Top-Earning Nonprofit Hospitals Provide Less Charity Care

Nonprofit hospitals with the highest net incomes tend to allocate the smallest proportion of their earnings to caring for uninsured and low-income patients, according to a study published in JAMA Internal Medicine.

To qualify for tax-exempt nonprofit status, hospitals must provide charity care and other community services. Unlike other forms of financial assistance, under charity care, patients don’t receive any bills. In 2017, nonprofit hospitals generated $47.9 billion in net income, providing $14.2 billion in charity care – $9.7 billion to uninsured patients and $4.5 billion to patients with insurance who couldn’t afford their bills.

However, for every $100 they earned, the highest-income nonprofit hospitals included in the study spent just $11.50 on charity care for uninsured patients and $5.10 on other low-income individuals. The lowest-earning nonprofit hospitals – most of which had net losses – spent $72.30 of every $100 earned on uninsured patients and $40.90 on low-income patients.

“I don’t think we should say that hospitals with the best finances provided the least charity care,” said lead author Ge Bai, PhD, CPA, from the Johns Hopkins Carey Business School and Bloomberg School of Public Health. “Instead, we can say that hospitals with the best finances provided disproportionally low charity care.”

The researchers analyzed Medicare cost reports, which aren’t audited and may not provide a complete picture of hospital spending. It’s also possible that fewer patients need charity care in the communities where higher net income hospitals are based. “This [limitation] might have been addressed by accounting for variables like the percent of the hospital’s patient population on Medicaid, average income, average education, average unemployment, i.e., factors that could help answer whether the observed behavior in hospitals with higher net income reflects differences in generosity vs. differences in the patients that are treated ,” said Anupam Jena, MD, PhD, a Harvard Medical School researcher who was not involved in the study.

Sources: Bai G, Yehia F, Anderson GF. Charity care provision by US nonprofit hospitals. JAMA Intern Med. 2020 February 17. [Epub ahead of print]; Reuters, February 17, 2020.