Recent reporting by the Associated Press and WRAL that most North Carolina hospitals are, “falling short in treating the poor for free or reduced rates to validate their tax-exempt status” is deeply concerning.
We appreciate North Carolina Treasurer Dale Folwell addressing this and his past critique of hospital costs, however there is more to be done. Here is our letter to the Treasurer.
Tax-exempt Hospitals Failing to Comply with Centers for Medicare & Medicaid Services Policy and Internal Revenue Code § 501(r)
Dear State Treasurer Folwell:
With resolute and unwavering enforcement of Centers for Medicare & Medicaid Services (CMS) policy, and hospital organizations’ compliance with Internal Revenue Code (IRC) § 501(r), North Carolinians will benefit from improved access to care, improved affordability, a reduction in spending on health care of an estimated 40 percent annually, being generally healthier, and longer life expectations.
The Associated Press (AP) and WRAL recently reported a study conducted by Johns Hopkins Bloomberg School of Public Health, contracted by your office, concluded most North Carolina hospitals are, “falling short in treating the poor for free or reduced rates to validate their tax-exempt status.” The study was clearly warranted as your suspicion was born out by the facts. Knowing the truth (facts) is not only important for your office but all stakeholders: taxpayers, citizens, obligors, employers, and insurers.
You were quoted by AP and WRAL: “We need solid, accountable and auditable benchmarks for what (the) definition of charitable care is so that the average person can figure out whether these entities are actually earning the right to continue to be nonprofit entities,” Folwell told reporters.”
After multi-years of advocacy, Secretary Tommy Thompson (R), U.S. Department of Health & Human Services (HHS), in an exchange of letters, February 19, 2004, provided guidance to Richard J. Davidson, President, American Hospital Association, (AHA) “to take action to assist the uninsured and underinsured.”
With this guidance as a tool, I strongly encourage you to work with AHA member hospitals to take action to assist the uninsured and underinsured and therefore, end the situation where, as you said in your own words, “uninsured Americans and others of limited means are often billed and required to pay higher charges.”
It was inspiring working with the staff of HHS, conscientious, competent, and dedicated civil servants. I provided written testimony to the U.S. Senate Committee on Finance. Again, the committee’s staffers were knowledgeable, competent, and dedicated. I worked with HHS Secretary Sebelius’s office. Unfortunately, it was at a time of intense political pressure against the Patient Protection and Affordable Care Act (ACA).
Secretary Tommy Thompson asserted:
Your letter suggests that HHS regulations require hospitals to bill all patients using the same schedule of charges and suggests that as a result, the uninsured are forced to pay “full price” for their care. That suggestion is not correct and certainly does not accurately reflect my policy. The advice you have been given regarding this issue is not consistent with my understanding of Medicare’s billing rules. To be sure that there will be no further confusion on this matter, at my direction, the Centers for Medicare & Medicaid Services and the Office of Inspector General have prepared summaries of our policy that hospitals can use to assist the uninsured and underinsured. This guidance shows that hospitals can provide discounts to uninsured and underinsured patients who cannot afford their hospital bills and to Medicare beneficiaries who cannot afford their Medicare cost-sharing obligations. Nothing in the Medicare program rules or regulations prohibit such discounts. … (Emphasis added)
Centers for Medicare & Medicaid Services summary:
Questions On Charges For The Uninsured
Q1: Can a hospital waive collection of charges to an indigent, uninsured individual?
A1: Yes. Nothing in the Centers for Medicare & Medicaid Services’ (CMS’) regulations, Provider Reimbursement Manual, or Program Instructions prohibit a hospital from waiving collection of charges to any patients, Medicare or non-Medicare, including low-income, uninsured or medically indigent individuals, if it is done as part of the hospital’s indigency policy. By “indigency policy” we mean a policy developed and utilized by a hospital to determine patients’ financial ability to pay for services. By “medically indigent,” we mean patients whose health insurance coverage, if any, does not provide full coverage for all of their medical expenses and that their medical expenses, in relationship to their income, would make them indigent if they were forced to pay full charges for their medical expenses. (Emphasis added)
In addition to CMS’ policy, the Office of Inspector General (OIG) advises that nothing in that agency’s rules or regulations under the Federal anti-kickback statute prohibits hospitals from waiving collection of charges to uninsured patients of limited means, so long as the waiver is not linked in any manner to the generation of business payable by a Federal health care program – a highly unlikely circumstance.
CMS: Definition (Policy) for Charity Care (Financial Assistance)
Charity Care – The value of medical expenses that exceed the patient’s financial ability-to-pay the hospital organization’s charges so as to not cause the individual being rendered medically indigent
Medically Indigent – Patients whose health insurance coverage, if any, does not provide full coverage for all of their medical expenses and that their medical expenses, in relationship to their income, would make them indigent if they were forced to pay full charges for their medical expenses
Indigency Policy – means-test insured and uninsured patients as to his or her financial ability-to-pay the hospitals charges and not be forced into “medical indigency.”
Deciphering the legalese: insured and uninsured obligors of limited means are required to pay out-of-pocket only an amount he or she can afford if any. Any medical expenses exceeding the amount an obligor of limited means can afford should be attributed to “charity care” to protect obligors from being rendered “medically indigent” and for accounting purposes. If an obligor fails to pay his or her adjusted billing, defaults, any balance due should be attributed to bad debt for accounting purposes.
The determination, decisioning, of the amount an obligor can afford can be accomplished in seconds at admission. To eliminate conflicts of interest and protect stakeholders the decisioning should be accomplished by an independent third-party credit expert. The expert using today’s credit management technology to achieve transparent, objective, and replicable decisions. Such technology is common and has been deployed and utilized by lenders for decades. A specific decisioning algorithm can be implemented at an individual hospital, county, or state level to determine the amount an obligor of limited means can afford out-of-pocket.
If your office is working on this issue, we ask that you advise us on the status of your effort in order that, as you said, “the average person can figure out whether these entities are actually earning the right to continue to be nonprofit entities.”
Thank you in advance for your work on behalf of all North Carolinians, stay healthy & best regards,
/S/
Roger Berliner
Advocate
Vision of a New Way
1063 Snowdon Ct
Asheboro, NC 27203
336-672-1230 Office
336-460-0330 Cell
roger.berliner@visionofanewway.org
https://www.visionofanewway.org
Additional Information
N.C. Hospitals: Charity Care Case Report
Report: NC nonprofit hospitals falling short on charity care
Don’t Let the Fox Guard the Henhouse