Apparently persuaded that you will know a non-profit hospital when you see one, the IRS has been busy developing some of the new conditions attached to federal tax exempt status for acute care facilities required by Section 9007 of the Affordable Care Act. IRS Section 501(r)'s, new requirements applicable to charitable tax-exempt hospitals. These requirements include the obligation to perform a community health needs assessment every three years, the obligation to establish written policies on financial assistance and emergency care, and the imposition of certain limitations on billing and collection actions.
Now, charitable financial assistance at the acute care level has long been a thorny issue. California has required reporting of charity care by acute care facilities for some time, and that data has been fascinating. Since California's reporting didn't require any real standardization of the definition of charity care, merely a snapshot of a facility's own definition and provision of charity care, the first thing that became apparent was that definitions of charity care may often be in the eye of the beholder. In particular, the decision to include written off bad debt as charity care can have a significant effect on the calculation of the charity care rate or percentage of operating income. The second thing that became apparent was the fact that, in California, for-profit or investor owned facilities appeared to provide as much or more charity care than tax exempt charitable facilities. The third interesting insight gleaned from the California data was that the provision of charity care in acute care facilities was not evenly distributed between and among facilities, not by a long shot. Further, a study of institutional response to a Texas statutory requirement that acute care charity care be provided at a certain minimum level showed that the statutory threshold requirement served to level the provision of charity care, but reduced the total amount of charity care. This implies that the acute care providers — left to their own devices — defined their fair share differently or that there is a natural tendency to see the regulatory threshold as both the floor and the ceiling in these kind of matters — a target to be hit but not overshot or undershot. Standardization has its risks, particularly if the standardization is to quantity but not as to quality.
The IRS, perhaps drawing lessons from both the California and Texas data, has not seen fit to define charity care for the acute care facilities. They are to define it themselves and each is left, as at present, to design its own eligibility criteria for charity care. This means the new rules are all about disclosure. Of course, disclosure itself may produce the same leveling effect discussed earlier, perhaps with a loss of total charity care. But, this would be hard to know as reporting has been so relatively sketchy to date.
I am interested in just who this disclosure of widely variable definitions and eligibility criteria is supposed to help. Is it consumers who, once advised of the existence and terms of the programs, per the new regulations, will become wily analysts of the acute care institution charity care programs in their communities?
More importantly, perhaps uncompensated care — in a culture of coverage — is more likely to tend to become a function of un-affordability rather than un-insurance. Preliminary data on hospital uncompensated care from several large acute care hospital chains may bear this out. This is the situation where an insured person appears at the facility with ACA acquired high deductible health insurance or with Medicaid in an expansion state with co-insurance requirements. The hospital accepts the coverage, but struggles when the patient fails to pay their after-billed high deductible or co-insurance amount because of un-affordability.
Interestingly, the Mosaic acute care system in Missouri is reported to have recently announced its decision to allow those in arrears on acute care payment to still be evaluated for patient charity care assistance for ongoing services. That is more than Indiana's expansion Medicaid offers its very low income non-payers of Medicaid premiums. For some low income individuals in some states, it might be better to approach an acute care facility without any insurance at all, rather than as an expansion Medicaid enrollee with un-affordable premiums and co-insurance.