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N.C. Nonprofit Hospitals – for Profit or Community – Part 2

In the first part of this series, we established what a nonprofit hospital is and how North Carolina’s nonprofit hospitals may not be living up to their charitable commitment to the community and are instead more focused on profits. This focus leads one to wonder what exactly these hospitals are doing with their growing profits.

Many large healthcare systems are spending excessively on new buildings, new services, and high salaries. Some of these large expenditures can benefit the community. An increase in facilities can give more people access to healthcare and new services can bring in new and better treatments for patients. But, all of these also focus on bringing in more business and more profit for the hospital.

So how much profit are these nonprofit hospitals actually putting into charity care (forgiving all or part of a patient’s bill) for patients with no insurance and/or low income? According to the Charlotte Observer, in 2010 most of the state’s hospitals spent less than 3 percent of their budgets on charity care. Mecklenburg County’s hospitals, which are among the state’s most profitable, performed slightly better than average, with all spending more than 4 percent of their budgets on charity care.

Unfortunately, North Carolina, like most other states, has no requirement that hospitals spend any money on charity care. Federal rules require nonprofit hospitals to provide some “community benefit,” but they don’t specify what those benefits should be. The lack of regulation allows hospitals to continue to focus on raising profits and only reinvesting that money into its own infrastructure to benefit the community.

This is somewhat disappointing considering how important charity care is to the community. In NC, the unemployment rate is one of the highest and one in 5 residents under the age of 65 lacks health insurance. Charity care can prevent this group from being plagued by medical bills they can’t afford and having their credit destroyed by collections. When a hospital turns an account over to collections they often are losing money anyway. The hospital would experience little financial harm if they forgave more bills for those in need.

Not only do the hospitals send bills to collections, which can severely damage a patient’s credit, but they also file suits to collect money from patients. Often these are the same patients that could use charity care the most. They are often uninsured and survive on minimal wages. Most of the time, once the hospital wins the suit, there is no money to collect. So instead the hospital will place a lien on the person’s home. This practice only adds more financial burden to an already stressful and desperate situation. This can destroy a person financially and seems to be an incomplete contradiction to the hospital’s charitable commitment to the community. According to the Charlotte Observer, During the past five years ending in 2010, N.C. hospitals filed more than 40,000 lawsuits to collect on bills.

For those struggling to pay their medical bills, charity care may be their only hope in avoiding financial devastation. This makes it very disappointing that many hospitals have restrictive policies for those seeking charity care. Most require that the person make a certain percentage less than the poverty level and only hold a small amount in assets. Even if the person does qualify, many people are unaware that charity care exists. Patients are not always informed by hospital officials about charity care policies and key details aren’t always included on the websites. Two-thirds of North Carolina hospitals didn’t list their full financial assistance policies on the Web.

While there are always two sides to each story, it does seem apparent that nonprofit hospitals in North Carolina could do more to give back to the community. If they are founded on an idea of charity and are exempt from paying hundreds of millions in taxes, more than 4% should be put back into the community, where it is desperately needed. In the final installment of this series on N.C. nonprofit hospitals, we will look at some possible solutions to fix this broken system.

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