Nonprofit hospitals with highest incomes provide disproportionately low charity care
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Nonprofit hospitals that bring in the highest net incomes provide disproportionately low charity care compared with lower-earning nonprofit hospitals, according to research published in JAMA Internal Medicine.
“Providing charity care is the main justification for nonprofit hospitals to receive tax-exempt benefits and the demonstration that hospitals are advancing their charitable mission,” Ge Bai, PhD, CPA, associate professor of accounting and health policy and management at Johns Hopkins University, told Healio Primary Care.
Bai and colleagues examined 2017 Medicare cost reports published by CMS that included charity care information for uninsured and insured patients. They measured the amount of charity care provided, ranked each hospital based on overall net income and divided hospitals into quartiles based on their overall net income. Researchers evaluated charity care in each quartile and in the top 1% and 5% of hospitals.
A total of 2,563 nonprofit short-term general hospitals were included in analyses.
Researchers found that in 2017, nonprofit hospitals in the U.S. generated $47.9 billion in overall net income while providing $9.7 billion in charity care to uninsured patients and $4.5 billion in charity care to insured patients.
The first quartile of hospitals generated all of the overall net income among hospitals (100.2%) and provided 57.3% of uninsured charity care and 54.6% of insured charity care, according to researchers. The remaining hospitals had net losses after aggregation. Hospitals in the fourth quartile had losses that were equivalent to 15.8% of the total income and provided 17.1% of total uninsured charity care and 17.7% of total insured charity care.
Bai and colleagues determined that relative to overall net income, the amount of charity care was smaller among hospitals with larger incomes. They found that for every $100 of their overall net income, hospitals in the top quartile provided $11.5 in charity care to uninsured patients and $5.1 in charity care to insured patients.
In comparison, researchers found that for every $100 of overall net income among hospitals ranked in the third quartile, they contributed $72.3 in uninsured charity care and $40.9 in insured charity care.
After stratifying results by the state Medicaid expansion, Bai and colleagues found that nonprofit hospitals provided less total charity care than other states. For every $100 of total income, states with expanded Medicaid provided $12 in uninsured charity care and $8.7 in insured charity care. In comparison, hospitals in states that did not implement Medicaid expansion provided $37.8 and $11 in charity care for every $100 of income.
“Patients’ socioeconomic background and insurance status influence the hospital’s charity care provision, but hospitals have substantial discretion in determining how much charity care to provide,” Bai told Healio Primary Care.
Researchers noted that currently, nonprofit hospitals can design their own financial assistance policies for both insured and underinsured patients.
“Public awareness and scrutiny and political pressure will likely motivate them to provide more charity care,” Bai said. – by Erin Michael
Disclosures: Bai reports providing consulting services for Altemose, Cohen, Feeley and Rambo regarding some nonprofit hospitals. All other authors report no relevant financial disclosures.