North Carolina Hospitals Profit on Medicare

The North Carolina State Health Plan and Rice University’s Baker Institute for Public Policy Find that the Majority of North Carolina’s Hospitals Are Overcharging Patients While Profiting From Medicare.

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An analysis by the North Carolina State Health Plan and Rice University's Baker Institute for Public Policy found that the majority of North Carolina hospitals did not lose money on Medicare — they profited. This raises serious concerns over hospitals’ commitment to their patients and their charitable mission.

State Treasurer Dale R. Folwell, CPA, invited researchers from the North Carolina State Health Plan and Rice University’s Baker Institute for Public Policy to analyze hospitals’ Internal Revenue Service 990 tax filings, and community benefit reports, and hospitals’ self-reported Medicare Cost Reports, which were drawn from the National Academy for State Health Policy’s Hospital Cost Tool. The tax filings and Medicare cost reports use different methodologies that result in wildly different loss calculations. The report was then peer reviewed by the University of Southern California’s Sol Price School of Public Policy.

Hospital lobbyists have defended their crushing price inflation by claiming to lose billions of dollars on Medicare patients. However, hospitals’ self-reported data show that a majority of hospitals profited off of Medicare patients in North Carolina from 2015 through 2020.

Medicare losses are often the largest line item of community benefits cited by hospitals to justify their tax exemptions, mergers and price increases. North Carolina hospital lobbyists claimed they lost $3.1 billion on Medicare in 2020 — the same year hospitals actually reaped a total of $87 million in Medicare profits. The lobbyists’ loss claim was 3,670% larger than hospitals’ self-reported Medicare profits.

On average, North Carolina hospitals charge privately insured individuals 280% of Medicare, which forces patients and employers to pay thousands of dollars more for medical care. Treasurer Folwell is calling for price relief for patients, businesses and state employees.

KEY TAKEAWAYS:

  • North Carolina was in the top 10 states with the highest average hospital Medicare profit margins for five years, according to Medicare Cost Report data.
    • Only 15 hospitals consistently lost money on Medicare, while 35 hospitals posted profits over all six years in North Carolina, according to Medicare Cost Report data.
    • A range of 55% to 66% of more than 100 hospitals profited off Medicare from 2015 through 2020 in North Carolina, according to Medicare Cost Report data.
  • North Carolina hospitals’ own Medicare Cost Report data contradicts a long-standing narrative about cost shifting and tax exemptions.
    • Even as hospital lobbyists claimed a $3.1 billion Medicare shortfall, North Carolina hospitals made a total of $87 million in Medicare profits in 2020.
    • These lobbyists attributed 52% of hospitals’ community benefit spending to Medicare losses in 2020. Novant Health claimed a Medicare loss that eclipsed all of its other community benefit spending combined in 2019, including charity care and Medicaid losses.
    • Atrium Health actually made a $119.2 million profit on Medicare and Medicare Advantage — while claiming to lose $640 million in 2019.
  • Similar discrepancies exist in many nonprofit hospitals’ tax filings.
    • Sixty nonprofit hospitals claimed to lose a total of $863.8 million on Medicare in their federal tax filings. This claimed loss was 2,985% greater on hospitals’ 990 tax filings than on their Medicare Cost Reports.
  • For state employees covered by the State Health Plan and patients covered by private insurance, hospital bills are now drastically less affordable because of price inflation.
    • North Carolina hospitals charged privately insured patients 280% of Medicare rates on average in 2020, according to the RAND Corporation.
    • Worse, North Carolina was the 11th most expensive state in the nation for outpatient care in 2020, according to the RAND Corporation.
  • Taxpayers are not getting a meaningful return for billions of dollars in tax breaks given to nonprofit hospitals in North Carolina.
    • The IRS cannot even demonstrate that it is consistently reviewing non-profit hospitals’ community benefits, according to the U.S. Government Accountability Office.
    • Without reform, nonprofit hospitals face little accountability or trans-parency to safeguard their commitment to their charitable mission.