Hospitals Flout Charity Aid Law

By Nina Bernstein
The New York Times, February 12, 2012
New York’s charity care system, partly financed by an 8.95 percent surcharge on hospital bills, is one of the most complicated in the nation, but many states have wrestled with aggressive debt collection by hospitals in recent years. Like New York, several passed laws curbing hospitals’ pursuit of unpaid bills, including Illinois, California and Minnesota.
But a new study of New York hospitals’ practices and state records finds that most medical centers are violating the rules without consequences, even as the state government ignores glaring problems in the hospitals’ own reports.
Hospitals are not legally barred from seeking judgments or liens, but must first offer an aid application, help the patient complete it, and wait while it is pending. Instead, many hospitals turn to collection agencies, and sue when that fails. The unpaid bills — typically reflecting much higher rates than what insurers pay — are then treated as the equivalent of charity care.
Change is now urgent, health care experts agree, because the state pool stands to lose hundreds of millions of federal dollars in 2014, when provisions of the health care overhaul will no longer treat so-called bad debt, based on uncollected bills, as if it were charity care.
http://www.nytimes.com/2012/02/13/nyregion/study-finds-new-york-hospitals-flout-charity-rules.html?_r=1&emc=eta1&pagewanted=all

How much charity care should hospitals be expected to provide? Contrary to the prevailing view, the answer should be, “None.” Let me explain.
With our fragmented, dysfunctional system of financing health care it is inevitable that some individuals will receive essential health care services in hospitals, often on an urgent or emergency basis, even though they lack both the funds and insurance coverage to pay for those services. Charity always has been expected of hospitals, so much so that some even have included “Charity” in their names.
The issue became more acute with a differentiation between nonprofit and for-profit hospitals. Nonprofit hospitals were relieved of tax obligations on retained revenues exceeding their costs in exchange for fulfilling their obligation to provide charity care. These retained excesses could then be used for capital improvements, or for charity care.
For-profit hospitals, as entrepreneurial entities, are taxed on these retained revenues as profits. As such, they usually are not expected to provide free care as part of their mission to profitably serve the health care needs of the community.
Members of Congress have expressed concerns over the fact that many nonprofit hospitals seem to be shirking their responsibilities to provide charitable services. They have been acting more like the for-profit hospitals in that much of their uncompensated care is not for prearranged charitable services but rather represents charges that patients were unable to pay. They then write this off as their charitable obligation, but usually only after vigorous attempts to collect the bills – efforts which often leave those patients in financial ruin forever.
It seems ironic that members of Congress pursue an investigation of the charity practices of nonprofit hospitals while paying their respects to market principles by exempting the for-profit hospitals from such an investigation, though it is understandable when you realize that Congress allows tax policy to trump health policy.
The fundamental flaw in all of this is our dysfunctional health care financing system. Everyone should have comprehensive health care coverage that pays all appropriate costs. There should never be a situation in which a person would require charity care. This is a fundamental principle common to most other wealthier nations in that their systems are designed to see that everyone receives appropriate care without the necessity of negotiating financial barriers. Services outside of the system, such as vanity cosmetic surgery, would be available based on the ability to pay, but would never require a need for charity.
Once again, it’s clear that we need to move forward with enacting an efficient, comprehensive, equitable single payer national health program. Why do we keep putting it off when the need is so clear?