors: the biggest have seen 2018 year over year asset growth 5 times that of the top 5 investor-owned systems (8.4% vs. 1.5%) per their most recent annual IRS filings. Total compensation for their CEO’s is 30% higher and their spending on lobbyists four-times that of their FP peers.
So, the spotlight on charity care puts NFP hospitals in the spotlight. But caution is warranted. Regulators- aka Senator Grassley and others- are keen to examine how NFP’s dodge taxes while getting bigger and in most, more profitable. In Section 9007 of the Affordable Care Act (March 2010), hospitals wishing to retain their tax-exempt status were mandated to develop written financial assistance policies for patients unable to pay for their services and observe fair billing and debt collection practices. That provision will get fresh attention in DC and state houses.
Thus, the charity care study exposes more than a difference between NFPs and FPs. It’s good news, bad news for not for profit hospital operators and their boards.
Paul
RESOURCES
“For-profit hospitals provide less charity care” Pittsburgh Post Gazette September 4, 2016 https://www.post-gazette.com/news/health/2016/09/04/For-profit-hospitals-provide-less-charity-care-counting-charity-care-series/stories/201605050208
Bai “Charity Care Provision by US Nonprofit Hospitals” JAMA Intern Med. Published online February 17, 2020; https://jamanetwork.com/journals/jamainternalmedicine/article-abstract/2760774
Rosenbaum S, Kindig DA, Bao J, Byrnes MK, O’Laughlin C. “The Value of the Nonprofit Hospital Tax Exemption was $24.6 billion in 2011.” Health Aff (Millwood). 2015;34(7):1225-1233. https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2014.1424
Young GJ, Chou CH, Alexander J, Lee SY, Raver E. “Provision of Community Benefits by Tax-Exempt U.S. Hospitals.” https://www.nejm.org/doi/full/10.1056/NEJMsa1210239
Nikpay SS, Ayanian JZ. “Hospital charity care—Effects of New Community-Benefits Requirements.” https://www.ncbi.nlm.nih.gov/pubmed/26510018
Herring B, Gaskin D, Zare H, Anderson G. “Comparing the Value of Nonprofit Hospitals’ Tax Exemption to their Community Benefits.” https://www.ncbi.nlm.nih.gov/pubmed/29436247
“Top 82 U.S. Non-Profit Hospitals: Quantifying Government Payments and Financial Assets | Open The Books Oversight Report” June 24, 2019 https://www.openthebooks.com/top-82-us-non-profit-hospitals-quantifying-government-payments-and-financial-assets–open-the-books-oversight-report/
NEWS ITEMS OF NOTE FROM LAST WEEK
Health Reimbursement Accounts Short of Expectations
The policy that took effect January 1 was intended to get employers to use health reimbursement accounts as a way to encourage their employees to be more cost sensitive. According to Modern Healthcare, just a few hundred employers have made the switch so far, falling well short of the Trump administration’s expectation that 800,000 companies would take advantage of the rule this year, enrolling 1.1M workers.
Livingston “New form of employer health insurance growing slower than planned” Modern Healthcare February 15, 2020; https://www.modernhealthcare.com/insurance/new-form-employer-health-insurance growing-slower-planned
IMPORTANT STUDIES / REPORTS FROM LAST WEEK
Study: Guidelines Influence Clinician Practice Patterns Less Than Financial Incentives
Researchers compared changes between the use of two low-value laboratory tests after the release of Choosing Wisely recommendations in Canada and the U.S. involving 54,223,448 adults aged 18-64 years. They found recommendations alone are insufficient for reducing the use of low-value services, but payment changes policy changes are more efficient.
Henderson et al; “Comparison of payment changes and choosing wisely recommendations for use of low-value laboratory tests in the United States and Canada” JAMA —February 17, 2020 https://www.mdlinx.com/journal-summaries/less-is-more-healthcare-economics-insurance
Coronavirus Update
As of February 24, 2020, there 79,707 confirmed cases worldwide including 35 in the U.S. To date, 2,626 have died and 25,262 have recovered. The mortality rate of coronavirus (3.3%) is far higher than that of the seasonal flu (.01%).
Worldometer; February 24, 2020 https://www.worldometers.info/coronavirus/#countries
NORC: One in Five Uses Crowdfunding to Pay Medical Bills
According to research by the National Opinion Research Center (NORC) at the University of Chicago, one in five Americans reported that they or someone in their household have contributed to a crowdfunding campaign to pay for medical bills or treatments: 8 million for themselves and over 12 million Americans for someone else. Highlights: 46% donated to a friend’s crowdfunding campaign, 61% donated to a relative, co-worker, or acquaintance (24%, 14%, and 23%, respectively) and 35%donated to someone they did not know personally.
“Millions of Americans Donate through Crowdfunding Sites to Help Others Pay for Medical Bills” NORC February 19, 2020 https://www.norc.org/NewsEventsPublications/PressReleases/Pages/millions-of-americans-donate-through-crowdfunding-sites-to-help-others-pay-for-medical-bills
Report: Private Equity Acquisitions of Medical Practices
The Oregon Health Sciences researchers examined private equity acquisitions of medical practices from 2013-2016. Highlights:
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Of approximately 18 000 unique group medical practices, there were 355 physician practice acquisitions (1426 sites and 5714 physicians) by private equity firms from 2013 to 2016, increasing from 59 practices in 2013 to 136 practices in 2016.
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Acquired practices had a mean of 4.0 sites, 16.3 physicians in each practice, and 6.2 physicians affiliated with each site.
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The most commonly represented medical groups included anesthesiology (19.4%), multispecialty (19.4%), emergency medicine (12.1%), family practice (11.0%), and dermatology (9.9%). From 2015 to 2016, there was an increase in the number of acquired cardiology, ophthalmology, radiology, and obstetrics/gynecology practices.
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Within acquired practices, anesthesiologists represented 33.1% of all physicians; emergency medicine specialists, 15.8%; family practitioners, 9.0%; and dermatologists, 5.8%.
Zhu et al “Private Equity Acquisitions of Physician Medical Groups Across Specialties, 2013-2016” JAMA. 2020; https://jamanetwork.com/journals/jama/article-abstract/2761076
Study: Hospital Environment More Important to Patient Perceptions than Clinical Quality
Researchers analyzed 3,000 U.S. hospitals finding that “neither medical quality nor patient survival rates have much impact on patient satisfaction with their hospital… patients are very sensitive to the “room and board” aspects of care that are highly visible. Quiet rooms have a larger impact on patient satisfaction than medical quality, and communication with nurses affects satisfaction far more than the hospital-level risk of dying… when hospitals face greater competition from other hospitals, patient satisfaction is higher but medical quality is lower.”
Young et al “Patients as Consumers in the Market for Medicine: The Halo Effect of Hospitality” Social Forces February 13, 2020 https://academic.oup.com/sf/advance-article-abstract/doi/10.1093/sf/soaa007/5735232?redirectedFrom=fulltext
