Kansas Case Study in Abuse of Nonprofit Charity Status

Impunity Inequity IRS Non-Profit

            Marble Falls       Living in a rural area comes with an automatic health issue.  There are fewer hospitals than in cities.  When a rural family has a health crisis, they better have a working car, because there is going to be some amount of distance to a hospital for emergency or any other kind of health care.  Less automatic, but equally dangerous for the health of too many rural families, is the stark economic reality that many rural hospitals are failing, in no small measure in some cases because of politics.  In the “be careful what you wish for” category, the vast proportion of the ten states still not part of the Medicaid expansion via the Affordable Care Act, are also rural and red, taking away some of the subsidies and support for rural hospitals’ bottom lines.

There’s something else going on in the Midwest as well, and it’s a tight-fisted, quick to court position by some hospitals ignoring their responsibilities to their patients and communities and the privileges they receive from their charitable status.  It wasn’t that long ago that hospitals like the Heartland Medical Center in St. Joseph, Missouri was headlining many reports for suing thousands of its patients.  They were one of many produced by investigations that even forced comment and some complaint from Iowa’s Senator Chuck Grassley, author of the amendment to the ACA requiring IRS review of charity care and seizure of the tax exemption from noncompliant hospitals.  Now we have Pratt Regional Medical Center front and center plying the same abusive tactics.

The Wall Street Journal reported that this one facility has “sued some 400 people in a county of 9000.”  They did so in 2023, suing more of their patients than they did in the previous five years combined.  In a couple of months that summer, the Pratt County sheriff’s office notched four of every five summons it delivered for the hospital.  The article makes the point that there are 15 million Americans who have medical debt, and that there was more than $49 billion outstanding in medical bills in June 2023, so there’s no question that it’s a supersized problem, but it’s likely worse in rural areas like Kansas, where “four of five rural Kansas hospitals recently reported losing money on patient services…”

Nonetheless, there’s no excuse for any of this. Kansas should accept Medicaid expansion.  Pratt Regional Medical Center should provide required charity care.  It claims it puts out the notices, but patients say they didn’t know they were eligible.  The bottom line on their required IRS 990 forms tells the facts.  “The hospital spent about 0.2% of its total expenses on financial assistance in its fiscal 2022, less than it spent on collections and billings.”

They need to either lose their 501c3 tax-exempt status or shape up and do right PDQ, and the IRS needs to do its job requiring charitable compliance, because that is what will take away this litigation tactic from scofflaw hospitals.