The nation’s nonprofit hospitals have failed to deliver $14 billion annually in financial aid known as charity care, by hiding information and imposing difficult requirements on patients, according to a new study.
This financial aid process is also characterized by racial disparities, according to the study, by DollarFor, a nonprofit organization that helps patients submit hospital financial assistance applications and holds hospitals accountable to financial assistance laws.
The charity care policies of hospitals are based on Internal Revenue Service regulations for supplying “community benefit,” which is required to maintain nonprofit status under Section 501(r) of Schedule H of their tax return. DollarFor has reduced or dismissed thousands of health care bills.
“In this study, Dollar For’s research team examined both hospital self-reported tax filings and a first-of-its-kind study in Maryland that matched patient billing records to their income filings,” said the new report, titled “Bridging the Chasm: Closing the $14 Billion Access Gap in Charity Care.”
“Shockingly, the study uncovered that hospitals are failing to provide at least $14 billion annually in debt relief for their charity care-eligible patients.
“In a follow-up study, Dollar For delved deeper into the challenges patients face in accessing financial assistance. Surveying over 1,600 patients, the study aimed to uncover why so many individuals were falling through the cracks. The results revealed a stark reality: only 29% of patients with hospital bills they cannot afford are able to learn about, apply for, and receive charity care. The majority of patients (52%) reported receiving no information whatsoever from their hospital regarding financial assistance.
“The analysis also unveiled a troubling disparity: Black patients have a 62% lower probability of being approved for charity care than all other races.”
The founder of DollarFor, Jared Walker, described his work to us in this interview. “If you meet the income requirements, hospitals are legally required to write off your medical bills,” Walker said. “Unfortunately, hospitals don’t do a great job telling people about these things. So we have millions and millions of people that are declaring bankruptcy or on payment plans for bills that they actually don’t have to pay.”
Process ‘somewhat or very hard’
The report found that patients not only did not know about financial aid, if they did know about it, the process for applying was hard. The report said:
- “Nearly a quarter of patients describe the application process as somewhat or very hard.
- “Approval rates are highest (67%) when patients get help from Dollar For or the hospital directly.
- “Many applicants (45%) don’t receive any assistance during the application process.
- “63% of applicants who receive help from Dollar For or a similar organization describe the process as easy.
Other findings: The most common reason for a denial is that the bill is old, or that there were paperwork issues. Patients who don’t get charity care often are sent to collections or enter a payment plan. But those who get charity care “report meaningful additional health (94%) and financial (58%) benefits,” the report added.
“Hospitals desperately need to rethink their charity care programs to make sure they’re reaching the patients who need them,” said Jared Walker, founder at Dollar For. “A medical crisis shouldn’t turn into a financial crisis. But unfortunately for most people, it does. Hospitals and the government have the power to change that.”
With a passage on Maryland, the report dives deep into that state.
“This research relied on two sources: hospital self-reported numbers from their tax filings and a first-of-its-kind study in Maryland that matched patient billing records to their income filings. After extrapolating hospital self-reported amounts (charity care and bad debt) in their tax filings, we found that approximately $7 billion per year in charity care eligible amounts end up as bad debt. However, the Maryland data suggests that hospitals self-report less than half of their charity care-eligible bad debt, so the actual amount is likely twice that number.”
“Under Maryland law, all patients within 200% [federal poverty level] should not be charged
for medically necessary care. Despite this, the [Maryland Health Services Cost Review Commission] found that the bills for 60% of patients at or below 200% [federal poverty level] ended up as bad debt,” the report adds.
“This is particularly relevant because, unsurprisingly, people with lower incomes are far more likely to be burdened with medical debt. While 9% of the adult population has reported having medical debt, 12% of adults with incomes below 400% [federal poverty level] have medical debt, whereas only 4% of adults with incomes 600% [federal poverty level] or above have medical debt. This suggests that bad debt pools are likely disproportionately filled with charity care-eligible bills.”
What charity care looks like
Walker told us about a number of cases in his interview. Here’s one:
“We had a patient out of Arizona at Banner Health. Her husband passed away from Covid. Single mom, couple of kids and not a big income, and she got a $450,000 bill from this hospital. English was her second language, we were trying to get through to the hospital saying, ‘Hey, this is absurd — not only is a person experiencing extreme loss, but this medical bill is like, out of this world large.’
“It was the same kind of thing. We submitted all the paperwork, we jumped through all the hoops, and the hospital just let us wait and wait and wait. And again, they sent her to collections. We had to continue calling. I did like five or six three-way calls with the patient and the hospital and waited on hold for hours. Finally, the medical bill was waived.”
Or rhis one: “I had a case at Ascension Health in Austin, Texas. Somebody was driving under the influence, reckless driving, and hit him on the sidewalk. He was hit by a car and had a huge medical bill, like $76,000. He was definitely within the income guidelines, plus he missed several months of work.
“We applied, and the hospital said, ‘Well, this is under review, because it’s a big bill. Call back in a month.’ We called back and they said ‘We’re gonna review this.’
“That happened eight different times — eight months of calling in, ‘Oh, yeah, we’re gonna review this, we’re gonna review this.’ Meanwhile, they sent him to collections. During this time, you’re supposed to freeze the bill, and not do all of these collection practices, but of most of the time, the financial assistance and charity care department and the billing department are not communicating.”
