Ethan Rhodes
Hospitals, especially non-profit hospitals, are known to provide charity care and make donations to other charities. Charity care is the term used to describe the financial assistance provided by hospitals to patients who cannot afford treatment. While hospitals bear the direct costs of providing charity care, they may receive support from donors and federal, state, and local governments to cover these expenses. Non-profit hospitals are required to provide some level of charity care to maintain their tax-exempt status. Hospitals also engage in fundraising activities, targeting individuals for donations, sometimes while they are still receiving treatment. This has raised questions about the ethics of hospital donations, with concerns about the high fundraising fees and the extent to which donations are utilized for patient care.
| Characteristics | Values |
|---|---|
| Hospitals that receive tax-exempt status | Need to provide charity care and other community benefits |
| Charity care | Hospitals bear the direct costs, but donors and governments may cover some or all of these expenses |
| Charity care eligibility | Hospitals establish their own policies, which vary in eligibility criteria and application procedures |
| Charity care spending | Nonprofit hospitals spent more on charity care than for-profit hospitals |
| Charity care expenses | Unreimbursed Medicaid expenses, unreimbursed health professions education, subsidized health services, community health improvement services, and unfunded research |
| Fundraising | Hospitals target people for fundraising, including their own patients |
| Fundraising costs | Some hospitals spend 70-80% of donated money on fundraising salaries and advertising |
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What You'll Learn
Charity care and community benefits
Hospitals do make charitable donations, and they also provide charity care and community benefits. Charity care is a type of financial assistance provided by hospitals to help patients who cannot afford treatment. This care is often offered by nonprofit hospitals as a way to maintain their tax-exempt status. Charity care is distinct from "bad debt", where a hospital pursues payment from a patient but ultimately does not receive it.
The amount of charity care provided varies between hospitals, with each hospital establishing its policies within the broad parameters set by government regulations. These policies include eligibility criteria, application procedures, and the level of care provided. While hospitals bear the direct costs of charity care, they may receive support from donors and federal, state, and local governments to cover these expenses. In addition to charity care, hospitals also engage in other community benefit activities, such as unreimbursed Medicaid expenses, health professions education, and community health improvement services.
Research has shown that nonprofit hospitals often solicit monetary donations from the public and spend significant amounts on fundraising salaries. For example, St. Jude, the largest healthcare charity in the country, raised $2 billion in 2020 through extensive advertising and celebrity endorsements. However, only about half of the money received by St. Jude goes towards patient care and research, with the rest spent on fundraising and reserve funds.
There is ongoing debate about the extent to which nonprofit hospitals should provide community benefits to justify their tax exemptions. Proposals have been made to strengthen the requirements for these hospitals to qualify for tax-exempt status, such as mandating a minimum amount of community benefits or creating a system where hospitals provide charity care or subsidize other hospitals that do.
Overall, while hospitals do engage in charitable activities and donations, the effectiveness and impact of these efforts are subject to scrutiny and ongoing discussion.
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Tax-exempt status
Hospitals, particularly non-profit hospitals, are often associated with charity work and community benefits. In the United States, non-profit hospitals are required to provide a certain level of charity care and community benefits to maintain their tax-exempt status. This means that they do not pay certain taxes, such as property taxes, which for-profit hospitals are subject to. This tax exemption is intended to support hospitals in providing care to those who cannot afford it and contributing to the betterment of their communities.
To qualify for and maintain this tax-exempt status, non-profit hospitals must adhere to specific requirements. They are expected to provide charity care, which involves offering financial assistance or free/reduced-cost treatment to patients who cannot afford to pay. Charity care is distinct from "bad debt", where a hospital determines that collecting payment from a patient is unlikely. Non-profit hospitals must also demonstrate that they are providing community benefits, which can include unreimbursed Medicaid expenses, health professions education, subsidized health services, community health improvement initiatives, and research.
The level of charity care and community benefits provided by non-profit hospitals varies, and there have been discussions and proposals to strengthen the requirements for maintaining tax-exempt status. Some suggestions include setting income thresholds for charity care eligibility, mandating minimum community benefits, and restructuring the tax exemption to more closely tie government subsidies to the value of community contributions.
While non-profit hospitals benefit from tax exemptions, they often actively solicit monetary donations from the public and may spend a significant portion of those donations on fundraising salaries and activities. This has raised questions about the efficiency of fundraising practices and the allocation of donated funds.
Overall, the tax-exempt status of non-profit hospitals is intended to encourage and support their charitable work and community engagement. However, there are ongoing discussions and proposals to ensure that these hospitals provide a substantial level of charity care and community benefits to justify their tax exemptions.
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Patient fundraising
Hospitals and other institutions often rely on fundraising to secure the necessary staff, equipment, and facility upgrades to function at maximum capacity. Healthcare fundraising consists of revenue-generating activities outside of receiving payment for patient services, such as soliciting donations and applying for grants. This is typically managed by a hospital's development department.
To ensure positive interactions, hospitals should safeguard and foster sensitive relationships between patients and clinicians through thoughtful touchpoints. Hospitals can also encourage patients to start their own medical fundraisers on platforms like GoFundMe to cover medical expenses, inviting their community to join their journey. Before sharing a fundraiser publicly, it is recommended to first ask a few close friends or family members for support and to add words of encouragement. Patients can also be added as team members to help manage the fundraiser.
Overall, patient fundraising plays a critical role in the healthcare revenue puzzle, driving long-term effectiveness and positive outcomes for institutions, patients, and communities.
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Charity spending
Hospitals can receive charitable donations and also make charitable donations. Charity care is a term used to describe the charitable spending of hospitals, which can include unreimbursed Medicaid expenses, health professions education, community health improvement services, and more. Charity care is provided by both for-profit and non-profit hospitals, with non-profit hospitals being required to provide some level of charity care to maintain their tax-exempt status.
The amount of charity care provided varies between hospitals, with factors such as hospital size, location, and teaching status influencing the amount of charitable spending. Research has shown that small-sized non-profit hospitals tend to have a higher percentage of charitable spending relative to total expenses compared to their for-profit counterparts. However, for-profit hospitals were found to provide more charity care in certain instances, such as in the case of larger hospitals.
Non-profit hospitals often solicit monetary donations from the public and may spend a significant portion of these donations on fundraising salaries and activities. For example, St. Jude, a non-profit hospital, spent 30% of their donations on fundraising, and another 20% went into their reserve fund. Hospitals may also target patients for fundraising, even while they are still receiving treatment.
To ensure accountability, there have been proposals for reforms to strengthen the requirements for non-profit hospitals to qualify for tax-exempt status. These proposals include creating or expanding mandates for hospitals to provide charity care to patients below an income threshold, establishing minimum community benefits, and restructuring tax exemptions to be more closely tied to the value of charity care provided.
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Charity care policies
Within the broad parameters set by government regulations, hospitals establish their own charity care policies, which vary in eligibility criteria, application procedures, and the extent of charity care provided. Eligibility for charity care may be based on income thresholds, limited assets, residency within the hospital service area, or the inability to afford large medical bills despite exceeding income thresholds. Hospitals may assess eligibility for charity care upon patient check-in or include information about it in discharge papers or bills.
Proposals to strengthen charity care policies include mandating minimum community benefits, introducing a floor-and-trade system, and restructuring tax exemptions to more closely tie government subsidies to the value of charity care provided. These policies aim to increase access to healthcare for those who cannot afford it and reduce the financial burden on hospitals providing charity care.
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Frequently asked questions
Hospitals can be charities themselves, and some hospitals are for-profit. Nonprofit hospitals are required to provide some level of charity care and community benefits to maintain their tax-exempt status. Hospitals establish their own charity care policies within government regulations.
St. Jude is the largest healthcare charity in the country. In 2020, St. Jude's raised a record $2 billion, with only about half going to patient care and research. Nonprofit hospitals on average spend more on charity care as a percentage of total expenses than for-profit hospitals.
Hospitals may target people for fundraising while they are still receiving treatment. They may also send out letters with photos of patients receiving treatment, advertise on television, and hire celebrities for endorsement.
