In Defense of Nonprofit Hospitals

On a slow day I can always find studies, reports, op-eds, and even law review articles condemning tax exemption for nonprofit hospitals.  Even in the wake of Obamacare, we still have the most expensive healthcare system in the world and certainly the highest number of health-care deprived people of all developed countries. It’s easy to point the finger at nonprofit hospitals whose doctors and administrators earn the same as their for-profit counterparts.  Legitimately, so.  And when nonprofit hospitals use the same sort of debt collection practices as for-profit hospitals.  That too is legitimate because nonprofit hospitals treat those able as well as those unable to pay.  It makes sense that they should insist that the able pay what they can. Otherwise its just private benefit, not charity.  The real problem is that increasingly nobody is able to pay, not even the insured.

So I appreciate a real and logical defense of nonprofit hospitals and their tax exemptions.  They are few and far between, let’s just be honest.  We have almost shouted down those who defend nonprofit hospitals. We are left with unhelpful, knee-jerk talking points from the American Hospital Association.  But Dr. Rahul Koranne, President and CEO of the Minnesota Hospital Association recently penned a thoughtful defense of nonprofit hospitals in the Star-Tribune.

Recent stories, such as “Collecting ill will with debt ‘sharks'” (front page, April 21) have painted Minnesota’s nonprofit hospitals and health systems as predatory debt collectors, but nothing could be further from the truth.  As caregivers, our mission is to serve our patients and communities, not to burden them with debt. Collecting debts is the last thing we want, but we find ourselves in an impossible position between insurance companies and patients. On one end, we are increasingly being squeezed by payers with rising rates of denials and unending costly administrative burdens just to get paid for the care we provide to our patients. On the other end, we are being put in the difficult position to collect the growing portion of a medical bill from patients whose insurance coverage increasingly leaves them financially exposed. 

We are the beating heart of our communities — from urban to rural — here to provide care to our patients when and where they need it, 24 hours a day, every day of the year. Yet, the truth is that the system designed around health care financing is fundamentally broken. It is pushing us and our patients toward a breaking point.   

. . .

While public policy debates and news coverage around the state of health care often focus on the idea that insurance equals coverage, the reality is that it does not. And it is the patients who are left in a position to learn that brutal reality, often when they are in their highest time of need. For over a decade, policy discussions have centered around expanding insurance coverage, but this focus has inadvertently led to the growing problem of “underinsurance.” As a result, patients are drowning in unaffordable deductibles and copays despite having insurance because the coverage they’ve been offered doesn’t adequately meet their health care needs.

In Minnesota alone, 62.6% of private-sector workers have high-deductible health plans, higher than the national average of 55.7%. Minnesotans also face higher deductibles than the national average, with deductibles 7.9% higher in 2021. This shift in insurance plans has left more patients unable to afford their share of the costs despite having coverage. It’s a financial nightmare that neither patients nor providers signed up for. The reality is that this is not a simplistic problem and the discussion should not be either.

The government does not cover the cost of care

More than half of Minnesotans now receive health care paid for by public programs, and that number continues to grow. As the largest payer, the government sometimes reimburses as low as 68 cents on the dollar of the actual cost of care. These patients make up about two-thirds of those who our nonprofit hospitals and health systems serve.

The shortfall from government underfunding is staggering. In 2021 alone, Minnesota hospitals faced a total shortfall of about $2.3 billion, including $500 million in unpaid boarding losses, $1 billion in Medicare reimbursement shortfall and $837 million in Medicaid reimbursement shortfall. As a result, 67% of nonprofit hospitals and health systems operated in the red last year, which is unsustainable and is forcing hospitals and health systems to cut services to stay open. This underfunding drives up the cost of care for everyone as hospitals struggle to survive.

We are here to provide care to patients, not collect debts

At Minnesota’s nonprofit hospitals and health systems, we do everything we can to protect patients’ access to care and shield them from the medical debt that often results from insurers’ unwillingness to pay. There are no patients who come through our doors who we don’t treat — and no patients who aren’t offered every possible opportunity to manage the costs their insurers won’t cover.

In addition to the quarter-billion dollars in charity care we provided last year, we offer financing and payment plans and we exhaust all other options to ensure that patients get the care they need without facing financial ruin. We are here to heal, not to collect debts. But when insurers fail to fulfill their obligations, we have an impossible choice between pursuing payment or writing off the cost of care, which drives up costs for all other patients.

Maybe nonprofit hospitals aren’t the wolves we think they are.

darryll k. jones