DROPPING CHARITABLE TREATMENTS MBAA 2014

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The Impact of Dropping
Charitable Medical Treatments
WHAT HAPPENS TO THE UNINSURED?
DROPPING CHARITABLE TREATMENTS MBAA 2014
Many people are expected to remain
u n i n s u r e d e v e n w i t h t h e
implementation of the A!ordable Care
Act. This includes those who cannot
a!ord a plan on the exchange (and will
likely be penalized) as well as those
who live in states where Medicaid was
not expanded and have f ound
themselves in the coverage gap,
meaning their incomes are too high to
qualify for Medicaid and too low to
qualify for subsidies.

Long before the A!ordable Care Act was ever conceived, charitable medical treatments
were being performed in communities to aid those who may have a di#cult time paying for
healthcare. These treatments continue to be o!ered and are usually provided to uninsured
or underinsured individuals or individuals whose income falls within a pre-set range, which
may be up to four times the federal poverty level.

In order to provide these services, some facilities require hard evidence of low income,
such as tax documents and pay stubs. Others dont require much more than a simple
verbal statement by the patient regarding their inability to pay. Often, patients do not
deliver the documentation required after services are rendered, and facilities have been
known to generate bills and follow through on collection e!orts. If the income is validated
(or the statement is accepted by the facility), either a bill is not generated or a sliding-scale
statement is calculated based on the patients ability to pay.

While charitable treatment is noble, and a literal lifesaver for many who have reaped its
benets, it is found that most hospitals spend just a tiny fraction of their giant revenues
Page 2
Many people are expected to remain uninsured
even with the implementation of the Afordable
Care Act.
Whats in it for Them?

DROPPING CHARITABLE TREATMENTS MBAA 2014

keepi ng these programs
going. Some spend up to ve
percent and some spend less
than one percent. Given the
markup of many hospital
services and items (many
times the actual cost plus a
reasonable prot), o#cials
say it may not be a far reach
to say that these facilities
really dont spend much at
all in giving back to the
community.

But why would hospitals continue providing services especially those that really dont
have to? What benet is it to them? Some hospital administrations have really grasped the
idea that it is much less expensive to provide free care to some patients than it is to
continue denying them routine medical services only to have their illness progress to the
point where they have to go into the emergency room, where charges get even higher, and
overcrowding is already an issue.

Also, tax-exempt hospitals in the U.S. receive an estimated $7-$13 billion per year in tax
breaks due to providing community benets including charitable treatments, plans that are
designed to increase public health and monetary shortcomings that go along with servicing
patients that are part of research or Medicaid.
Some states require hospitals to provide some type of charitable medical treatment, but for
many it remains an option. In some states that do mandate charitable treatments, not only
are hospitals required to provide free/low-cost treatment, there is a minimum amount that
they are required to provide in order to maintain a tax exemption.

For example, in the state of Texas, it is mandatory for both public and private hospitals to
deliver a minimum of four percent of their net patient income in charitable medical
treatments. Four percent doesnt seem like much, but again, it can be the di!erence
between life and death or bankruptcy and nancial freedom for the patients. In other
states, the only requirement is for the non-prot facilities to list which community benets
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Why Would a Hospital Drop Charitable Benets?
DROPPING CHARITABLE TREATMENTS MBAA 2014
t hey provi de i n order t o
preserve their status as tax-
exempt.

For states expanding Medicaid,

it would only make sense to see
charitable treatments tapering
o! mainly because there will
be no coverage gap. The
pati ent ei ther qual i es for
Medicaid, so the hospital has
no reason to provide charity
treatment, or they qualify for the
subsidies under the A!ordable
Care Act.

Studies have already shown an estimated 30 percent decrease in patients seeking free
medical services in those states. These numbers dropped to $1.9 million in the rst quarter
of 2014 from $2.8 million in the rst quarter of 2013.

In contrast, states that have not expanded Medicaid saw a slight increase to $4.2 million in
the rst quarter of 2014 from $3.8 million in the rst quarter of 2013. Some fear that
reimbursements and tax cuts may also be at risk as the funds for these programs may be
re-directed to cover the A!ordable Care Act subsidies. If this happens, hospitals may cut
the programs due to lack of tax benet or reimbursements.

Popular belief among supporters of charitable treatment is that a lower value is placed on
the lives of those with less money, and by not o!ering a comparable healthcare service to
them, they are essentially being told they do not matter as much as those who can freely
pay for their medical services.

Given the number of dollars these facilities receive due to over billing, double billing and
generally higher than necessary fees, it is not considered a far stretch to go ahead and
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Whats the General Belief?
DROPPING CHARITABLE TREATMENTS MBAA 2014
provide the uninsured, underinsured and low-income individuals with the same quality
healthcare as their wealthier counterparts.

Studies have shown that a high number of hospitals do not always disclose the availability
of a free or low-cost program to their low-income patients. This may in fact be part of the
reason that such a small percentage of revenues are spent on these programs.

The sta! may also consider it the responsibility of the patient to speak up and say they
need assistance with paying. Understandably, if free or low-cost care is o!ered to
everyone, it will be accepted by most, and more money will be said to be lost due to
these programs. Although, for those patients who have no idea whether a program like this
exists, being without this available resource can obviously lead to needless nancial ruin.

It was also found that some for-prot hospitals provided just as much charitable service as some
non-prot hospitals. This might be due to the lack of federal minimum requirement on charitable
services.

Non-prot facilities have also been found charging uninsured, low-income patients more than
patients with health insurance. One explanation for this may be the negotiation on the part of the
insurance company; nevertheless, it may be di#cult to nd any justication in requiring that a poor
individual pay more than an enormous corporation for identical services.
In states where Medicaid will not be expanded, the discontinuation of charitable medical
treatment programs could be detrimental, sending the many patients into nancial distress
in the event that they need any type of medical service. Even some of the insurance plans
available provide minimal benet nancially, and if an ailment struck that happened to be
time/cost consuming, these patients could end up with collection accounts or life-altering
debt.

In a perfect world, every citizen would have healthcare. No one would go broke because of
his or her health, and no one would be turned away without rst being treated and allowed
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What About the Patients?
Non-prot facilities have also been found
charging uninsured, low-income patients more
than patients with health insurance.

DROPPING CHARITABLE TREATMENTS MBAA 2014

to fully recover. At the very least, charitable treatment programs would have a suitable
replacement before being dropped, such as the expansion of Medicaid, giving the poorer
demographic a healthcare alternative.

Since thats not our world, however, these people who fall through the cracks in areas
where charitable care is dropped will have very few choices. Many patients who depend on
charity care choose to go to the emergency room for care, which is often a
counterproductive option for hospital sta! and for other patients with true emergencies.

Hopefully, a facility o!ering

charitable treatment would be
within a reasonable distance.
Either way, these individuals
will likely nd themselves either
in a dangerous debt spiral (if
t hey r ecei ve car e) or a
dangerous health spiral (if they
do not). However, a patient can
choose to negoti ate thei r
medical costs either before or
after treatment for a potentially
signicant price savings.

Understandably, each geographic area cannot be expected to o!er the same services at
the same levels as a facility in another area. Each area is comprised of di!erent
demographics and di!erent levels of uninsured or underinsured people.

An inner-city hospital where a lot of low-income people go for care will absolutely have a
greater need to o!er charitable medical treatment than a hospital in a more a$uent area
with a smaller population of low-income individuals. This subject is one that should
continue to receive a great amount of media attention until a fair solution is achieved.

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