AHA rebukes 'flawed' study on hospital finances

The American Hospital Association called a Health Affairs study critical of how nonprofit hospitals managed finances before the pandemic "flawed" and said it is "of no real value to policymakers and other stakeholders" in a June 7 blog post.

The Health Affairs study, funded by Arnold Ventures, analyzed data from 2,219 nonprofit hospitals and found cash reserves increased 68 percent on average from 2012 to 2019 while charity care spending dropped 4.4 percent. For-profit hospitals, meanwhile, saw a 78 percent increase in cash reserves while charity care dropped 175 percent.

However, the blog post, written by Melinda Hatton, the AHA's general counsel and secretary, said study authors did not account for broad coverage trends affecting how financial assistance is measured. Study authors examined data from the National Academy for State Health Policy's cost tool methodology, which the AHA said inflates hospital profits because it does not include all costs.

The tool also does not recognize that CMS covers reimbursement only for 65 percent of allowable bad debt; the remaining 35 percent is an unrecognized loss.

Ms. Hatton also noted the Health Affairs analysis does not account for the drop in nonelderly uninsured Americans during the study period, 2012 to 2019, due to the Affordable Care Act. She also said the report does not have a mechanism to measure community benefits provided by nonprofit hospitals, such as social determinants of health and wellness initiatives and underwriting medical research.

The cost of providing emergency care, essential health services and health professional education is also missing from the Health Affairs report, she wrote. EY and the AHA found hospitals provide $9 of community benefits for every dollar in federal tax exemption received, which totaled $110 billion in 2019.

"Despite the repeated efforts by some organizations to claim otherwise, it is clear that by examining the facts that tax exempt hospitals and health systems, regardless of size and location, provide a full range of benefits to their patients and communities in exchange for that privilege," Ms. Hatton wrote. "In total, all hospitals do far more than any other sector of the healthcare field for those in need and to advance health for all."

Ms. Hatton also pointed to Kaufman Hall's most recent "National Hospital Flash Report" — which shows the median year-to-date operating margins at zero percent — notes inflation, declining hospital volume and increased length of stay are all factors affecting the financial situations of nonprofit hospitals.

 

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