- Sen. Bernie Sanders, I-Vt., Chair of the Senate Health, Education, Labor and Pensions (HELP) Committee is calling on Congress and the Internal Revenue Service to establish federal standards to hold nonprofit hospitals accountable for charity care requirements, alleging that nonprofits “price gouge” patients in need.
- Nonprofit hospitals receive tax breaks in exchange for providing medical care for free or at reduced rates, and are required by the Affordable Care Act to maintain publicly available financial assistance programs. Facilities are also obligated to avoid taking “extraordinary collection actions” against patients eligible for charity care.
- In a Senate HELP Committee report dated Oct. 10, Sanders accused nonprofit hospitals of providing minimal charity care “even as these hospitals saw a steady increase in their revenues and operating profits,” and hiding financial assistance programs from patients. An April report from the Lown Institute found more than three-quarters of nonprofit hospitals spent less on charity care and community investments than the value of of their tax breaks.
The HELP Committee report further exemplifies rising federal scrutiny into nonprofit hospitals’ charity care spending. A bipartisan group of senators sent a pair of letters to federal tax commissioners in August urging a review of charity care tax regulations, alleging that current government oversight is lax.
Recent research has uncovered nonprofit hospitals’ growing operating profits and cash reserves in the face of decreased charity care spending. A study published in June in Health Affairs found that charity care spending at nonprofits dropped from 2012 to 2019, while mean cash reserves and operating profits increased. Another analysis from health policy research firm KFF found that half of all U.S. hospitals spend just 1.4% or less of their operating expenses on charity care.
The report from Sanders highlights 16 of the largest nonprofit hospitals — including CommonSpirit, Providence, Ascension, Cleveland Clinic and Mass General Brigham — and found that 12 dedicated less than 2% of their total revenue in 2021 to charity care. Six of those nonprofits spent less than 1%.
“The disparities between the paltry amounts these hospitals are spending on charity care and their massive revenues and excessive executive compensation demonstrates that they are failing to live up to their end of the non-profit bargain,” the report read.
In addition to disparities on spending, the report also detailed steps that some nonprofits have allegedly taken to recoup medical bills, citing a New York Times investigation last year that found that Providence pressured patients into paying their medical bills — including those who were eligible for charity care. The investigation found that Providence paid consulting firm McKinsey & Company $45 million in 2019 to create a program training employees on how to solicit money from patients, regardless of their charity care eligibility.
Sanders recommends that Congress take steps to enforce standards so that nonprofits’ charity care is “consistent with the enormous tax breaks they receive,” including establishing clear, enforceable standards for nonprofit hospital financial assistance programs.
For the IRS’ part, the report recommends the agency should target “administrative gaps” in tax filings and increase transparency about what information about community benefits nonprofit hospitals must disclose.
Hospital groups have pushed back against the reports scrutinizing charity care spending, with Rick Pollack, president and CEO of the American Hospital Association, calling Sanders’ report “totally off base.”
“This tunnel-visioned ‘research’ neglects to consider that under the law community benefit is defined by much more than charity care and includes patient financial aid, health education programs and housing assistance, just to name a few,” said Pollack in an AHA blog post.
An AHA report, released on the same day as Sanders’ report, says that tax-exempt hospitals provided nearly $130 billion in total benefits to their communities in 2020.