North Carolina’s Treasurer took aim at N.C. nonprofit hospitals Wednesday, releasing a report that found some have billed millions of dollars to poor patients who should have qualified for free or discounted charity care.
But clear data on how Charlotte’s major hospitals handled billing low-income and uninsured patients is “clouded” by failures in state oversight, according to the medical debt study by state Treasurer Dale Folwell.
Data on most facilities operated by Charlotte’s largest hospital system, Atrium Health, were not included in the study. That’s because hospitals like Atrium, which operates as a public entity called a hospital authority, are not required to deliver the same transparency in tax returns as other nonprofit hospitals, according to the study.
Data released on Atrium Health’s main competitor in the Charlotte area, Novant Health, was called into question in the study.
Novant Health’s Presbyterian Hospitals reported in fiscal year 2019 that of more than $85 million in bad debt — bills the hospital has given up on collecting — none came from poor patients eligible for charity care.
All told, 42 N.C. hospitals said they billed no money to any poor patients eligible for charity care, including facilities owned by Atrium and Novant, along with Wake Forest Baptist, WakeMed, Greenville-based Vidant Health and Duke Health.
But the state Treasurer’s study questioned those claims. “Such claims are not always supported by hospitals’ own disclosures on federal tax filings,” the study said.
The study claimed that some hospitals which reported not billing any patients eligible for charity care may not have strong measures in place to identify patients eligible for free or reduced care — meaning some patients fell through the cracks.
For example, just one hospital system in the state, WakeMed, reported that all uninsured patients were contacted personally by a financial counselor, according to the study.
The study reported that some nonprofit hospitals in the state billed poor patients at an average rate of almost three times the national average.
“This is really happening right in front of our eyes,” Folwell said in a news conference Wednesday.
Novant Health defended its charity care and financial assistance policies in a statement to the Observer Wednesday, calling its policies “the state’s most generous.”
Novant Health has committed to never suing a patient due to their inability to pay, the hospital system said. And Novant provides free care or care at a reduced price to uninsured patients who have a household income of up to 300% of the federal poverty level, covering about 90% of all uninsured patients, according to the hospital system.
Bills are discounted for the other 10% of uninsured patients who don’t qualify because their incomes are above that guideline, according to Novant. “Patients in this category will not pay more than what an average insurance company may pay,” Novant said.
Financial navigators are available to assist patients in exploring payment options, Novant added. Patients can call 336-277-7299 or toll-free 888-277-3901 to speak with a navigator weekdays 8 a.m. to 6 p.m.
Atrium also defended its charity care in a statement to the Observer Wednesday afternoon.
“Last year alone, Atrium Health provided more than $437 million in services to over 100,000 uninsured patients who never received a bill for their care,” the hospital system said in a statement. “To put that into perspective, that would equate to free care provided for 1 in 10 residents of Charlotte.”
On its website, Atrium said that for hospital outpatient or medical group services with a bill of less than $10,000, each patient account is reviewed for financial assistance before billing, based on a financial assistance score from a third-party vendor.
Atrium did not say on the site what that criteria is. Patients who qualify will not receive a bill.
And uninsured patients who received hospital inpatient services or observation services, or patients with hospital outpatient or medical group services with a bill greater than or equal to $10,000, fall under a different financial assistance program, according to the Atrium site.
Under that program, which includes an online application, Atrium said it provides free care for uninsured patients with income less than or equal to 200% of federal poverty guidelines. Uninsured patients with incomes between 201% and 400% of federal poverty guidelines are eligible for partial assistance.
Hospital association response
The North Carolina Healthcare Association responded to the study by defending its members’ hospitals: “From free mammogram testing in under-served communities to creating clinics that improve health equity and expand access for under-served populations, feeding the hungry (food as medicine), and partnering to provide affordable housing, North Carolina hospitals are anchors in their community.”
The organization called hospitals’ charity care spending and community benefit activity “transparent and accountable” through federal oversight by the IRS and the United States Treasurer.
“There should be no doubt that nonprofit hospitals are proudly fulfilling their charity care and community benefit commitments to North Carolinians,” the statement said. “Attacking and demonizing hospitals while their exhausted employees are working 24/7 to meet a pandemic peak in hospitalizations is distracting, disrespectful and potentially dangerous.”
Nonprofit hospitals in NC
Nonprofit hospitals receive tax-exempt status through providing community benefits in eight categories: charity care; unreimbursed costs from Medicaid; community health improvement projects; unfunded research; donations to the community; unreimbursed costs from other means-tested programs; unreimbursed education of health professionals; and subsidized services provided at a financial loss that are not means-tested, according to the study.
But the study argues that charity care may be a better justification for tax-exempt status than many of the other categories.
And the study criticized a “lack of accountability at the federal level” for charity care spending. For example, the IRS lets each hospital decide what criteria would qualify a patient for charity care. And there are no charity care spending benchmarks from the federal government, according to the study.
In 2019, more than 85% of hospitals held tax-exempt status in North Carolina, according to the report.
Another charity care report
Folwell has been an outspoken critic of high pricing from hospital systems across the state, especially in relation to the State Health Plan, which provides health care coverage for teachers, legislators, retirees, public safety workers and other state employees.
In October, Folwell released a report on nonprofit hospitals in N.C., which compared charity care spending by nonprofit hospitals to the federal, state and local tax breaks those hospitals received.
The report found that North Carolina hospitals raked in $1.8 billion in federal, state and local tax breaks between 2019 and 2020. Most hospital systems — including Atrium and Novant — spent less than 60% of what they received in tax exemptions on charity care.
A 2012 investigation by the Charlotte Observer and News & Observer of Raleigh came to similar conclusions. Among other things, the investigation found that most hospitals devoted a fraction of their expenses to help the poor and uninsured.
In 2010, most of the state’s hospitals spent less than 3 percent of their budgets on charity care – the practice of forgiving all or part of a patient’s bill, the investigation found.
In October, Folwell argued that the hospitals receive tax-exempt status on the basis of providing charity care — but said many don’t provide enough charity care to sufficiently justify that status.
Hospitals also receive tax-exempt status due to bad debt incurred by patients who do not pay for services, or losses incurred by serving Medicare or Medicaid patients, or for funding community-building activities.
The October report found that Atrium Health received about $440 million in total tax exemptions in 2019-2020, and spent $260 million on charity care. Novant Health received about $324 million in total estimated tax exemptions, and spent $179 million on charity care, the report said.
Observer reporter Ames Alexander contributed to this article.