Research Shows Some North Carolina Nonprofit Hospitals Billing Poor Patients Amid Failures in Charity Care

The North Carolina State Health Plan and the National Academy of State Health Policy discover that some nonprofit hospitals billed nearly $150 million to disadvantaged patients instead of providing them charity care.

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An analysis by the North Carolina State Health Plan and the National Academy for State Health Policy found that some North Carolina’s nonprofit hospitals are billing poor patients at a rate up to almost three times the national average.

State Treasurer Dale R. Folwell invited National Academy of State Health Policy researchers to extend their national analysis of hospitals to North Carolina. Together with the North Carolina State Health Plan, these researchers found that failures in charity care exposed poor patients to bills and medical debt. The study was peer reviewed by Dr. Vivian Ho, James A. Baker III Institute Chair in Health Economics at Rice University.

Some of North Carolina’s nonprofit hospitals billed $149.2 million to poor patients who should have qualified for charity care under the hospitals’ own policies. This is an underestimate that accounts for only 18 of 105 nonprofit hospitals in the state. Across the state, hospitals billed an average 11.9% to 28.7% of their bad debt to disadvantaged patients in fiscal year 2019. The pandemic has made the problem far worse, based on available 2020 data.

Hover over the dots on the map below to show details. Page 1 includes an interactive map, and page 2 includes an interactive comparison chart.

Key findings from the study include: 

• In North Carolina nonprofit hospitals face very little accountability for their charity care and bad debt.
  • Neither the federal nor the state government fully require a minimum threshold for community benefit spending or charity care eligibility.
    • Worse, the Internal Revenue Service cannot demonstrate that it is consistently reviewing hospitals’ community benefits.
• Some NC nonprofit hospitals are billing poor patients instead of providing charity care, despite receiving more than $1.8 billion in tax breaks.
  • North Carolina nonprofit hospitals should have provided an average 11.9% to 28.7% of their bad debt as charity care in FY 2019 — a rate up to almost three times the national average of 10%.
  • When patients don’t qualify for charity care, hospitals attempt to collect on bills, sometimes through damaging credit scores, suing patients, or encouraging them to open medical credit cards that charge interest. If a hospital gives up, the bill becomes bad debt.
    • Atrium Health Wake Forest Baptist, UNC Health, Cone Health, and AccessOne Health encouraged patients to use medical credit cards that can charge interest rates as high as 18% after a promotional period.
• Eighteen nonprofit hospitals billed almost $150 million to poor patients who should have qualified for charity care under the hospitals’ own policies.
  • This is an underestimate because only 16% of N.C. hospitals provided reliable data, and many do not have to publish any data at all.
• The pandemic is expected to intensify the problem.
  • One in five North Carolina families had medical debt in collections in 2020, according to the Urban Institute.
  • The levels of bad debt eligible for charity care were worse in 2020 than in the previous fiscal year. Nonprofit hospitals estimated that an average 31% to 48% of their bad debt should have been charity care in fiscal year 2020, according to the little data available. 
• Without standards and accountability, it has become difficult to tell nonprofit hospitals apart from for-profits.
  • Only one in five nonprofit hospitals provided enough charity care to equal the value of their tax exemptions in FY 2019.
  • On average, North Carolina’s hospitals were three times more profitable than the national average operating profit margin. But these profits are not trickling down to patients.
  • Some nonprofit hospitals even billed more than 60% — and 80% — of their bad debt to disadvantaged patients likely eligible for charity care.
• We need accountability and transparency.
  • There is precedent for states to strengthen accountability. Other states require profitable hospitals to justify their tax exemptions with community benefits.
  • Utah, Illinois, Oregon and Nevada all require a minimum threshold for community benefit spending. Pennsylvania instituted defined standards and California mandated a more generous eligibility policy for charity care.
  • North Carolina should follow other states’ example in requiring thresholds for profitable nonprofit hospitals’ community benefits.