Hospital Charity Cases: Who Gets Picked And Why?

Charity care is a program that helps patients with low incomes cover their hospital bills. It is a way for hospitals to show that they provide a benefit to the local community. Charity care is intended for patients who are uninsured or underinsured and are unable to pay for their medical treatment. Hospitals decide eligibility for charity care based on factors such as income, household size, and the bill's age. While federal and state laws require nonprofit hospitals to provide charity care, each hospital establishes its own charity care policies and application procedures. Many eligible patients may not receive charity care due to a lack of awareness or difficulty with the application process.

Eligibility criteria

Charity care, also known as "financial assistance", is defined by the Internal Revenue Service (IRS) as "free or discounted health services provided to persons who meet the organization's eligibility criteria for financial assistance and are unable to pay for all or a portion of the services". Hospitals establish their own charity care policies, which vary in terms of eligibility criteria, application procedures, and the levels of charity care provided.

To determine eligibility for charity care, hospitals generally consider the patient's income, the number of people in the household, and the bill's age. They may ask for documentation such as W-2 statements, pay stubs, previous income tax returns, unemployment benefits statements, Social Security benefit statements, or documentation from the state's department of social services. On average, households under 204% of the Federal Poverty Level will qualify for free care, while families under 322% will qualify for discounted care. Some hospitals also take into account whether the patient has insurance, their state of residence, and the size of the bill.

Charity care is typically available to uninsured and underinsured patients who are unable to pay for their medical expenses. Even patients with health insurance may qualify for charity care if their insurance does not cover the full cost of their treatment. In such cases, charity care may cover deductibles or copays.

It is important to note that eligibility for charity care may depend on the hospital and the state in which the patient is treated. Some states have passed laws requiring hospitals to offer charity care to certain groups of patients. Hospitals are required by law to provide information about their charity care policies and application procedures, which patients can find on the hospital's website or by contacting the billing department.

Application procedures

Each hospital runs its own charity care program and decides how patients must apply and who qualifies. Hospitals typically consider the patient’s income, the number of people in the household, and the bill’s age when deciding who qualifies.

To determine if you're eligible for charity care, the hospital will ask for information and documentation to verify your income. This generally includes W-2 statements or pay stubs, previous income tax returns, unemployment benefits statements, Social Security benefit statements, or documentation from your state's department of social services.

Providers usually have dedicated teams of financial counsellors or financial navigators who assist patients through the process. The charity care approval process typically takes two to six weeks, depending on the provider's backlog of applications and how long it takes you to provide all the necessary documentation.

You'll receive a letter from the provider stating whether your application was approved or denied. If it was denied, the letter must also explain how to appeal this decision and how long you have to do so. You can apply for charity care as soon as you visit the hospital or after you are discharged. There is no deadline to apply.

If a patient qualifies for charity care, the law requires nonprofit hospitals to refund any payments made towards that bill. Doctors and other billers may have a separate financial assistance application that must be submitted. Internal Revenue Service code 501(r) requires nonprofit hospitals to give patients at least 240 days to apply after receiving a bill, give patients a chance to fix incomplete applications, and pause sending a bill to collections while reviewing the financial assistance application.

Levels of charity care

Charity care, also known as "financial assistance", is defined by the Internal Revenue Service (IRS) as "free or discounted health services provided to persons who meet the organization's eligibility criteria for financial assistance and are unable to pay for all or a portion of the services". Hospitals establish their own charity care policies, which vary in terms of eligibility criteria, application procedures, and the levels of charity care provided.

The level of charity care provided by hospitals varies substantially across facilities. Charity care costs represented 1.4% or less of operating expenses at half of all hospitals in 2020, while they represented 7.0% of operating expenses or more among 9% of hospitals. This variation likely reflects differences in hospitals' missions and business practices, the need for charity care among patients, and federal, state, and local policies and regulations.

Some hospitals may offer more generous charity care policies than others. For example, hospitals may set different income caps for eligibility, with some requiring patients to have incomes at or below 200% of the federal poverty level (FPL) and others imposing more restrictive criteria. Hospitals may also differ in the specific services they cover under their charity care programs. For instance, charity care may cover inpatient hospital stays and emergency room visits, but it may not cover medical providers who are not considered part of the hospital's medical staff, such as radiologists or anesthesiologists who work in the emergency room but are not employed by the hospital.

In addition, the level of charity care provided by a hospital may depend on the availability of funding and resources. While hospitals bear the direct costs of providing charity care, they may receive support from donors, federal, state, and local governments, and tax benefits to help cover these expenses. The value of tax exemptions alone covered about half of the cost of charity care provided by nonprofit hospitals from 2011 to 2018.

Furthermore, the level of charity care provided may be influenced by the hospital's location and the specific state and local regulations in place. Some states have passed laws requiring healthcare providers to offer charity care to certain groups of patients, while others have laws requiring hospitals to provide free or discounted care to vulnerable populations that meet minimum eligibility requirements.

Funding sources

Charity care is also funded by donations. Hospitals bear the direct costs of providing charity care, but support from donors and governments may cover some or all of these expenses. Hospitals also provide their own funding for charity care as a way of showing that they provide a benefit to the local community. Nonprofit hospitals must offer charity care to maintain their nonprofit status with the Internal Revenue Service (IRS). The IRS defines "charity care", also known as "financial assistance", as "free or discounted health services provided to persons who meet the organization's eligibility criteria for financial assistance and are unable to pay for all or a portion of the services".

In some cases, patients may have insurance that covers part of a hospital bill, and charity care will be used to pay the remaining amount that the insurance doesn't cover. Hospitals will also consider a patient's income, the number of people in their household, and the bill's age when deciding who qualifies for charity care. Charity care is not a pot of money that hospitals give out, and it cannot be "used up". If a patient is approved for financial assistance, the hospital writes off their bill as if it never existed.

State and federal laws

Federal law requires that nonprofit hospitals, which account for nearly three-fifths (58%) of community hospitals, provide some level of charity care as a condition of receiving tax-exempt status. This is in addition to the general requirements for tax exemption under Section 501(c)(3) of the Internal Revenue Service (IRS) code. Furthermore, the Patient Protection and Affordable Care Act (ACA), enacted on March 23, 2010, added new requirements for hospital organizations to be described in Section 501(c)(3), including new reporting obligations and an excise tax.

However, federal regulations do not define or set minimum standards for hospitals to determine eligibility for charity care or the level of assistance provided. This has resulted in gaps in federal regulation and weak oversight, allowing hospitals to provide low levels of charity care in some cases. The IRS's only enforcement mechanism for Section 501(r) requirements is the revocation of a hospital's nonprofit status, and it cannot fine or otherwise penalize noncompliant hospitals.

To address these issues, several policy options can be considered at the state and federal levels. These include setting standards for charity care eligibility and obligations, tightening the definition of "community benefit," requiring hospitals to engage in community needs assessments and implementation plans, and mandating nonprofit hospitals' participation in public health programs.

At the state level, laws and regulations vary. For example, Washington State law requires hospitals to provide free or reduced-cost medical care to individuals who meet certain income qualifications. Each hospital in Washington has its own Charity Care policy, and hospitals are prohibited from imposing unreasonable application procedures for charity care. Other states may have similar or differing requirements for hospitals within their jurisdictions.

Overall, while federal law mandates that nonprofit hospitals provide some level of charity care, the specifics of eligibility and assistance levels are determined by individual hospitals within the broad parameters set by government regulations. States play a crucial role in overseeing and enforcing these regulations, with the support of federal policies and guidelines.

Frequently asked questions