But a recent study found that less than half of nonprofit hospitals surveyed were telling patients they could be eligible for charity care.
There are nearly 3,000 community hospitals in the United States that qualify for tax-free nonprofit status. In return for that tax break—worth $25 billion in 2011 —hospitals are supposed tell the Internal Revenue Service each year how much care they write off for those who can’t pay.
Under the Affordable Care Act, hospitals are supposed to follow several rules, which take full effect next year.
They must have written policies about charity care. They must make those policies known to patients. And they can’t charge uninsured patients more than they charge privately insured or Medicare patients.
Researchers at the University of Michigan's Institute for Healthcare Policy and Innovation analyzed the tax returns of 1,800 nonprofit hospitals to see how they performed. Nearly all had written policies to guide them in deciding which patients should be offered discounts.
But many hospitals weren’t following other rules on charity care.
Among their findings:
• Only 42 percent of hospitals were notifying patients that they could be eligible for charity care before trying to collect unpaid medical bills.
• Only 29 percent said they charged uninsured and under-insured patients generally the same rate they charged private insurance and Medicare. Researchers assume that many of the remaining hospitals charged more.
•20 percent, or 1 in 5, were reporting patients to credit agencies or placing liens on their properties or garnishing wages, practices that aren't supposed to happen if hospitals are following the rules.
• Only 11 percent of hospitals said they had a conducted a community needs assessment in the past three years to identify pressing health issues in their local community.
How hospitals handle charity care is especially important in the 19 states that have not expanded Medicaid to cover people with lower incomes. In those states, there is likely to be more demand for charity care, said John Ayanian, the institute director and a study co-author.
Americans who sign up for insurance plans that have high deductibles may also need financial assistance after a hospital stay.
"The point of these rules is to make sure people don't find out six months after they've been discharged that they had a bill, and if they didn't pay it, it would get referred to collection," said Sayeh Nikpay, a postdoctoral fellow at the institute and a co-author.
The researchers looked at records for 2012, the first year hospitals had to comply with the ACA’s requirements and the most recent year for which data was available.
The study was published last month in the New England Journal of Medicine.
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