CHARLOTTE, NC – Atrium Health, North Carolina’s largest hospital system, has publicly stated that in 2019 it provided $ 640 million in services to Medicare patients who were never paid, by far the largest “community benefit.” “provided that year.
Like other nonprofit hospitals nationwide, Atrium records losses on the federal health insurance program for seniors and people with disabilities as a community benefit to meet legal requirements for federal, state, and local tax breaks.
But for the same year that Atrium’s website claims it recorded the $ 640 million loss on Medicare, the hospital system claimed $ 82 million in profits from Medicare and another $ 37.2 million in profits from Medicare Advantage in a federally required financial document, according to a report released Oct. 25 by the North Carolina state treasurer’s office.
The lack of clarity about whether health systems like Atrium make or lose money by treating Medicare beneficiaries reflects how roughly the federal government regulates how hospitals calculate community benefits.
As a result, analysis of financial data from North Carolina hospitals concluded that what taxpayers get from local nonprofit hospitals in exchange for billions of dollars a year tax exemptions is unclear.
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“There is no transparency, accountability and oversight,” says North Carolina state treasurer Dale Folwell, a Republican critical of Atrium and the business practices of other hospitals. “With the hospital cartel, the profits are always on the people.”
Atrium did not make the officials available for an interview. In a statement, spokesperson Dan Fogleman said the hospital system reported $ 85 million in unpaid Medicare patient services in its most recent cost report to the Centers for Medicare & Medicaid Services.
“And as labor, equipment, supplies and inflation continue to drive health care costs up, the gap between Medicare payments and the costs incurred to deliver the quality care we provide has grown in the post-Covid inflationary environment.” , says Fogleman.
More than half of the hospitals in the United States are nonprofit or government-run organizations. The federal government requires them to run emergency rooms that are open to all patients regardless of their ability to pay, accept Medicare-insured patients, and use excess funds to improve facilities and patient care to prove they are returning to the hospital. community.
Although their tax-exempt status is based on charitable acts, nonprofit hospital systems invested more than $ 283 billion in assets from stocks, hedge funds, venture capital and private equity and other investments in 2019, according to a 2021 KHN analysis of the IRS filings.
According to the analysis, hospital systems used most of it to generate income and classified only $ 19 billion, or about 7% of their total investments, mainly dedicated to their non-profit missions.
The new North Carolina report describes how Medicare profit margins reported by hospitals differed from the financial framework provided to the public through IRS records, annual reports, and community benefit documents.
Although most hospitals have complained of significant Medicare losses, analysis of data from more than 100 North Carolina hospitals found that most made profits on Medicare from 2015 to 2020.
IRS audits are supposed to protect the public from fraud and abuse, but the system has major gaps, say health economists and federal control groups.
Federal law requires the IRS to review community-based activities at least once every three years. However, the agency does not have “a well-documented process to ensure these activities are audited,” says a 2020 report from the Government Accountability Office.
In response to the GAO’s recommendations, IRS leaders updated the system last year to ensure the agency could identify cases where hospitals were suspected of not meeting the requirements.
The IRS referred nearly 1,000 hospitals nationwide to its audit division for violations of the Affordable Care Act from 2015 to 2019, but the IRS was unable to identify whether they were related to community benefits, the GAO says. .
The revenue agency does not have the authority to determine what activities hospitals must perform to comply with the law, the GAO says. An analysis of IRS data found 30 hospitals that did not report any community benefit spending in 2016, “indicating potential non-compliance,” the report said.
“Perhaps this is the result of the IRS underfunding,” says Vivian Ho, a professor of health economics at Rice University in Houston who worked on the North Carolina report. “They don’t have the resources to reconsider what information they should be looking for.”
It is imperative that the government collects accurate information from hospitals because the data affects all patients, Ho says.
Federal law prohibits IRS employees from discussing tax information submitted to the agency by individuals or organizations, IRS spokesman Anthony Burke says in response to questions about the effectiveness of government monitoring of hospitals.
Hospitals have long used what they report as losses on Medicare to justify charging higher prices to patients with private insurance. According to a study published in 2021 by Rand Corp., a nonprofit research organization, hospitals across the nation charge private insurers more than they receive from Medicare for the same services.
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In the Affordable Care Act, federal lawmakers mandated that to maintain their tax-exempt status, nonprofit hospitals must conduct a community health needs assessment, maintain a written financial assistance policy, set billing limits, and collection and set a limit on expenses.
In written responses to KHN, the North Carolina Healthcare Association, which lobbies on behalf of hospitals, says hospitals provided $ 1.2 billion in charitable care in 2020. It adds that those community benefits may include many activities. different, such as bridging the gap between how much a procedure costs and how much a provider is reimbursed, volunteering staff and paying for medical care programs.
“Providing assistance to vulnerable populations is part of their non-profit mission,” the statement said.
Atrium spends millions of dollars a year providing assistance to people who need behavioral health care “but don’t have a safety net, not even from the state,” the association says.
Fogleman, the Atrium spokesperson, says an advisory committee has consistently told Congress that Medicare payments don’t cover the full cost of services in most hospitals, including Atrium’s.
In North Carolina, large hospital systems received $ 1.8 billion in tax breaks in 2020, according to the state treasurer’s office.
The same year, lobbyists at North Carolina hospitals reported collectively losing $ 3.1 billion on Medicare, according to the office’s report. Other data shows that they made a profit of $ 87 million.
From 2015 to 2020, the report concludes, 35 hospitals reported Medicare profits each year.
Other hospitals listed in the report did not respond to requests for comment.
The American Hospital Association argues that the federal government reimburses providers significantly less than it costs for Medicare beneficiaries care. Unlike private insurers, the federal government does not negotiate prices with hospitals. Medicare bases the amount it pays on the location of hospitals, labor costs, and other factors.
Melinda Hatton, the association’s general counsel, says in a statement that “underpayments” totaled more than $ 75 billion in 2020. “These figures show that few, if any, hospitals break even and far fewer make a difference. profit based on Medicare payments, “she said.
But Glenn Melnick, a professor of health economics and finance at the University of Southern California who looked at the data from North Carolina, says no one is sure how nonprofit hospitals are calculating their numbers.
“Nonprofit hospital systems are getting so large that we need more transparency,” says Melnick. “Healthcare is incredibly expensive and will bankrupt us if we don’t keep it under control.”
According to a report released this year by the Lown Institute, a think tank in Needham, Massachusetts, nonprofit hospitals receive far more tax breaks than they spend on community investments or charitable care.
Using 2019 IRS data, the researchers found that out of 275 hospital systems across the country, 227 spent less on community investment or charitable care than they did on tax breaks. The deficit was more than $ 18 billion, the report said.
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Leah Kane is a senior consumer protection attorney at the Charlotte Center for Legal Advocacy, a nonprofit organization that provides civil legal assistance to people who cannot afford an attorney. She says her agency receives calls from people who have not been offered charitable care by the hospitals.
He says his group is concerned that hospitals are offering charitable care to uninsured patients but not to other people, such as underinsured, who don’t have the income to pay thousands of dollars for care not covered by their insurance plans.
“People are angry and stressed,” Kane says. “They don’t know what this is [debt] it will mean for their lives ”.
KHN correspondent Aneri Pattani contributed to this report.
KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism on health issues. Together with Policy Analysis and Polling, KHN is one of the three main operational programs of the KFF (Kaiser Family Foundation). KFF is a gifted non-profit organization that provides information on health issues to the nation.