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America's Hospitals: In Danger or Bouncing Back?
Slide Presentation by Paul Hattis, M.D., J.D., M.P.H.
On November 20, 2002, Paul Hattis, M.D., J.D., M.P.H., made a presentation in a Web-assisted teleconference at Event 2, which was entitled "Hospital Uncompensated Care Issues."
This is the text version of Dr. Hattis' slide presentation. Select to access the PowerPoint® slides (66 KB).
Hospital Uncompensated Care Issues
Paul Hattis, M.D., J.D., M.P.H.
Acting Concentration Head in Health Policy and Management
Tufts University Medical School
Slide 1
Background on the term "community benefits"
- Origins are from the Internal Revenue service Code rulings interpreting
eligibility for tax exemption under Section 501(c)(3).
- In 1969, IRS promulgated Revenue Ruling 69-545, replacing an earlier
revenue ruling that was more focused on provision of free care.
- Though "community benefits" has a broader notion than just
uncompensated care, a February 2001 memorandum to IRS field agents suggests
that charity care is still tied to the community benefits concept.
Slide 2
State Context
- States determine requirements for legally non-profit corporations.
- 14 states have passed laws, regulations or guidelines that relate to
community benefits.
- Laws usually directed to hospitals, but in some states include HMOs or
other health organizations.
Slide 3
State Activity Concerning Hospital Community Benefits
- Usually state legal focus arises after some egregious behavior by a non-profit
hospital or need for tax dollars to support local government.
- Generally, community benefit laws, regulations or guidelines are primarily
focused on community benefits reporting to state government.
- Texas and Pennsylvania, are the only two states with community benefit
benchmarks. In both cases, uncompensated care is included as one of the
alternative benchmarks to meet the legal requirements for charitable status.
Slide 4
Hospitals' Community Benefits in Massachusetts
- Attorney General issues guidelines for non-profit hospitals (1994) and
all HMOs (1998).
- Guidelines require community benefits reporting board actions, community
benefits plans and community engagement process.
- Newest twist: all reports are now on the Web
In Massachusetts, the free care pool mechanism that has a greater impact
on the availability of charity care.
Slide 5
What Most Hospitals are Doing Under the Aegis of Their Community Benefit Obligation
Where most hospitals direct their efforts:
- Uncompensated care or other services for the poor and uninsured.
- Public health programs.
- Not a systematic, planned approach.
Slide 6
The Connection Between These Community Benefit Obligations of Hospitals and the Provision of Uncompensated Care
- Not entirely clear (IRS memo makes federal expectations more murky; Texas
and Penn. clearer about what needs to be included).
- As long as substantial numbers of uninsured, there should be a connection
between the two.
- Key element for improvement: uncompensated care should be part of a more
planned community approach by the hospital.
Slide 7
Massachusetts Free Care Pool
- A state controlled pool to reimburse hospitals for a portion of costs
tied to uncompensated care to qualified patients. Currently, $315 million
pool comes from near equal contributions of hospitals, insurers and state
respectively each year.
- Distributed to hospitals based on formula that is tied to statewide and
hospital specific uncompensated care levels—reducing some of the unequal
burdens around provision of uncompensated care.
- Currently, hospitals need to make up pool shortfall—likely to run up
to over $200 million in the next year.
Slide 8
CB Obligations for For-Profit or Governmental Hospitals
- For for-profits, usually not except in cases where explicit agreement
has been reached after a conversion to maintain prior levels of a non-profit
provider.
- However, for marketing and other reasons for-profits often do provide
some levels of community benefit (as they do with UC).
- Governmental—usually there is no formal requirement—yet tied to their
mission.
Slide 9
Conversions
- Deals with state overseers are often quite specific about continuing
obligations for uncompensated care for a number of years.
- In addition, conversion foundations set-up after the conversion use some
of their proceeds to pay for uncompensated care or community benefit activities
in future years.
Slide 10
Other Governmental Programs Affecting Levels of Uncompensated Care
- Increasingly, some DON obligations tied to capital projects or opening
of new services can include commitments around access for the poor or community
benefit obligations.
- State-specific or county indigent care programs.
Slide 11
Where is the Community Benefits Movement Going?
- Ultimate aim is population health improvement—not just around medical/hospital
care access.
- Currently, concerns are rising over reductions in hospital commitments
towards community benefit across the country.
- CB relationship to UC, a function of whether we make headway on the number
of uninsured in the nation or not.
Current as of June 2003
Internet Citation:
Hospital Uncompensated Care Issues. Slide Presentation by Paul Hattis, at Web-Assisted Teleconference, "America's Hospitals: In Danger or Bouncing Back?" Agency for Healthcare Research and Quality, Rockville, MD. https://www.ahrq.gov/news/ulp/hospital/hattistxt.htm
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