Hospitals Doing Harm to Patients Paychecks


The Methodist Le Bonheur Healthcare system in Memphis, which includes Methodist University Hospital, has sued thousands of patients, including many of its own low-wage employees.
Andrea Morales for MLK50

New Orleans       With the passage of the Affordable Care Act, hospitals were on notice.  Costs were out of control and people were going to be looking.  Prices were going to be made public so some patients could compare.  Hospitals were going to be able to be ranked by health outcomes.  Accountability was coming!

This was especially true for nonprofits, thanks to a late amendment by Senator Charles Grassley, Republican from Iowa, their charitable contributions were going to be tracked to see if they aligned with their tax-exempt requirements.  The IRS was going to be doing the checking and the enforcement.  The penalty for not providing charitable care could be loss of the tax benefits, which would be a fatal diagnosis for most nonprofit hospitals. Reports indicate that the exemption is worth $9 billion.  They were given a number of years to get their act together, but the years since the passage of the Act meant that time has now come and gone.

What is the accounting now?  How is it working out?  We found that trying to parse the IRS 990s to determine the real level of charitable care was often whack-a-mole, where researchers with ACORN International and Labor Neighbor Research & Training Center were often trying to find the real charitable expenditures hidden in obfuscation.  Many nonprofit hospitals tried to claim the difference between their “sticker prices” for care and the Medicaid reimbursement rate as “charity.”

A recent report on Virginia hospitals in JAMA, the Journal of the American Medical Association, the doctors’ union and trade association, according to the Becker Hospital Review found that,

“…36 percent of hospitals in Virginia garnished patient wages to collect payment for medical bills in 2017. Most of the hospitals that garnished wages (71 percent) were nonprofit. Researchers note their findings “suggest hospitals with greater financial need (nonprofit, lower annual gross revenue) may be pursuing debt collection to the final stage of garnishment.” Those that garnished wages recorded average annual gross revenue of $806 million and garnished an average of $722,342 in wages, or $2,783 per patient.”

Virginia hospitals are not outliers.  The Wall Street Journal quickly reported that hospitals in Arizona followed the same playbook.  The hospital system connected to the University of Kentucky tried to use the Kentucky state revenue system to help collect their bills.  John Hopkins in Maryland was a big litigator.  All of this is after a raft of stories several years ago and reports by Pro Publica and others of nonprofits for whom debt collection was more central to their business plan than good patient care.

All of this is in the face of prohibitions in the Act that were supposed to curtail such practices, if not eliminate them entirely.  As the Journal reminded, the Act requires that,

“…hospitals must post and provide information on their financial-assistance policies and send notices that they are planning to sue. They also must limit the amount charged to the uninsured and wait four months before using stepped-up collection efforts such as filing a lawsuit.”

Ignoring the law, human decency, and the proscription that they “do no harm,” such practices define impunity.

If the IRS can’t do its enforcement job, then states, prosecutors, and the Justice Department need to step up, while the rest of us need to hit the streets before more patients are sentenced to poverty for the bad fortune of experiencing bad health.

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Stopping the Free Ride for Nonprofits on Property Taxes

New Orleans   Talking recently about greater accountability for nonprofit hospitals with a health expert from Massachusetts, she kept bringing up PILOT programs and why they were important in funding health care expansion in her state.  PILOT in the tax world stands for “payments in lieu of taxes.”  It perked my interest to find out how prevalent such payments might be, so let’s take a look.

First, the backstory.  All of the states in these United States offer property tax exemptions of one kind or another to tax exempt nonprofits.  Nonprofit educational institutions and hospital combines dominate their specific industries.  In cities where they are important service providers and employers, their historic and institutional footprint often also makes them significant landholders.  If these property holdings were taxed in the same way that other real estate properties, either residential or commercial, are taxed, the revenues received by their home cities would be a game changer for all citizens.

All of these “payment in lieu of taxes” situations are voluntary.  Some are wrested from nonprofit operators by cities using leverage when the institutions want to build or develop on public land.  Others have been able to negotiate PILOT arrangements when nonprofits are involved in what otherwise would be classified as for-profit enterprises like running food and lodging establishments.

A working paper by several people at the Lincoln Institute for Land Policy offered the most comprehensive view.  They undertook some exhaustive research and found that “218 localities in at least 28 states since 2000” have collected such payments and “these payments are collectively worth more than $92 million per year.”  Not chicken feed, but not a cure-all either.

The Lincoln Institute also found that most of the action is in the Northeast, more specifically in Massachusetts and Pennsylvania.  They mention that if Palo Alto in California, the home of Stanford University and health system in the West were separated and Baltimore was not included in the South, then 95% of PILOT revenues are collected in the northeast.  They also were clear that the bulk of the money comes from universities rather than hospitals.  The working paper indicates that “the majority of revenue comes from just 10 organizations: Harvard University, Yale University, Stanford University, Brown University, Boston University, Massachusetts General Hospital, Dartmouth College, Brigham & Women’s Center, Massachusetts Institute of Technology, and Princeton University” in that order.  Sadly, not a lot of money goes to local entities from what the researchers found.  Where they could get the numbers, they concluded that the payments were less than 1% of tax revenues.

Given the robust competition between nonprofit and for-profit hospital chains, it was surprising to see the small potatoes most of these tax-exempt operations are providing in local revenues.  Senator Chuck Grassley (R-IA) made this point a cornerstone of his contribution to the Affordable Care Act.

Seems like a lot of cities would be well advised to make PILOT a major goal for revenue enhancement, especially given the contention of how much charity really exists in charities.

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Please enjoy John Fogerty’s The Holy Grail (featuring Billy Gibbons of ZZ Top).

Thanks to KABF.

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