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https://www.wsj.com/articles/nonprofit-hospitals-vs-for-profit-charity-care-spending-11657936777

Big Hospitals Provide Skimpy Charity

Care—Despite Billions in Tax Breaks
Nonprofit medical institutions get federal benefits in exchange for providing support
to their communities but often lag behind their for-profit peers

By Anna Wilde Mathews Follow , Tom McGinty Follow and Melanie Evans Follow
July 25, 2022 10:26 am ET

Nonprofit hospitals get billions of dollars in tax breaks in exchange for providing support to their communities. A Wall
Street Journal analysis shows they are often not particularly generous.

These charitable organizations, which comprise the majority of hospitals in the U.S., wrote off in aggregate 2.3% of their
patient revenue on financial aid for patients’ medical bills. Their for-profit competitors, a category including publicly
traded giants such as HCA Healthcare Inc., wrote off 3.4%, the Journal found in an analysis of the most-recent annual
reports hospitals file with the federal government.

Among nonprofits with the smallest shares of patient revenue going toward charity care—well under 1%—were high-
profile institutions including the biggest hospitals of California’s Stanford Medicine and Louisiana’s Ochsner Health
systems. At Avera Health, a major hospital system in South Dakota, charity care was roughly half of 1% of patient
revenue across all its 18 hospitals.

Nonprofit hospitals had lower aggregate charity-care rates than for-profit competitors, with
three out of five nonprofits spending less than 2 cents on charity care for every dollar of net
patient revenue, according to a Journal analysis.

How much is spent on charity care for every dollar of net patient revenue, by hospital type

60% of nonprofits spent 21% spent 19% spent

less than 2 cents 2 to 4 cents more than 4 cents

Nonprofit
hospitals

Each dot
is a hospital

49% of for-profits spent 21% spent 30% spent

less than 2 cents 2 to 4 cents more than 4 cents
For-profit
hospitals

Note: WSJ analysis of most recent hospital Medicare cost reports. The timeframe of the most recent reports
varies by hospital, with fiscal years ending in 2019, 2020 and 2021.

Kara Dapena/THE WALL STREET JOURNAL

A spokeswoman for Stanford Health Care, the Stanford system’s biggest hospital, said it provides generous charity care
and many other outlays for community benefit. Ochsner Health said the data used by the Journal didn’t include all of the
system’s charity and other community benefits it provided. An Avera spokesman said that financial aid varies across U.S.
hospitals, depending on community needs and hospital policies, and that federal data the Journal used skews
unfavorably for its hospitals.

“The financial assistance programs, the charity care that’s provided, are as important as the actual medical services,”
said Ngozi Ezike, president and CEO of Sinai Chicago, which has two general hospitals that serve patients in west and
south Chicago. The hospitals rank in the top 10% nationally for what they spend on financial aid as a share of their
revenue. “We don’t want limited financial resources to mean limited lifespan,” Dr. Ezike said.

‘Charity care’
In return for not paying taxes, nonprofit hospitals are supposed to provide community benefits. The clearest form is free
or discounted care for poor patients who otherwise couldn’t afford it, say many health-policy experts. Hospitals have
traditionally described the cost of erasing, or writing off, bills as spending on “charity care.”

Federal law requires nonprofit hospitals to have policies to assist such patients. But federal guidelines allow them broad
freedom to write and implement those policies and don’t require hospitals to meet any specific targets for financial-
assistance totals.

The value of nonprofit hospitals’ subsidy from avoiding taxes is more than $60 billion a year, according to estimates by
Johns Hopkins University professor Gerard Anderson.

Nonprofit hospitals say the national charity-care figures don’t provide a full picture, because some states expanded their
Medicaid programs under the Affordable Care Act, reducing the uninsured population and resulting in less need for free
care.

Hospitals provide benefits to their communities beyond direct financial aid to patients, said Melinda Hatton, general
counsel for the American Hospital Association, a trade group that represents for-profits and nonprofits. Using financial
aid alone as the measure of whether they earn their tax breaks, she said, is “both uninformed and myopic.”

The Journal used federal filings to examine charity-care spending by state and found that in states that haven’t expanded
Medicaid—where the need for charity care may be greater—nonprofits’ rates were lower in aggregate than the for-profit
hospitals’. In Medicaid expansion states, nonprofits had similar charity-care rates to their for-profit rivals, in aggregate,
with the difference amounting to less than a 10th of a percentage point—1.56% of patient revenue for nonprofits versus
1.49% for for-profits.

Ms. Hatton said hospitals absorb losses for patients covered by Medicaid, which doesn’t pay enough to cover costs.
Hospitals also help improve health more broadly with community education and investments in job training and
 housing, she said.
Nonprofit hospitals had lower aggregate
charity-care rates than their for-profit
competitors in states that didn't expand Many nonprofit hospitals set restrictive policies that may deny financial aid to
Medicaid—states that tend to have a higher patients who can’t afford their care, sending some bills to collection agencies.
share of uninsured people compared with Some won’t forgive bills even if a patient’s income is barely above the poverty
states that did expand Medicaid.

level or require patients to tap retirement savings. Other nonprofits reject

Charity-care rate in states needy patients based on nonfinancial factors, such as immigration status, or
with and without Medicaid expansion,
aggregated by hospital type whether they have insurance, even if limited coverage leaves them with large
bills.
For-profit 5%
hospitals 1.5 Hospitals also often set up a gantlet for patients who do apply for aid, with
detailed document demands and deadlines that can be difficult and confusing.
Nonprofit 4.2 What’s more, advocates say, hospitals sometimes fail to fully inform patients
hospitals 1.6 that they may qualify for what assistance there is, sending them multiple bills
before they even apply for aid. Some grant aid only to people who live nearby,
Note: WSJ analysis of most recent hospital
Medicare cost reports. The timeframe of the most in certain cases defining the acceptable geography down to the ZIP Code.
recent reports varies by hospital, with fiscal years
ending in 2019, 2020 and 2021.

Kara Dapena/THE WALL STREET JOURNAL

Mr. Escobar’s bill
Erwin Escobar, a truck driver, was denied financial help by Peterson Regional
Medical Center in Kerrville, Texas, based on living outside its coverage area, according to a letter the hospital sent him.
The hospital’s public financial-assistance policy says it typically grants aid only to those in its home county and
surrounding counties.

According to a letter Mr. Escobar filed with the hospital, he makes around $3,500 a month and lives with his wife and
son, putting his household income at less than 200% of the federal poverty level, which the hospital says is its typical
cutoff for free care.

Mr. Escobar, who is uninsured, went to the hospital’s emergency room after he experienced sharp chest pains while
driving with his family from their home in Houston to El Paso last year, according to him and his wife, Romina Escobar.
He was struggling to breathe.

“It was an emergency,” Ms. Escobar said. “It’s not like I could turn around and go four hours to a hospital here” in
Houston. She said the family can’t afford the roughly $8,500 bill for the visit, which ended with a pneumonia diagnosis.
Working with a nonprofit patient-advocacy organization, Dollar For, the Escobars appealed the rejection to the hospital,
which refused again, according to a letter it sent to Mr. Escobar. This time, the hospital said their income was too high.
A spokeswoman for Peterson Health, the hospital’s parent, declined to comment on details of the Escobars’ case but said
the nonprofit has “a solid charity-care policy in place that we followed. We feel confident in how we managed this
situation.”

Hospitals’ financial assistance and billing practices are coming under new scrutiny along with concern about the
prevalence of medical debt, including an investigation the U.S. Department of Health and Human Services announced in
April. Around 17% of U.S. households face medical debt, according to data from the Census Bureau, and recent estimates
of the total in collections range from $88 billion to $140 billion.

Struggling patients
The Journal analyzed annual cost reports filed by thousands of hospitals with Medicare for the most recent year
available—typically fiscal 2020 or 2021—comparing hospitals’ charity-care costs and net revenue from patient care to
gauge how much help they give to patients struggling with medical bills. The Journal also reviewed dozens of hospitals’
published financial-aid policies.

In light of disruptions stemming from the pandemic, the Journal also looked at the most recent five years of Medicare
cost reports and found little change in the pattern of how hospitals’ charity-care spending ranked nationally.

Nonprofits and their for-profit competitors overall fell well short of the share
Aggregate charity-care spending rates in
hospitals’ most-recent reports compared with of patient revenue that government hospitals, such as those owned by cities
their most-recent five reports showed little and counties, wrote off as financial assistance, which was 4.7% in the most
change, with nonprofits falling short of for-
recent year.
profits in how much they spend on charity for
every dollar of net patient revenue.

High-profile nonprofit hospitals with low charity-care rates in the Journal’s

Charity-care rate in most recent report analysis said the findings understated the help they gave their communities.
and most recent five reports,
aggregated by hospital type
Nonprofit Stanford Health Care’s charity-care rate of 0.5% of patient revenue
For-profit 3.4% was in the lowest third of hospitals in California, as well as the lowest quartile
hospitals 3.3 nationwide. In its fiscal year ended Aug. 31, 2021, the hospital granted about
$19.5 million of financial assistance and took in patient revenue totaling $4.18
Nonprofit 2.3 billion. Its net income was $306 million, more than 15 times its charity-care
hospitals 2.2 total.

Note: WSJ analysis of hospital Medicare cost Within 20 miles of Stanford, the two nearest for-profit hospitals, both owned
reports. The timeframe of the most recent reports
varies by hospital, with fiscal years ending in 2019, by HCA, had significantly higher charity-care ratios. At Good Samaritan
2020 and 2021.
Hospital in San Jose, 1.1% of its patient revenue went to financial aid in its
Kara Dapena/THE WALL STREET JOURNAL

most recent fiscal year, while Regional Medical Center in San Jose spent 3.5%.
Two thirds of hospitals in California, a Medicaid expansion state, had charity-care rates below
the national median. Nonprofit Stanford Health Care’s rate was in the lowest quartile
nationwide, while two nearby for-profits had significantly higher rates.

National percentile, by hospital

100th
Hospital in California
Low
Lowrank
rankin
inrevenue,
revenue, High
Highrank
rank
Rest of U.S.
high
highrank
rankin
incharity
charity in
inboth
both
MORE CHARITY

Regional
Medical Center
For-profit
CHARITY-CARE RATE

50

Good Samaritan Hospital

For-profit
LESS CHARITY

Stanford Health Care

Low
Lowrank
rank High
Highrank
rankin
inrevenue,
revenue, Nonprofit
in
inboth
both low
lowrank
rankin
incharity
charity
0
0 50 100th

LESS REVENUE MORE REVENUE

NET PATIENT REVENUE

Note: WSJ analysis of most recent hospital Medicare cost reports. The timeframe of the most recent reports
varies by hospital, with fiscal years ending in 2019, 2020 and 2021. Includes nonprofit, for-profit and
government hospitals.

Kara Dapena/THE WALL STREET JOURNAL

Nashville-based HCA’s financial-assistance policy writes off or limits medical bills for emergent, nonelective care based
on household income, a spokesman said. Meantime, the company’s 2021 federal, state and local taxes totaled $5.5
billion, he added.

Stanford Health Care said it is “dedicated to providing generous charity care” and offers full write-offs of bills for
patients making under 400% of the federal poverty level, around $54,000 for an individual. It said that in fiscal 2020,
Stanford Health Care’s total community benefit expenditures were $861 million, including costs such as losses incurred
in treating Medicaid patients. Stanford said it doesn’t provide obstetric and neonatal intensive care, which may generate
higher charity-care rates, and there are differences in financial assistance on a geographic level.

The charity-care rate of nonprofit Ochsner Medical Center in New Orleans was 0.4% in its 2020 cost report, at the 16th
percentile nationwide and in the lower half of hospitals in the state. The hospital wrote off about $6.45 million on
financial assistance on patient revenue of $1.7 billion, with net income of $291 million. Over five years, the share of
patient revenue the hospital devoted to charity care was 0.6%.
Three quarters of hospitals in Louisiana, a Medicaid expansion state, had charity-care rates
below the national median. Nonprofit Ochsner Medical Center in New Orleans had a charity-
care rate at the 16th percentile nationwide.

National percentile, by hospital

100th
MORE CHARITY

Hospital in Louisiana
Rest of U.S.
CHARITY-CARE RATE

50
LESS CHARITY

Ochsner Medical Center

Nonprofit

0
0 50 100th

LESS REVENUE MORE REVENUE

NET PATIENT REVENUE

Note: WSJ analysis of most recent hospital Medicare cost reports. The timeframe of the most recent reports
varies by hospital, with fiscal years ending in 2019, 2020 and 2021. Includes nonprofit, for-profit and
government hospitals.

Kara Dapena/THE WALL STREET JOURNAL

Ochsner Health Chief Financial Officer Pete November said in a written statement that the cost-report data for the big
New Orleans hospital “did not include all of our charity investments, nor does it include a significant portion of our
charity care across our health system.” Ochsner Health provided $270.1 million in community benefit in 2020, he said.
Ochsner Health also said that the Covid-19 pandemic may have affected its charity care and revenue in 2020.

At nonprofit Avera Health, which spent half a percent of patient revenue on direct aid, a spokesman said the hospital has
sizable business from clinics, related divisions and its employed physicians. Other, smaller nonprofits may have less
revenue from physicians, skewing the percentage spent on charity care inside the hospital, he said.
South Dakota hasn’t expanded Medicaid, and most hospitals there had charity-care rates
below the national median. Avera Health is a major South Dakota hospital system, and all its
hospitals had charity-care rates below the national median, with its flagship in Sioux Falls at
the 19th percentile nationwide.

National percentile, by hospital

100th
MORE CHARITY

Hospital in Avera
Health system
South Dakota
CHARITY-CARE RATE

Rest of U.S.
50
LESS CHARITY

Avera McKennan
Hospital & University
Health Center
0 Nonprofit
0 50 100th

LESS REVENUE MORE REVENUE

NET PATIENT REVENUE

Note: WSJ analysis of most recent hospital Medicare cost reports. The timeframe of the most recent reports
varies by hospital, with fiscal years ending in 2019, 2020 and 2021. Includes nonprofit, for-profit and
government hospitals. Thirteen out of Avera’s 18 hospitals are in South Dakota and all but one
are nonprofits.

Kara Dapena/THE WALL STREET JOURNAL

The Journal also measured charity cost as a share of hospitals’ operating costs reported to Medicare, which excludes
services by physicians. The results show little difference. Using this denominator, Avera’s charity-care spending across
all hospitals was still under 1%.

The Avera spokesman said: “We have an extensive patient advocacy program that works hard to find payer sources on
behalf of and in partnership with our patients.”

Self-set rules
Because federal rules let hospitals decide who qualifies for aid, their standards vary. “The policies are wildly different,”
said Jared Walker, executive director of Dollar For, the patient-advocacy group. “When people ask, ‘Am I eligible?’ The
answer is always, ‘It depends.’ ”

On New York’s Long Island, nonprofit Mount Sinai South Nassau grants full bill forgiveness only to patients making an
income at or below the federal poverty level—$13,590 for an individual—though it offers discounts to those making as
much as 300% of the federal poverty level. The hospital spent 0.4% of its patient revenue on financial assistance, in the
lowest quartile nationally and in the state, according to its 2020 cost report.

Mount Sinai South Nassau officials said the hospital signs up many patients for Medicaid coverage, limiting the need for
assistance, and people in its area are mostly insured. After getting questions from the Journal about the hospital’s cutoff
for free care, Adhi Sharma, who became president of Mount Sinai South Nassau in September 2021, said that he planned
to review the policy: “If we’re an outlier there, we need to think about what we can do to adjust that.”

The financial-aid policy at Altru Health System, a North Dakota-based nonprofit that derived its name from the word
“altruism,” said it may deny financial aid to those who are unemployed without documented health reasons. The system
recently revised its policy and removed the provision, a spokeswoman said.

Altru wrote off less than half a percent of its patient revenue for charity care, according to the Journal’s analysis.

“Several other financial assistance opportunities were available then, and remain in place now, to support patients who
are either employed or unemployed,” an Altru spokeswoman said. The system aims to help patients get affordable care,
she said.

Hospitals may deny financial assistance to patients depending on what facility they visit. Many hospitals provide aid only
for emergency or “medically necessary care” and may exclude certain providers.

Nonprofit Cottage Health, based in Santa Barbara, Calif., refused financial assistance to Bria Craig and her husband
because its policy doesn’t include the system’s urgent-care clinics, according to letters Cottage sent the family. Cottage
Health billed the couple more than $1,200 in total for three visits for Covid-19 testing in August 2021 and January 2022.
The family’s health insurance paid a portion, but the bills show they were left with a tab of more than $900.

The couple, who have two children, made about $49,000 in 2021, according to a tax document for Mrs. Craig reviewed
by the Journal. That is well under the cutoff for complete bill forgiveness under Cottage Health’s financial-assistance
policy.

“I was pretty angry and upset,” said Mrs. Craig, who worked with Dollar For on her financial-aid application. “You’re
going there urgently because you need help and have nowhere else to go.”

Cottage Health declined to discuss Mrs. Craig’s case and said it “has a different payment model for urgent care than for
acute or emergent care, which treat more complex conditions and have wider variation of cost.”

After the Journal requested comment on the case, Mrs. Craig said, a Cottage Health representative contacted her to
discuss the bill. Cottage Health agreed to forgive the entire amount, she said.

Write to Anna Wilde Mathews at anna.mathews@wsj.com, Tom McGinty at tom.mcginty@wsj.com and Melanie Evans
at Melanie.Evans@wsj.com
Corrections & Amplifications

In Medicaid expansion states, nonprofit hospitals’ charity-care spending was equal to 1.56% of their net patient revenues
versus 1.49% for for-profit hospitals. An earlier version of this article incorrectly transposed those figures. (July 26.)

Appeared in the July 26, 2022, print edition as 'Hospitals Lag Behind In Charity Care'.