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Nonprofit hospitals should act like nonprofits

Bipartisan support for ensuring nonprofit hospitals adhere to missions

Nonprofit hospitals should keep their end of the bargain and focus more on their patients than on their bottom lines, Christensen writes.
Nonprofit hospitals should keep their end of the bargain and focus more on their patients than on their bottom lines, Christensen writes. (Caroline Brehman/CQ Roll Call file photo)

In an ideal world, every nonprofit hospital would be genuinely devoted to charitable purposes, to caring for the sick, the poor, and the infirm, ensuring equitable access to quality health care.

The IRS even has rules requiring nonprofit hospitals to provide financial assistance and other community benefits. In practice, however, many nonprofit hospitals act more like big businesses than charitable organizations. These hospitals implement policies designed to squeeze maximum revenue from patients, even from those who can least afford it.

To combat this, some states have passed laws requiring nonprofit hospitals to provide charity care, or discounted medical care, to lower-income patients.

In Oregon, for example, patients earning up to twice the federal poverty level are entitled to full forgiveness of their hospital bills, and patients earning more than that, up to four times the federal poverty level, are still entitled to partial bill forgiveness. The idea behind these laws is simple: Nonprofit hospitals receive billions of dollars in tax breaks each year. In exchange for Uncle Sam cutting them some slack, they should provide substantial benefits to the community.

Unfortunately, Oregon’s nonprofit hospitals are finding ways to deny eligible patients access to charity care. According to a recent report by SEIU Local 49, some hospitals hide information about charity care on hard-to-find pages on their websites.

Others bury required charity care disclosures in paperwork that has little to do with charity care. Still others force patients to apply for charity care, requiring them to complete lengthy paperwork even when the hospital already has sufficient information to determine their eligibility. Some nonprofit hospitals were even found sending patients’ bills to collections before giving them a chance to apply for a discount.

These practices are widespread among nonprofit hospitals, not just in Oregon but in nearly every state in America. A recent study in the journal Health Affairs confirmed that nonprofit hospitals spend less on charity care than for-profit hospitals of comparable size.

It’s not surprising then that in nearly every state, nonprofit hospitals are accumulating “fair share deficits,” meaning that they receive more in tax breaks than what they spend on charity care for those in need.

In particular, the fair share deficits in six states — California, Pennsylvania, New York, Ohio, Michigan and Illinois — each exceed $1 billion. And in Washington state, a single nonprofit hospital system, Providence Saint Joseph Health, accumulated a fair share deficit of $705 million, larger than the statewide deficits of 40 other states and the District of Columbia.

The fact that nonprofit hospitals are making big bucks at the expense of both their patients and the taxpayer is a problem acknowledged by politicians on both sides of the aisle.

Charles E. Grassley, Republican senator from Iowa, has been vocal about his concerns for well over a decade. As far back as 2010, when the Illinois Supreme Court ruled that a nonprofit hospital in that state hadn’t provided enough charity care to merit a tax exemption, Sen. Grassley went on record, saying, “There is often no discernible difference between the operations of taxable and tax-exempt hospitals.”

He continued, “Tax-exempt hospitals should give more attention to their charitable activities. That includes not only providing charitable patient care, but also publicizing it to patients, not charging indigent uninsured patients more than insured patients, and cutting aggressive collection practices.”

Rep. Pramila Jayapal, a Democrat from Seattle and current chair of the Congressional Progressive Caucus, recently introduced legislation with a Republican colleague, Rep. Victoria Spartz of Indiana, that would give the Federal Trade Commission authority to stop nonprofit hospitals from engaging in anticompetitive practices.

In a statement about the bill, Rep. Jayapal summed up her frustrations, saying, “[E]nough is enough with corporate profiteering off people’s illnesses in our healthcare system.”

As a physician and former member of Congress, I agree with both Sen. Grassley and Rep. Jayapal. There’s nothing partisan about the idea that nonprofit hospitals shouldn’t be allowed to have their tax-exempt cake and eat it too.

In red states, blue states and everywhere in between, we all need nonprofit hospitals to act like nonprofits. That means they should keep their end of the bargain and focus more on their patients than on their bottom lines. When they don’t, we need state and federal agencies to hold them accountable on behalf of the patients they serve.

Former Del. Donna M. Christensen, D-V.I., is a member of the Consumers for Quality Care board. She retired in 2015 from the U.S. House of Representatives, where she served nine terms. She was the first female physician to serve as a member in the history of the U.S. Congress.

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