Some nonprofit hospitals reaping benefits off patients while providing less care

At a time when North Carolina is ranked as one of the most expensive states for health care in the nation, many nonprofit hospitals are reaping huge profits while providing little in the way of charity care.

That’s according to a report by the N.C. State Health Plan and Johns Hopkins Bloomberg School of Public Health. State Treasurer Dale Folwell invited researchers from Johns Hopkins University to extend their national study of hospitals’ charity care spending to North Carolina.

Charity care spending is free or discounted care provided to low-income patients. It is not Medicaid or Medicare.

Folwell held a virtual press conference Wednesday, Oct. 27, along with Dr. Ge Bai of Johns Hopkins Bloomberg School of Public Health and Julie Havlak with the State Health Plan to discuss the report, done with data from 2019. The report found that hospitals took in more than $1.8 billion in tax breaks, while “charity care” spending didn’t surpass 60% of the tax exemption’s estimated value across most of the state’s largest health systems. About 25 of 100-plus non-profits outspent tax breaks with charity care.

For example, Charlotte’s Atrium Health charity care spending equaled less than 60% of its tax exemption. At the same time, the system grew its net position by $585.2 million and achieved $8.4 billion in unrestricted reserves in 2020. Novant Health, which has a presence in North Carolina, had charity care spending at about 55% of its tax exemption.  Duke had under 60%. Wake Med stood out, with its charity care spending coming in at 1.25% more than its tax exemption.

Folwell stressed they weren’t talking about the doctors or nurses who provide health care but the ‘multi-million-dollar executives who run the multi-billion-dollar non-profits.

“We aren’t talking about a company that makes software or makes widgets. All that profit was made on the back of a sick person. To put it into context, the money in reserves is nearly twice as much as the long-term debt of the state of North Carolina,” he said.

He said the hospitals only report 1% to 2% of profit but make billions. It comes at a time when one in five families has medical debt in collections, and the State Health Plan faces its own economic challenges.

“The State Health Plan is on an unsustainable course as far as healthcare costs going up faster than the appropriations in the State Health Plan,” Folwell said.

“We need audible and accountable benchmarks going forward for charitable care spending. We have a cartelization of health care in North Carolina over the last 40 years,” Folwell said. He says there may be less charity care and higher profits when all of the information from the pandemic is determined months from now. The SHP currently has nearly 750,000 participants.

Bai reiterated that being nonprofit doesn’t mean the hospital systems don’t make money. She said they are called non-profit because of their tax-exempt status. They receive billions of tax exemptions each year. They don’t pay federal, state, or local property taxes. They also accept tax-deductible donations from donors and issue tax-exempt bonds, which reduce hospitals borrowing costs. The exemptions are primarily expected to subsidize the cost of charity care.

“Why should taxpayers continue to subsidize these nonprofit hospitals and why should local communities be deprived of their property tax revenues and other revenues to fund schools, parks, etc.,” she said.

“Many of these entities are the largest users of zoning in their communities,” Folwell said. “The three biggest taxes to focus on are sales, property, and income tax (of which they are exempt). These big nonprofits get a sales tax refund while the local school districts of North Carolina do not. Does that make any sense?”

Bai said hospitals could put excess profits into reserves. There aren’t any guidelines on how much they can put into reserves. There are no shareholders or stakeholders in a non-profit. There is no one to answer to.

A reporter asked to what extent would expanding Medicaid in North Carolina reduce the need for hospitals to provide charity care. Folwell said while the subject of expanding Medicaid is between the governor and lawmakers, he cited a report in Politico that said in states where Medicaid was expanded, the profit of nonprofit hospitals exploded, while charity care went down.

Ironically, there was a key finding in the report.

“Many for-profit hospitals provide charity care than nonprofit hospitals in terms of a total expense,” Bai said. “It’s not clear while we look at the comparison why the non-profit hospitals receive so much subsidy at the same time while they provide less charity care than for-profit hospitals.”

“Everyone knows that something is wrong with healthcare,” said Folwell. “On behalf of those who teach, protect, and otherwise serve, we are trying to figure out what is right, get it right and keep it right for the financial solvency of our State Health Plan.”