California's nonprofit hospitals are providing significantly less charity care, report says

The amount of charity care provided by California's nonprofit hospitals as a percentage of operating expenses declined 34 percent from 2011 through 2016, according to an analysis issued by the California Nurses Association.

For the analysis, the CNA examined data on charity care and bad debt provided by about 170 California nonprofit general acute care hospitals to the California Office of Statewide Health Planning and Development. Because hospitals that are part of Oakland, Calif.-based Kaiser Permanente report only limited data to the health planning office, CNA used federal tax Form 990 to examine Kaiser Permanente charity care data. It examined net income for all California nonprofit general acute care hospitals using data from the health planning office, and for Kaiser Permanente hospitals using IRS Form 990.

The analysis found charity care provided by California's nonprofit hospitals, as a percentage of operating expenses, declined 42 percent from 2013, the year California approved expanding Medicaid under the ACA, through 2016. It found a 34 percent decline from 2011 through 2016.

Specifically, nonprofit general acute care hospitals provided $651 million of charity care in 2016 compared to $985 million in 2011, the analysis found. San Francisco-based Dignity Health, one of the state's largest nonprofit health systems, saw charity care decline 34.6 percent from 2011 through 2016, according to the analysis. Other declines included Los Angeles-based Cedars-Sinai Medical Center (76.3 percent); Kaiser Permanente (46.8 percent); San Diego-based Scripps Health (31.1 percent); and Sacramento-based Sutter Health (47.1 percent).

At the same time, nonprofit general acute care hospitals reported net income of $4.4 billion in 2011 and $3.4 billion in 2016, according to the analysis. They reported $51.2 billion and $69.5 billion of operating expenses in those years, respectively.

Additionally, nonprofit general acute care hospitals reported $696 million of bad debt in 2011 and $929 million of bad debt in 2013, compared to $459 million in 2016.

Hospital industry leaders attribute the charity care decline to the ACA, which allowed millions of Californians to gain free and reduced-cost coverage, reports the Los Angeles Times. They said hospitals continue to offer community benefits, including farmers markets, as well as STD prevention, nutrition and health education classes.

"Hospitals can provide as much charity care as a community requires, and hospitals don't turn off charity care," Anne McLeod, senior vice president of health policy and innovation at the California Hospital Association, told the LA Times. "We absolutely celebrate the fact that less charity care is required in the community. That means that California has demonstrated itself as a leader in implementing healthcare coverage under the Affordable Care Act using all of the tools available to it."

But CNA Co-President Deborah Burger, RN, argued against this reasoning in a statement.

She said: "None of those [community benefit] programs compensate for the hospital care patients need who can't afford the increasingly high costs of essential medical care when they are sick or injured. The decline in charity care, and the escalating out-of-pocket costs, put lives, health and security, in jeopardy."

The union released the analysis after California Attorney General Xavier Becerra recently rejected three California hospitals' appeals to be exempted from charity care obligations. While nonprofit hospitals must provide charity care to maintain their tax-exempt status, California does not specify a required amount, according to the LA Times.

Various healthcare organizations, including Kaiser Permanente, Cedars-Sinai and others, challenged the union's analysis, with some citing what they perceive as accuracy issues or a limited view of overall community impact.

John Nelson, vice president of communications for Kaiser Permanente, called the analysis "wrong" in a statement to Becker's Hospital Review.

"The union chose to exclude a significant amount of the charity care our integrated system provides people in need. Kaiser Permanente provides a variety of charity care benefits, ranging from emergency care, urgent care, medical office visits and pharmacy benefits," he said. "The hospital services (emergency department and inpatient) are reported on the Kaiser Foundation Hospitals Form 990 (our federal tax return).  There is no place on the Hospital 990 to report the nonhospital services (medical office visits & pharmacy, for example), so we report that total on our Kaiser Foundation Health Plan Form 990. Overall, the amounts we are devoting to charity care across our integrated system are increasing: In 2011 we spent $249 million. Last year, we spent $379 million, a 52 percent increase. Our spending on charity care is increasing despite the implementation of the ACA. Although there are fewer uninsured people, there are more low-income patients that face real challenges when confronted with the high out of pocket costs (copays & deductibles) associated with their healthcare."

Cedars-Sinai spokesperson Sally Stewart said in a statement to the LA Times the analysis "is not reflective of the true picture of our charitable mission at Cedars-Sinai, where our nurses, physicians and staff members remain deeply committed to providing the highest quality of accessible and affordable healthcare to everyone in our community, especially those in need."

Read the full LA Times report, including additional response to the analysis, here.


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