Saturday, August 16, 2008

Is Charity Care Declining at Safety Net Hospitals?

A paper from the Center for Studying Health System Change published as a web-exclusive by Health Affairs indicates that competitive pressures in the health care industry are driving "safety-net" hospitals, which have been the bastion of most charity care offered by the nonprofit hospital sector, to take steps to reduce services for the poor and increase the percentage of paying patients.

The authors found that although the costs of uncompensated care at its sample hospitals (an ongoing survey of hospitals in 12 metropolitan areas throughout the country) have risen by 28% over the last decade, those costs have actually declined by 7% as a percentage of hospital revenues. The paper notes that safety-net hospitals increasingly are targeting well-insured patients and profitable services, "adopting some of the same strategies being used in the private sector to attract higher-paying patients and changing their 'image' as a safety-net provider."

The paper also notes some other disturbing trends, particularly with access to physician services. The authors state, "the recent growth of large single-specialty groups that dominate a market might also contribute to decreased charity care. In Seattle, for example, access to orthopedic surgeons is virtually nonexistent for uninsured people and Medicaid enrollees, because a single group of orthopedic surgeons has a virtual monopoly in the community and does not accept Medicaid or uninsured patients."

This paper is sure to add fuel to the tax-exemption fire currently surrounding nonprofit hospitals. In fact, at the end of the paper the authors suggest that tax-exemption is one public policy lever that might be used to offset the trends noted. I have suggested for several years now that federal tests for classifying nonprofit hospitals as tax-exempt charity need wholesale revision to provide stronger accountability, with a particular emphasis on whether a nonprofit hospital significantly improves access to health care services for its community (as opposed to simply replicating services available in the private market). See, for example, The Failure of Community Benefit, 15 Health Matrix 29 (2005) (available on Lexis here).


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are we to believe that public hospitals are not in competition with non-profit ?..Non-profits have charity care policies that match any public hospital while public hospitals receive almost dollar for dollar on the charity care they provide..public hospitals continue to rebuild there facilities not so much to serve the poor put to eliminate the competition..if you want to level the playing field, remove the tax exemption from non-public and remove the subsidies of the public hospitals ..

Posted by: jim | Aug 17, 2008 5:22:18 PM

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