I began my career working for a nonprofit hospital. That was more than 30 years ago when the cost of health care was much lower compared to the average wage of American workers. In the late 1980s, for example, the percent of GDP spent on health care was just over 10%. It’s nearly 20% today. Around that time a politically motivated attorney general began looking into the amount of charity care provided by nonprofit hospitals within the state to make sure hospitals were providing enough to justify their tax breaks. The investigation ultimately found hospitals in the state were providing enough charity care to avoid further investigation, but perhaps the question should have been why was the bar set so low? After all, there are construction cranes standing at every major hospital campus in my town.
The issue of nonprofit hospital status came to a head in Pottstown, Pennsylvania, where a for-profit hospital was purchased by a firm that converted it to a not-for-profit facility. That meant the hospital didn’t pay federal or state income taxes. It didn’t pay sales taxes on supplies, and most of all it no longer owed property taxes.
The takeover by Tower Health meant the 219-bed Pottstown Hospital no longer had to pay federal and state taxes. It also no longer had to pay local property taxes, taking away more than $900,000 a year from the already underfunded Pottstown School District, school officials said.
The school system appealed the nonprofit tax election and when a state court reviewed the compensation of senior executives the property tax beak was struck down.
The court decision, which Tower Health is appealing, stunned the nonprofit hospital industry, which includes roughly 3,000 nongovernment tax-exempt hospitals nationwide.
“The ruling sent a warning shot to all nonprofit hospitals, highlighting that their state and local tax exemptions, which are often greater than their federal income tax exemptions, can be challenged by state and local courts,” said Ge Bai, a health policy expert at Johns Hopkins University.
It amazes me that for-profit hospitals can coexist alongside nonprofit hospitals due to the tax breaks their competitors enjoy. Indeed, that for-profit hospitals survive and even thrive is a testament to how uncompetitive the hospital sector is. In any other industry it would be impossible to compete against all the advantages nonprofit hospitals enjoy.
The Pottstown case reflects the growing scrutiny of how much the nation’s nonprofit hospitals spend — and on what — to justify billions in state and federal tax breaks. In exchange for these savings, hospitals are supposed to provide community benefits, like care for those who can’t afford it and free health screenings.
More than a dozen states have considered or passed legislation to better define charity care, to increase transparency about the benefits hospitals provide, or, in some cases, to set minimum financial thresholds for charitable help to their communities.
This brings me to an article I read in The Los Angeles Times. Crushing medical bills are causing Americans to lose faith in the health care system.
For Emily Boller, it was a $5,000 hospital bill for a simple case of pink eye that took four years to pay off. For Mary Curley, it was the threatening collection letters from a lab that arrived more than two years later, just as her husband lost his job and the family was fighting to save their home.
For Cory Day, it was a $1,000 fee he was charged at an emergency room outside Los Angeles, even though he only checked in and then left before being seen. “I feel like the hospital is a predator,” Day said. “This is a place that’s supposed to be looking after you.”
The experience offered a stark lesson, he said: “Don’t trust the system.”
There was a case from Georgia where a lady named Taylor Davis checked in at an emergency room in Georgia but left after seven hours before being seen. She was later billed $700.
Following the billing, Davis said she’s reluctant to return to any ER or hospital and now sees it as a “last resort.”
Wouldn’t a (non-predatory) ER be a great example of a community benefit? Although the LA Times article did not specify which type of hospitals the above examples were from, there’s a good chance they were committed by nonprofit hospitals. The writer talks about having spent hundreds of hours interviewing Americans about health care and noticing a similar theme, saying:
Many of my conversations with patients have revealed a deep and disturbing disillusionment with our healthcare system.
If nothing else, this should be a flashing red light: the simmering resentment of growing numbers of patients who feel victimized by this system.
Mr. Levey concluded his article saying:
Absent action, patients’ trust is sure to erode further. And without the trust of the people it serves, this American healthcare system cannot long endure.
Let’s hope he’s right. Our health care system is in dire need of reform into a patient-centered health care system that competes for consumers’ business rather than ambushes them.
I suggest another good reason to mistrust hospitals.
Hospitals aren’t shy about claiming to pay for “charity care” when they forgive bad medical debt. But a significant share of that bad debt is apparently funded by others – specifically by insurance companies, and self-insured employer medical coverage. That means privately-insured patients are paying the tab, not the hospitals.
This sleight of hand has existed since at least the mid-1960s and has roots in what hospitals claim is inadequate reimbursement from Medicare and Medicaid. To make up the lost revenue the hospitals began increase their charges to privately-insured patients.
This practice has been an open secret for decades and often analyzed, e.g., by the respected actuarial firm Milliman just a few years ago. Milliman estimated the impact of this cost shifting raises private insurance premiums by around 15%. I still have a copy of an Atlantic Monthly article from March 1970 that described this practice in some detail. The estimated hospital surcharge for bad debt at that time was also 15%. The author of that article was a young physician named Michael Crichton.
So, yeah, I mistrust hospitals. Not so much because of this practice. Not even so much as their reluctance to disclose this practice. I mistrust them because they claim to be “charitable” with other peoples’ money. It’s just not my idea of “charity”.
Hospitals by law are supposed to forgive all debts from persons who are uninsured and have incomes less than 200% of poverty ($60,000 for a family of four). The law technically just covers non-profit hospitals, but many states have extended coverage to for-profits also.
And yet medical debt keeps growing, and ugly incidents are easy to find. I have studied this a lot, and offer the following:
1. Patients are not told what they are eligible for. It is easy to see this happening in a busy ER.
2. The paperwork to get forgiveness can be a barrier.
3. Forgiveness is generally limited to the uninsured. If you have some insurance, too bad — even if you cannot afford the deductible.
In a middle class suburb with no illegal aliens, I am not sure just how many people are hospitalized with absolutely no insurance. Just a guess on my part.
“Hospitals by law are supposed to forgive all debts from persons who are uninsured and have incomes less than 200% of poverty ”
Yes.
But it’s who they end up charging after forgiving those individuals’ bad debts that makes a mockery of their claim to be providing “charity care”.
Also a lot of bad debts are incurred in the emergency room. Gouging poor people who turn to the ER makes it hard to claim community benefits.
There is something that feels a little nuts in expecting a hospital to know your family income before deciding what to charge you for your care,
No other business in the country has to do this, except maybe for lawyers to determine if you qualify for a public defender.
In the 1950’s, according to an uncle of mine who was an ER doctor, everybody got charged about $35, and the hospital was expected to tap wealthy charitable donors to stay open. I still remember my mother participating in the annual fund drives. Patients were not expected to pay the full cost of their care.
Congress has a history of passing legislation that has lofty noble mandates but no funding.
The EMTALA law in 1984 was like this. Or the benefits are severely means-tested as in the Affordable Care Act.
I would vote for a law that declared ambulances and ER’s to be public functions, and raised taxes to pay for them. The ambulance part of this would cost $6-$8 billion a year. The ER portion is tricky, because of patients who start in the ER and wind up needing surgery and extended recovery. I don’t have the fiscal answer yet.
“Patients were not expected to pay the full cost of their care.”
Still true. 😎
I am OK with patients not paying the full cost of their emergency care.
We don’t pay the full cost of firemen or policemen either. We expect the community to cover nearly all of the cost with taxes.
Just driving through a nice American suburb, like I did this morning, leaves me convinced that a society this rich can find the money to pay for paramedics, ER doctors, et al.
I realize it is hard to stop the socialist bandwagon at just ER care, however. I would try however.
“I am OK with patients not paying the full cost of their emergency care.”
So am I, and for more than emergency care too. Still, I think all patients should pay something, even as little as $5, toward the full cost of whatever care they receive.
Insurance is intended to subsidize the full cost, making the remainder affordable. Problem is, the cost of medical care continues to rise every year. That means the cost of medical insurance also rises every year. Even medical insurance is unaffordable for people who are not working, or whose employer does not or cannot adequately subsidize the cost. And employer subsidies don’t solve the underlying problem anyway.
It is past time American policy leaders give up the fiction that “healthcare” costs can be made affordable if only the proper insurance mechanism is devised. The root of the problem is the cost of care, not insurance. Even Obama conceded that in his September 2009 address to Congress.
Government subsidy of insurance, as in Obamacare, is a band-aid. It’s not the solution any more than employer subsidies are the solution.
We have reached the point at which there is no excuse for failing to know what happens next if we continue to follow the path we’re on: NHS in the USA.