February 20, 2020

Nonprofit hospitals that had the highest earnings in 2017 provided less charity care relative to their revenue than nonprofit hospitals with lower earnings, according to a new study published in JAMA Internal Medicine.

Study details

For the study, researchers looked at Medicare cost reports on 2,563 nonprofit short-term general hospitals to determine how much they spent on charity care for both insured and uninsured patients in 2017. The researchers noted that the Medicare cost reports were not audited, and therefore may not have offered a full picture of hospitals' finances. However, the researchers said the reports are "the only publicly available data source containing charity care information for uninsured and insured patients … separately."

Charity care disparities among nonprofit hospitals

The researchers found that, overall, nonprofit hospitals in 2017 generated $47.9 billion in net income and provided $9.7 billion in charity care to uninsured patients, as well as $4.5 billion in charity care to insured patients who couldn't afford to pay their medical bills.

However, the researchers also found a disparity in the amount of charity care nonprofit hospitals provided when comparing the highest-income hospitals with lower-income hospitals. According to the researchers, nonprofit hospitals that were in the top quartile in 2017 provided $11.50 of charity care for uninsured patients and $5.10 of charity care for insured patients for every $100 of overall net income earned. In comparison, nonprofit hospitals that were in the third quartile in 2017 provided $72.30 in charity for uninsured patients and $40.90 of charity care for insured patients for every $100 of overall net income earned.

The researchers also found that hospitals located in states that expanded Medicaid under the Affordable Care Act provided noticeably less charity care than hospitals in non-expansion states.

Discussion

The researchers said their findings suggest that nonprofit hospitals with higher revenues "should consider more generous financial assistance eligibility criteria to reduce the financial risk exposure of disadvantaged uninsured and underinsured patients."

Ge Bai from the Johns Hopkins Carey Business School and the Johns Hopkins Bloomberg School of Public Health, who was a lead author on the study, said while the socioeconomic background and insurance status of patients can affect charity care, "hospitals still have substantial discretion in determining how much charity care to provide, and more charity care will make a dent in their bottom line."

Still, Bai cautioned against sensationalizing the findings. "I don't think we should say that hospitals with the best finances provided the least charity care. Instead, we can say that hospitals with the best finances provided disproportionally low charity care."

Further, Anupam Jena, a researcher at Harvard Medical School who wasn't involved in the study, said it's unclear how much differences in patient populations that the hospitals serve may have affected charity care rates, or how economic differences in the communities the hospitals serve may have affected the rates.

For example, Jena explained, if fewer patients in a hospital's community needed charity care, that could account for the disparity in the amount of charity care that hospital provided when compared with a hospital that serves a patient population which more often needs charity care (Owens, "Vitals," Axios, 2/18; Rapaport, Reuters, 2/17; Bai et al., JAMA Internal Medicine, 2/17).

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