Top-Earning Non-Profit Hospitals Offer Less Charity Care

February 18, 2020 - Non-profit hospitals are eligible for tax exemptions in exchange for providing charity care and other community services. But a new study from researchers at Johns Hopkins University showed significant disparities in the levels of charity care provided by these hospitals.

Published as a research letter in JAMA Internal Medicine, the study found that hospitals in the top-earning quartile gave $11.50 of charity to uninsured patients and $5.10 to insured patients for every $100 of net income.

In comparison, non-profit hospitals in the third quartile of income gave $72.30 of charity to the uninsured and $40.90 to the insured for every $100 of net income.

 “The highest-earning hospitals have done very well financially,” the study’s lead author and associate professor Ge Bai of the Johns Hopkins Carey Business School stated in a press release. “The top 1 percent made more than $10 billion profit, and the top 5 percent more than $25 billion. Yes, they take certain measures to help financially disadvantaged patients, but they’re positioned to do more.”

Overall, the study examined Medicare cost report data from 2,563 nonprofit short-term general hospitals. The 640 hospitals in the top-earning quartile produced nearly $48 billion in net income in 2017 – or slightly over 100 percent of all net income reported by the 2,563 facilities, data from that year showed.

Additionally, the hospitals in the top one percent of earning generated nearly one-quarter (23 percent) of the net income of all non-profit hospitals, while providing just seven percent of charity care to the uninsured and five percent of charity care to the insured.

Altogether, non-profit hospitals in the three lower quartiles had negative net income that year. Yet, these hospitals tended to be more generous with charity care, with those in the bottom quartile for earnings incurring losses equivalent to 15.8 percent of total overall net income and providing 17.1 percent of uninsured and 17.7 percent of insured charity care in 2017.

Non-profit hospitals in states that did not expand Medicaid also provided higher levels of charity care, the study showed. The hospitals provided $37.80 in uninsured charity care and $11.00 in insured charity care for every $100 of overall net income versus $12.00 and $8.70 in charity care for non-profit hospitals in Medicaid expansion states.

The findings indicate a need for Congressional action, stated Bai and co-authors – Professor Gerard Anderson and PhD candidate Farah Yehia, both of the Johns Hopkins Bloomberg School of Public Health.

“Congress and state legislatures need to take a careful look at the proper balance between the hospitals’ profits and their level of charity care. Too many very profitable nonprofit hospitals are providing little charity care,” Anderson explained in the press release.

The study comes on the heels of reports that hospitals are suing patients and garnishing their wages in order to collect unpaid medical debt. A separate study from researchers at the Johns Hopkins University School of Medicine published in June 2019 found that in Virginia alone, hospitals sued patients about 20,000 times in 2017 and garnished their wages more than 9,000 times. Non-profits were much more likely to garnish wages compared to their for-profit counterparts and overall, 71 percent of hospitals that garnished wages were non-profit, the study found.

Patients are owing more and more for their care, which is creating problems for about one-quarter (26 percent) of American families. Even those covered by employer-sponsored insurance have difficulty affording their healthcare or insurance costs, Kaiser Family Foundation reported.

Policymakers and industry leaders have started to question whether non-profit hospitals are helping their patients with this growing concern.

But non-profit hospitals are helping individuals in their community, the American Hospital Association (AHA) asserts. Two analyses from last year showed that tax-exempt hospitals spent $95 billion on community health benefits in 2016, the most recent year for which the AHA had access to complete data.

These community health benefits, however, could go further to address healthcare affordability, researchers from John Hopkins University said.

“Nonprofit hospitals have full discretion in designing their financial assistance policy,” concluded Bai. “The top-earning hospitals, which have substantial financial strength, should design more generous eligibility criteria to help uninsured and underinsured patients. The hospitals’ nonprofit status and tax exemptions require such action.”