U.S. Allows Non-Profit Hospitals to Push Patients Into Debt

Inadequate regulation of non-profit hospitals in the United States allows many of them to aggressively pursue medical bills against people who cannot pay the report underlines.

A new report from Human Rights Watch, an international non-governmental organization, emphasizes the need for better oversight of non-profit hospitals and additional funding to the healthcare systems that actually provide services at no or reduced cost.

One in four (41%) of U.S. adults have some form of outstanding debt due to medical or dental bills, according to a 2022 survey, with 24% being either past due or unable to pay their health care bills. Of those with past-due medical debt, about 73% own at least some of that debt to hospitals.

Nearly 60% of more than 5,000 community hospitals across the U.S. are privately operated non-profits. Each year, they collectively receive public subsidies worth billions of dollars, mainly in the form of tax exemptions. In exchange, they provide "community benefits" such as free or reduced-price health care for patients who cannot pay for hospital services, including emergency care.

While in many countries, free or subsidized health care is the norm, in the U.S., this is referred to as "charity care." However, "community benefits" or "charity care" are not clearly defined by federal standards, allowing hospitals to follow their own definition of these terms without public oversight.

The U.S. government’s lack of guidance and oversight gives private non-profit hospitals wide discretion over how much they spend on making health care accessible for people who cannot pay, who qualifies for this assistance, and how far they will go to collect debts from patients who cannot pay their bills.

Because of poor regulation, many non-profit hospitals operate more like for-profit corporations, charging high fees and aggressively pursuing medical bills against people who cannot pay, including through lawsuits and selling debt to third-party debt collectors.

Many of these non-profit hospitals also spend far less on making healthcare services accessible for people without the means to pay than the value of the public subsidies they receive. For example, in 2020, non-profit hospitals received about $28 billion in tax benefits but only spent about $16 billion on free or reduced-price charity care, according to the Kaiser Family Foundation.

"Like wolves in sheep’s clothing, unscrupulous non-profit hospitals can hide among their responsible peers, benefiting from their public perception and tax-status as charitable institutions while engaging in extractive and exploitative practices," the report says.

Calls for more transparency

The report recommends the U.S. move away from its current, charity-dependent model of hospital services. Instead, it should consider measures taken by many other high-income countries, such as establishing a universally accessible public health care system, universal health insurance coverage, or some combination of these two.

New legislation should require recipients to demonstrate that their funding into health care is equal to the subsidies they receive.

Moreover, the U.S. government should allocate additional funding to publicly administered hospital systems that can provide medical care to all patients who cannot pay for treatment at no cost or progressively reduced costs.

Additionally, the report recommends prohibiting rights-impacting practices arising from non-profit hospitals’ extraordinary collection actions, such as foreclosures, bank account seizures, and the charging of interest on debt, as well as strengthening the definition of "reasonable effort," and prohibiting delaying or denying future medical care due to nonpayment.

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