Most Nonprofit Hospitals Updated Charity Care Policies During Pandemic

September 29, 2022 - Nonprofit hospitals were more likely to make positive changes to their charity care policies rather than restrictive updates during the COVID-19 pandemic, according to a study published in JAMA Network Open.

Tax-exempt hospitals, including nonprofit and government hospitals, must establish and publicize written charity policies that describe eligibility criteria and covered services to maintain their tax-exempt status.

Researchers compared charity care policies from December 2019 to December 2021 to determine how the financial challenges associated with the COVID-19 pandemic impacted charity care. The final analysis included 151 acute care hospitals.

Between 2019 and 2021, 127 hospitals (84.1 percent) updated their charity care policies and 77 hospitals made substantial changes that impacted charity care.

Changes were classified as generous if they expanded access to financial assistance or restrictive if they restricted access. An update was considered indeterminate if it did not clearly improve or limit access.

Forty-seven hospitals (31.1 percent) made their charity care policies more generous, while 12 hospitals (7.9 percent) made their policies more restrictive. There were 242 distinct policy changes in total: 135 were generous, 46 were restrictive, and 61were classified as indeterminate.

The study found that hospitals most frequently increased their charity care generosity by expanding eligibility criteria. For example, 26 hospitals increased the income cutoff for free care and 25 did the same for discounted care. Sixteen hospitals increased their cutoffs for both types of care.

Sixteen policies expanded presumptive eligibility, which involves considering patient characteristics that suggest financial need, including homelessness and unemployment, to shorten the application process for charity care. Some hospitals expanded presumptive eligibility by adding current Medicaid coverage and incarceration as criteria to be considered.

Twenty-four hospitals adjusted the assets involved in their eligibility determinations. However, half of these changes were considered indeterminate because the policies included nonspecific language.

Some 2019 policies included generic statements about examining assets. The updated 2021 policies specified asset cutoffs, but it is unclear if the changes improved or restricted access to charity care because the initial asset thresholds were not specified. When cutoffs for total assets were specified, they ranged between $20,000 and $1 million.

“Charity care policies continue to use vague language, especially for eligibility criteria such as assets, which limits patients’ understanding of charity care policies and may conceal policy changes over time,” researchers wrote.

Among hospitals that made their charity care policies more restrictive, residency requirements were the most common area of change. Some facilities narrowed eligibility to the hospital’s service area or restricted eligibility due to immigration status.

One hospital changed its policy to exclude foreign residents, which researchers considered restrictive. Another hospital specified that a person had to live in the US for at least 18 months before becoming eligible for charity care.

However, one hospital changed its eligibility requirement from US citizens and residents to anyone who lives in the US, which was considered an expansion of eligibility.

Hospitals also updated their policies to restrict certain types of services. For example, one hospital newly excluded care related to self-harm, while another excluded care provided while a patient is in law enforcement custody. One hospital updated its charity care policy to exclude birth control.

Seven hospitals expanded coverage for underinsured individuals, while five facilities restricted coverage for this population. Hospitals that restricted coverage commonly cited contractual obligations to payers as the reason for the change. Three facilities added language to their policies prohibiting patients from choosing charity care coverage over health insurance.

Two hospitals in the sample added policies that expanded COVID-19 testing and treatment coverage.

Nine hospitals underwent mergers or acquisitions between 2019 and 2021. Four of these hospitals made generous changes to their charity care policies. Another four hospitals represented two hospital systems that merged during the study period. This led to one new charity care policy that was more restrictive than the original policies.

“Our findings suggest that greater transparency and simplification in charity care policies—especially for eligibility criteria—are needed to ensure adequate access to charity care,” the study concluded.