The Virginian-Pilot had a front page article Sunday on the tax breaks for providing charity care. What they found was pretty amazing:
A Virginian-Pilot analysis of statistics gathered by Virginia Health Information, a nonprofit group, found that nonprofits statewide provided charity care equal to 3.3 percent of gross patient revenue in 2005. For- profits’ rate was 1.9 percent.
With so many people lacking health insurance, the numbers seemed a little low to me. The article details the reason why the numbers are so low:
To some advocates for the poor, charity care seems one of the best-kept secrets in the Virginia health system. In 2005, a team of Legal Aid lawyers did a telephone survey of 20 Virginia hospitals, asking about their charity care policies. They reported that the information was “exceedingly difficult” to obtain.
“No average patient, let alone a patient with a health problem or disability, could be expected to spend the time and energy that it took to obtain this information,” the team wrote. “It is one thing to have financial aid and charity care policies in place; it is quite another to make them accessible to the public.”
So while programs exist, getting the information is extremely difficult. As the result, many of those eligible end up with bills they cannot pay, which the hospitals pursue via the courts. The article reports that “recent studies have found that medical debt is a major factor in at least 50 percent of bankruptcy filings.”
I don’t know how we got here. It seems to me that there should be some requirement that non-profit hospitals spend a reasonable amount of their revenues on taking care of the poor. I don’t see 3.3% as reasonable. The fact that the IRS has no specific requirement is ridiculous. Health care is big business, and if the government wants me, as a taxpayer, to subsidize the operation, at the very least there should be some minimum amount of charity required.
Right now, the best we can do is to urge our legislators to take up the cause by passing legislation like that in other states:
Some states have passed laws requiring hospitals to notify patients of their charity care programs and determine eligibility for free care before filing collection lawsuits. Virginia has no such requirements.
I’ll take that even further. Virginia law should notification to patients of the availability of charity care prior to the providing of services. Such notification should include posters and fliers in the waiting room and as a part of the admissions process, a signature indicating that the information has been provided to the person who is accepting financial responsibility. Perhaps admissions personnel could ask a few financial questions in order to flag the file of the patient for followup with a financial counselor.
Universal health care may or may not be a part of our future. Until that happens, the non-profit hospitals should make their charity care programs easily accessible and stop sending already financially fragile patients into even worse situations.
Either that or give up your non-profit status. Because if you aren’t willing to be charitable, neither should we as taxpayers.
VIVIAN J. PAIGE | All Politics is Local 
I think you’re being a bit hard on the hospitals. It’s not as if they’re making money hand-over-fist. USA Today reported that “The nation’s hospitals… posted profit margins that reached a six-year high in 2004.” Those profit margins were 5.2%. That’s not a lot to work with.
Some questions are unanswered. Do the non-profit hospitals generally charge less than for-profit hospitals for similar care? If so, were those reduced charges included in the figure presented? Does the staff in a non-profit hospital generally get paid more or less than their peers?
Sorry, I messed up the USA today link: http://www.usatoday.com/news/health/2006-01-04-hospital-profits-usat_x.htm
Health care is big business, and if the government wants me, as a taxpayer, to subsidize the operation, at the very least there should be some minimum amount of charity required.
Vivian, how about this: you don’t have to subsidize anyone else’s care and hospitals dole out as much charity as they wish. Works for me.
I’ve worked in a “non-profit” hospital and the “top executives” are definitely making money hand over fist…..and it’s at the expense of patient care AND the staff that does the actual work of health care.
It’s outrageous how they choose to spend the money also…..
I, and many other health care providers and patients, prefer a universal health care system….we are sick of having high school graduates at insurance companies tell us the treatment our patients have to accept.
buzz…buzz….
So you’d rather have high-school graduates in the government tell you the treatment your patients have to accept?
AEM – I don’t think I’m being hard on them at all. I’m gad the Pilot brought this to our attention. Too bad the online version doesn’t include all of the charts that accompanied the story because one of them had the profit margins in them.
Brian – I wish it were that simple but the truth is that not only do nonprofit hospitals pay no taxes, but contributions to them are tax deductible. Given that, there is no way for me to get out of subsidizing their operations.
Mosquito – the interesting point in the story is that the hospitals cited support universal health care as well. I have to admit that I’m a little uncomfortable being on the same side as they are.
Sentara’s doing just fine, Mouse, and they’re our local “non-profit” monopoly. And no, they charge much more than other hospitals for routine, standard care and testing. Their monopoly status allows them to get away with that, in addition to controlling many of the physicians’ practices and other health care facilities.
Many of these hospitals accepted public subsidies under the Hill-Burton Act for construction in the first place, in exchange for an unspecified amount of charity care. They reneged on their promises without consequence.
Non-profit monopoly? What about
Chesapeake General
DePaul Medical Center (Closing?)
Mary Immaculate Hospital
Maryview Medical Center
Chesapeake General Hospital
Riverside Regional Medical Center
Southampton Memorial Hospital
All the data you’re looking for can be found here: http://www.vhi.org/hosp_acute.asp?region=5
AEM – you listed Chesapeake General twice. And Sentara is certainly the dominant provider in our region.
Vivian, now you’ve opened up the whole 501c can of worms. We ought do away with all the non-profit rigamarole and let them do as they will without interference from the government. It would, at least, solve the subsidy problem.
Actually, no I haven’t, Brian. I’m just expecting a charitable organization to provide charity. That is the same thing that other charities have to do. Why should nonprofit hospitals be any different?
Vivian, what do you mean by what “charities have to do?”
Further, I may have been unclear in my last post. I think that giving tax breaks to non-profits and their donors is largely a bad idea. Churces, the Salvation Army, et. al. did just fine before they had to justify themselves to the Feds. I suppose one could argue that not enough charity was supplied to the indigent, but when and how do we decide what is enough? I suspect that we will never dole out enough to satisfy the Utopians.
Sorry about the duplication. In any event, being dominant is not being a monopoly.
So, Vivian, you have the numbers for Norfolk General. If you count the bad debt expense, about 7.9% of patient revenue is spent on “charity.” With hospital profit margins running about 5.2%, Norfolk General had a net gain of 2.8%. That’s not a big buffer.
And where will that money go? It will not go to the stockholders — there are none.
Brian – take a look at form 990, which is what nonprofits have to file. You will see that they have areas for the various programs of the charity. And the IRS will revoke their exemption if they don’t.
AEM – why did you add in bad debts? Who is to say that those bad debts came from charity cases?
According to the chart here, Norfolk General spent 4.6% on charity care and had a net margin of 3.1%. Big buffer or not, that’s nothing to sneeze at – more than $32 million. Now, imagine if they had to pay taxes on that.
As to where the money goes – take a look at the salaries. And the rest of it is in the bank. And the current ratio (CA/CL) is over 4, which is excellent. Look at DePaul’s CR – under 1.
Vivian, I added the bad debt because the hospitals generally work out payment plans for those who can pay. Those who cannot pay are written off as “bad debts.”
DePaul is also going out of business.