SoCal nonprofit hospitals propose reduced charity care requirement
CA law empowers the state attorney general to establish specific charity care requirements when a nonprofit hospital changes ownership
Verdugo Hills Hospital, acquired by the University of Southern California in 2013, wants a 45 percent reduction in its charity care obligation for 2015 and subsequent years, according to its proposal. Photo source: Google
Nonprofit hospitals want to cut back on free care mandate; consumer advocates say need for free or discounted care is still great
By PAULINE BARTOLONE
Five years after Fresno-based attorney Joy Dockter started fighting for patients saddled with medical debt, hospitals continue to go after them — even though most are now insured.
Hospitals that used to sue uninsured patients for large sums of money before the Affordable Care Act expanded coverage now press to collect as little as $500 from insured patients who can’t afford their copayments and deductibles, she said.
“Our folks are already stretched, and they’re stretched far,” said Dockter, who works with Central California Legal Services. Patients are treated as if they “just went out and bought a big-screen TV and need to pay for it,” when in fact they may qualify for free or reduced care, she said.
Though millions of previously uninsured people now have coverage under the ACA, Dockter and other health consumer advocates argue that the need for free or discounted care is still great — even among people with insurance. However, four California hospitals are asking state Attorney General Xavier Becerra to reduce how much of it they’re required to provide. The hospitals claim there’s less need for charity care because the share of Californians without insurance has dropped significantly under the ACA, from 17 percent in 2013 to 6.8 percent last year.
“It’s not that they are trying to walk away from their charity care obligations,” said Jan Emerson-Shea, spokeswoman for the California Hospital Association. But “they would have to essentially bus people in from other parts of the state” to meet their requirement because there are not enough patients in need.
Tam Ma, legal and policy director at the health consumer advocacy coalition Health Access California, rejected that argument. “We find it hard to believe that these hospitals … can’t find people who need the charity care,” she said.
Under federal law, nonprofit hospitals must provide an unspecified amount of free or discounted care — or other charity, such as donations to community groups — in exchange for considerable tax breaks.
However, a separate California law empowers the state attorney general to establish specific charity care requirements when a nonprofit hospital changes ownership.
Three Southern California hospitals petitioned Becerra to reduce these state-based charity care obligations by about half. A fourth hospital, Emanuel Medical Center in Turlock, has asked for a 79 percent cut.
Becerra, who declined to comment for this story, has 90 days to respond to each hospital’s petition. He has scheduled a hearing for Thursday to consider the request by Emanuel Medical Center.
The California Hospital Association sent a letter to Becerra last September, saying that 32 hospitals want more “flexibility” in their charity care obligations. That letter suggests more petitions may be forthcoming, confirmed Anne McLeod, the association’s senior vice president for health policy and innovation.
About 20 states have laws that give their attorneys general or other officials specific ways they can intervene in nonprofit hospital sales, including the ability to hold hearings or set charity care quotas.
But California is unique because of the “significant requirements” it imposes, said Steve Valentine, a vice president at Premier Inc., which advises nonprofit hospitals going through ownership changes.
In addition to charity care requirements, the California attorney general has the power to establish other mandates, such as how many emergency room beds must remain open, Valentine said. The mandates vary by hospital.
Frederick Isasi, executive director of the national consumer advocacy group Families USA, said he’s not aware of hospitals outside of California that are challenging their charity care requirements. He believes all nonprofit hospitals have a duty to help patients afford care, including people who have insurance but are struggling with copayments and deductibles.
“As long as families in this country cannot afford the health care they’re receiving, there’s the need for hospitals to do everything they can,” Isasi said.
The American Hospital Association said nonprofit hospitals already give back more to their communities than they get in tax breaks.
“For every dollar invested in nonprofit hospitals and health systems through the federal tax exemption, they deliver $11 in benefits back to their communities,” said Mindy Hatton, the association’s senior vice president and general counsel.
California’s previous attorney general, Kamala Harris, denied similar requests from hospitals in 2016, including a few from the same institutions that have recently petitioned Becerra.
Becerra “may have a different point of view on it,” Emerson-Shea said. “You never know unless you ask.”
Health advocates are urging Becerra to deny the four hospitals’ requests. They point to California’s nearly 3 million uninsured residents, not to mention countless others with high-deductible, high-cost plans.
Ma, of Health Access, suggested hospitals consider extending charity care to middle-income Californians who are having difficulty paying their medical bills.
“How many GoFundMe accounts, campaigns, do you see out there?” asked Ma, referring to the increasingly common practice of people fundraising online to pay their medical bills. “All those folks should be screened for charity care.”
Most California hospitals create their own policies that govern who qualifies for charity care and how much.
Dockter helped 120 people who were struggling with medical debt last year, including insured patients who couldn’t afford $50 copayments, she said.
“We ask them, ‘Did you apply for charity care?’” Dockter said of her conversations with clients. “Almost without exception, the answer is, ‘What’s that?’”
Patient advocates say the number of uninsured people might soon grow if Medicaid and private insurance enrollment erode under the Trump administration. The recently adopted federal tax law eliminates the penalty for people without health insurance, starting in 2019.
Turlock’s Emanuel Medical Center, which became for-profit in 2014, must comply with a six-year charity care requirement. It was supposed to spend $3,348,377 on charity care in 2016. Now the hospital wants to cut its obligation retroactively by nearly 80 percent, according to the hospital’s proposal to the attorney general. The reduction would also apply to subsequent years.
Emanuel officials didn’t respond to repeated requests for comment or information for this story.
Verdugo Hills Hospital, acquired by the University of Southern California in 2013, has requested a 45 percent reduction in its charity care obligation for 2015 and subsequent years, according to its proposal.
The nonprofit hospital serves the community in other ways that aren’t reflected in the charity care requirement, such as free mental health programs and injury prevention classes, said its CEO, Keith Hobbs.
And since its acquisition, Verdugo Hills has invested $30 million to improve and expand facilities such as the emergency department, which has reduced wait times, Hobbs said.
“I feel really confident in the efforts that we’re taking” to help the community, he said.
Money saved from reducing its charity care requirement could enable Verdugo Hills to “keep looking at other ways to invest those dollars,” such as building a neonatal care unit, he said.