Hospitals with strong finances spend less than their peers on charity care

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The most profitable hospitals spend proportionally less than their peers on charity care. (Getty/NicoElNino)

New research suggests that hospitals with strong financial results could do more to help patients in need of charity care.

According to a research letter published in JAMA Internal Medicine, hospitals that produce high net income spend proportionally less than their peers on charity care for both insured and uninsured patients.

For every $100 of net income earned in 2017, hospitals ranked in the top quartile for net income provided $11.50 in charity care for uninsured patients and $5.10 for insured patients.

In comparison, the third quartile of hospitals provided $72.30 for uninsured patients and $40.90 for insured patients.

While the top quartile of hospitals generated more than 100% of total overall net income measured in the study, those same hospitals provided only a little more than half of total charity care.

Hospitals in the bottom quartile supported more than 17% of total charity care provided, despite incurring substantial net losses.

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Researchers also looked at the difference between charity provided to insured and uninsured patients to get a better sense of how much of charitable care provided by hospitals amounts to discretionary spending, according to lead author Ge Bai, Ph.D., CPA, an associate professor at Johns Hopkins Bloomberg School of Public Health.

Where uninsured patients receive charity care in the form of a full or partial discount on their bills, hospitals tend to waive deductible and coinsurance payments for insured patients. The study noted a decrease in the amount of charity care provided by hospitals in states that expanded Medicaid as compared to those that did not.

“Charity care provision to uninsured patients is sensitive to the number of uninsured patients,” Bai told FierceHealthcare by email. “States that adopted Medicaid expansion have a lower proportion of uninsured patients than other states, and thus it is expected that hospitals in the former states would provide less charity care to uninsured patients than hospitals in the latter states. In contrast, charity care provision to insured patients is not subject to the same constraint, and thus is more discretionary.”

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While it’s likely that lower demand for charity among uninsured patients produced some part of the decrease in charity spending in states that expanded Medicaid, it’s unclear whether the policy shift had an effect on charity spending for insured patients. Bai indicated a look at pre- and post-Medicaid expansion spending across those categories would be ripe for future research.

The study notes that the healthcare system’s current legal and regulatory framework gives nonprofit hospitals broad discretion in how they draw up their financial assistance policies. The authors recommend that hospitals consider reexamining their eligibility criteria to provide greater financial assistance to both uninsured and underinsured patients.

Providing more assistance voluntarily would likely be better for all parties involved than waiting for policymakers or government regulators to act, according to Bai.

“It’s very challenging to regulate charitable actions, which are directly linked to the financial viability of the entity,” she says. “The cure could be worse than the disease.”

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