Reason.com

Free Minds & Free Markets

How Much Charity Care Do Hospitals Really Provide?

If the public is being asked to pay more for charity care, and it is, then it's reasonable to ask exactly what it's getting for its money.

How much charity care do hospitals really provide? Nobody may know for sure. Hospitals report figures, but the numbers are squishy, and nobody checks them anyway.

That's a big deal because some hospitals get heaping sums of taxpayer money to compensate them, partially, for the charity care they provide. What's more, hospitals use charity care as an argument for expanding Medicaid. "We see a significant amount of indigent patients at our hospitals in Northern Virginia," said a lobbyist for Inova last February. "A significant percentage of them would be eligible for Medicaid insurance under the expansion of Medicaid.” In a December statement, the Virginia Hospital & Healthcare Association praised the "tireless efforts" of Gov Terry McAuliffe (D) to expand Medicaid, noting the "over $600 million per year in indigent care" its members provide.

In a Daily Press article last year, hospital executives warned that "beds could close, nurses could lose jobs and it could be tougher for Hampton Roads families to find a place to have babies or get mental health care unless Virginia finds some way to pay for the hundreds of millions of dollars a year hospitals give the area's poor and disabled."

Some of those cuts affect so-called DSH payments, which amounted to more than $163 million in fiscal 2015. The money goes to hospitals that provide a "disproportionate share" of medical care to indigent patients. Health-care reform will shrink DSH payments (PDF) by hundreds of millions of dollars in the coming decades. Hospitals are not happy.

And they have every right not to be. Federal law, the Emergency Medical Treatment & Labor Act (EMTALA), forbids hospitals to turn patients away from the emergency room. Most wouldn't do so anyway, but the combination of EMTALA and shrinking payments for uncompensated care means the government is forcing hospitals to provide a public benefit and internalize the cost. That's not too different from outright conscription.

Virginia also imposes an outdated and unjustifiable regulatory regime called Certificate of Public Need. It requires health-care providers to get the state's permission before building a hospital, or adding a wing, or even purchasing expensive equipment such as MRI machines. As a condition of approving new investments through COPN, Virginia sometimes demands that providers perform a certain level of charity care in return.

Still, in some cases the complaints about shrinking charity-care payments could be overwrought. While many rural hospitals are on shaky fiscal ground, the same does not hold true for the industry as a whole. VCU Health, for instance, was in the black to the tune of almost $200 million a couple of years ago. Henrico Doctors' cleared almost $50 million. Even hospitals in nonprofit systems, like Bon Secours St. Mary's, came out ahead by $65 million. The margins might have shrunk since those figures were reported - but by how much?

The more interesting "how much" question is how much hospitals actually spend on charity care. A 2011 state report (PDF) notes that there is no common standard for charity-care reporting, and this "limits the extent to which hospital-sponsored charity care can be measured." What's more, the hospitals report the figures themselves—and nobody is checking behind them. "We take their word for it," says Peter Boswell, who oversees hospital licensing in Virginia.

A spokesman for Bon Secours says its numbers reflect "charges reduced to the true out-of-pocket costs to provide the care." So if it costs Bon Secours $500 to set an indigent patient's broken bone, then Bon Secours reports $500 in charity care for that patient. But not everybody does it that way. Some report charity care in terms of "gross revenue forgone." In other words, it might cost $500 to set a broken bone—but if a hospital could have billed $10,000 for the service, then it will claim to have provided $10,000 in charity care rather than $500.

This leaves at least some claims about charity care suspect, since—as noted in last week's column—hospital prices are extremely volatile. Different hospitals charge different prices for the same good or service. What's more, individual hospitals charge different patients vastly different prices for the same good or service as well. Since prices are so arbitrary, and usually inscrutable, that leaves no way to check a hospital's math. Policing claims about charity care is difficult, says the Department of Medical Assistance Services' William Lessard, because "hospitals have very widely different cost-to-charge ratios."

Virginia Secretary of Health and Human Resources William Hazel puts it more bluntly. "We have no ability to double-check it, audit it, or whatever," he says. How hospitals arrive at charity-care figures is, he says, "mystical to me."

Which leads to a final question: Does it matter? After all, hospitals do provide an immense amount of charity care. If they didn't, a lot of people would suffer horribly, and many would die. Maybe it's churlish and ungrateful to quibble over the precise dollar amount.

Then again, the lack of a common standard could leave some institutions at a disadvantage. If Hospital A bases its figures on its actual costs, while Hospital B bases its figures on revenue foregone, then Hospital A could be getting short-changed while Hospital B could be getting credit, and public money, for doing more than it really is.

There's this, too: If the public is being asked to pay more for charity care, and it is, then it's reasonable to ask exactly what it's getting for its money.

Correction: Last week I wrote that two-thirds of states declined to expand Medicaid. That figure is out of date; 31 states and the District have expanded Medicaid or adopted a similar alternative.

This article originally appeared at the Richmond Times-Dispatch.

Photo Credit: taberandrew/flickr

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • fuckyougotmine||

    Ah, man. All of this seems so needlessly complicated -- let's follow the rest of the civilized world and implement universal healthcare.

  • Sir Chips Alot||

    as long as i can opt out of it and not have a single penny of my money stolen from me at gunpoint to pay for it.

  • Sir Chips Alot||

    as long as i can opt out of it and not have a single penny of my money stolen from me at gunpoint to pay for it.

  • Sir Chips Alot||

    as long as i can opt out of it and not have a single penny of my money stolen from me at gunpoint to pay for it.

  • Sevo||

    I'll second that!

  • Sevo||

    Sarc or stupidity?

  • Hayeksplosives||

    Pretty sure it's sarc.

    And a prediction of what we will surely be hearing more and more of from our well-meaning lefty friends.

  • Akira||

    I think "fuckyouigotmine" is serious. I seem to recall that user posting other anti-liberty comments around here. Plus, that name suggests a dislike of libertarianism.

    But if not: my apologies to fuckyouigotmine, and I will have my sarcasm detector recalibrated immediately.

  • Christophe||

    It's either sarcasm, or a very angry anti-libertarian. Check the link on his sig (BUT DON'T CLICK IT).

  • Rick Stewart||

    guckyougotmine is spam. Reason should get rid of the account.

  • fuckyougotmine||

    No, you're right. I'm only really here to make fun of/fuck with you people. Your ideology is bankrupt, and you are a ripe target for laughs.

  • ||

    After all, hospitals do provide an immense amount of charity care. If they didn't, a lot of people would suffer horribly, and many would die. Maybe it's churlish and ungrateful to quibble over the precise dollar amount.

    If we don't know how much charity care hospitals provide, how do you know it's an "immense amount"? They must have because otherwise we'd be surrounded by horrible death and suffering? I'd like you to prove that contention. Ungrateful!? The people being ordered to pay for it are being ungrateful for asking how much is being stolen and how it's being spent?!

    Holy crap. We're lost.

  • Tommy_Grand||

    It is weird that hospitals are in dire, terrible, financial need when the executives who run these hospitals live in such nice houses....

  • Illocust||

    A single patient going through an MRI machine can cost $10,000. The executives could forgoe their entire pay and it wouldn't make the difference between being in the black or red.

  • Illocust||

    Note: that price was what the insurance was charged by a children's hospital. The machine was new, so that cost wasn't just operating cost but recouping cost as well.

  • Tommy_Grand||

    let's give it a try for 2 years and see.

  • R C Dean||

    If you want to run a multi-billion dollar business that his high-volume, high-precision, and the price of a mistake is a dead body, with people who can't find a job that pays more than $50K, go right ahead.

  • Tommy_Grand||

    I'm higly confident I find a team of volunteers who would do a terrific job for less

  • muskegonlibertarian||

    As long as the health care industry can maintain its legal monopoly enforced by state and the federal government, we will never know the truth as to the cost of anything.

    Along this same line of thinking, here in Michigan retail stores (especially supermarkets) no longer are required to place price stickers on individual items, only upon the shelf where they are. As customers move things about, you can never be 100% sure as to the true price. Recently my wife purchased some flavored crackers which at Wal Mart were supposedly $1.88 per bag. At the checkout the price was $2.88. So this law, passed at the behest of the retail trade industry, effectively has created a situation where you can never be sure of the price.

    Increasingly we no longer are allowed to "know the price" of things...

  • Akira||

    That's why my blood boils when people complain that "free market" healthcare doesn't work. What kind of "free market" is it where most providers won't even tell you the cost of something? Where the government prevents competition through "certificate of need" laws? Where you can't buy health insurance across state lines?

  • SatanicBunniesOfDeath||

    A great deal of those people probably don't know what a free market actually is, and even if they did, I'd imagine a lot of them wouldn't care.

  • MichaelL||

    I learned, long ago, to compare the bar code, on the shelves, to make sure it was the price I was being told to pay at the counter. Burned once was enough on a fixed income.

  • Rick Stewart||

    I just buy the stuff, if the price at the register is not what I want to pay I hand the item back and say sorry but the item appears to be incorrectly priced.

  • R C Dean||

    the same does not hold true for the industry as a whole.

    True enough, but just throwing out dollar figures is worse than useless.

    $65 million sounds like a lot of money, but what if their total budget is $3BB? All of a sudden, that 1.5% operating margin looks pretty fucking thin, doesn't it?

  • R C Dean||

    I'll give the author this much:

    There is no standardized way to report charity care. These could easily be solved voluntarily, by the American Hospital Association or one of its peer groups adopting standards. The lack of standards leads to a lot of over-reporting, no question.

    Regardless of what you report as charity care, though, the bottom line is the bottom line. And non-profit hospital operating margins are, with a few exceptions, pretty thin. I have seen them range from negative to in the mid-single digits, with only a very few getting into the higher single digits or bare double digits.

  • Jr12||

    There once was a Libertarian Party that knew the difference between taxation and charity, understanding that the famous principled Libertarian argument consistently separates charity from taxation, by whether the funds are voluntarily offered or politically extracted. The Libertarian Party used to use their arguments to expose the adverse consequences of politicians pretending that "charity" requires the use of taxes and regulations to exploit some people for the benefit of others. Who are these people, now using the name “Libertarian Party,” to dither over how much taxation is necessary to allow journalists and politicians to posture as philanthropists. There’s already two parties for that.

  • Sevo||

    "There once was a Libertarian Party that knew the difference between taxation and charity,"

    Disregarding any tax money, there was an ad hoc system in place prior to O-care and it probably served at least as well if not better than what we got from that POS Obo and the hag Pelosi.
    Yes, it is mandated that ERs accept patients regardless of the ability to pay, but that practice was in place prior to the mandate. The hospitals provided what they determined to be adequate care and merely upped the charges to those who did pay to cover the costs. The providers directly involved probably had a better handle on what was required than the new federal bureaucrats.
    This may well be 'not fair', but given that I didn't want to see the proverbial 'children dying in the streets', I didn't mind paying the premium, and it seemed to work with a minimum of government agency or interference.
    My med insurance premiums haven't been paid by an employer in probably 30 years or so; I like my plan and pay for it myself.

  • GeneS||

    Also, while you look at EMTALA, consider that certain states have mandated other care from hospitals.
    Plan B is mandated from ER's, in very specific terms (treatment must be given, not prescriptions).
    Forensic exams (Rape and assault) are mandated in many states
    In some states blood draws for DWI's are mandated.

    There is no justification for these mandates besides the fact that the government believes it can.

  • nugentgreggJone||

    Family need to make a good support to the students activity like writing and other arts. FRor writing please choose the suggestion from the top essay writing services

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online