If Mayo were to prioritize commercially insured over publicly insured patients, it could potentially violate several state and federal laws. Possible repercussions remain unclear, but rarely have hospitals had their federal tax-exempt status revoked for failing to provide sufficient community benefits, although that has happened occasionally at the municipal level, experts said.
In 2011, Illinois stripped three hospitals of their property tax exemptions for failing to provide adequate charity care. And in 2013, the city of Pittsburgh demanded that UPMC compensate it for six years of property taxes for spending less than 2% of its revenue on charity care.
After reading about Noseworthy's comments in the Star Tribune, Emily Piper, commissioner of the Minnesota Department of Human Services, sent a letter, dated March 16, to Noseworthy. She said the department was reviewing its managed care, fee-for-service and ACO contracts with Mayo.
In a follow-up letter, assistant commissioner Nathan Moracco asked specific questions about how Mayo would meet the obligations of those agreements and those of state and federal law, and asked the clinic to respond within two weeks.
He pointed out that in 2015, Mayo had signed an agreement with Minnesota Health Care Programs, publicly subsidized programs that include Medicaid as well as coverage for immigrants and refugees. Per that agreement, Mayo promised to “render to recipients services of the same scope and quality as would be provided to the general public.” The agreement also required providers to comply with Title VI of the 1964 Civil Rights Act, which bars discrimination.
Minnesota's population is 82% white, 6% black, 5% Hispanic, 3% Asian and 2% American Indian/Alaska Native, according to the U.S. Census Bureau. Nonwhites are disproportionately on public insurance or are uninsured. Of those on Medicaid in 2015, 67% were white and 18% were black.
Of the nonelderly uninsured, 44% were white, 17% Hispanic, and 25% “other,” defined as Asian, Native Hawaiian and Pacific Islander, American Indian, Aleutian, Eskimo or multiracial.
Overall, 7% of Minnesotans do not have insurance, according to an analysis by the Kaiser Family Foundation. But only 4% of whites were uninsured, while 20% of Hispanics and 24% of people categorized as “other” lacked coverage.
Minnesota does not explicitly require not-for-profit hospitals to offer a minimum of community benefits, although state law does require them to report every year the benefits it does provide.
If Mayo did cut back on care to Medicaid or Medicare patients or others who are not commercially insured, “minorities would be disproportionately affected,” Rosenbaum said.
Because it receives federal funding by participating in Medicare and Medicaid, Mayo is prohibited from discriminating by race. Title VI bans not just overt discrimination but also the adoption of policies that might appear neutral but in reality disproportionately affect certain racial groups. How this could play out for Mayo Clinic remains to be seen.
Ultimately, even at not-for-profit hospitals, revenue has to exceed operating expenses, said Crossley, the University of Pittsburgh law professor.
“It's not unusual to hear about hospital management trying to adjust patient mix by adjusting the services they offer, to maximize revenue,” Crossley added. They might try to figure out which services have the best profit margins, for instance, and lure patients to those more lucrative units while closing down services that attract Medicaid patients and cause the hospital to lose money.
Young, who saw Noseworthy's comments as market-level and not patient-specific, said that although the remarks were in poor taste, the sentiments behind them were “commonplace.”
“We've asked them to compete,” Young said of not-for-profit hospitals. “They do think about how they have to market their services, and how they want to focus on the commercial population versus government.”