The clock is ticking on new rules under the Affordable Care Act that aim to ensure that hospitals devote more resources to charity care.
But an article in the New England Journal of Medicine argues that the changes, known as Section 501(r) under the Internal Revenue Code, may not be yielding the desired effect.
Section 501(r) mandates that not-for-profit hospitals must provide charity care to patients who need it—by actively ensuring that those who qualify for financial assistance get it, by charging reasonable rates to uninsured patients and by avoiding extraordinary collection practices. Hospitals also must perform a community needs assessment every three years.
Providers that don't comply risk incurring penalties, including the loss of their tax-exempt status, when the changes take effect next year.
The study's authors looked at hospital compliance with the new requirements in 2012, the most recent year for which data were available and the first year when hospitals needed to complete Section 501(r) on their federal tax forms.
What they found is that many hospitals weren't ready to meet the new rules. While as many as 94% of hospitals had written charity- and emergency-care policies, only 29% were charging charity-care patients the same as insured patients. Similarly, while 80% of hospitals did not report unpaid medical debt to credit agencies or pursue extraordinary collection practices, only 44% regularly informed patients of their potential eligibility for charity care before beginning the debt collection process.
Yet while Section 501(r) sets new requirements, it also leaves a lot to providers' discretion, the authors note. For instance, it's enough for a hospital to perform a community needs assessment—they don't need to take any further action. Moreover, the rules don't prohibit hospitals from making their charity-care policies more restrictive so that fewer patients can take advantage of them.
The new charity-care requirements grew out of concerns that hospitals weren't providing enough community benefit to justify their tax-exempt status. And with greater insurance coverage under the ACA, hospitals will be providing even less uncompensated care—potentially freeing up funds for public health improvement programs.
Yet the communities with the worst health outcomes also tend to be those that haven't expanded their Medicaid rosters and have the least generous charity-care policies. The study found, for instance, that hospitals in states that did not expand eligibility for Medicaid had less generous charity-care policies and a lower average income ceiling to qualify for free care, or 179% of the federal poverty level compared with 202% in hospitals in expansion states.
States that didn't expand Medicaid also had a lower percentage of hospitals performing a community needs assessment.
“In some ways, it could increase the disparities, using resources that some places don't have access to,” said Dr. David Kindig, professor emeritus of population health science at the University of Wisconsin School of Medicine and Public Health, who did not work on the current study. “This is not the only answer.”