'In Sheep's Clothing' report criticizes US hospitals' debt collection

More legislative action is needed in the U.S. to prevent Americans from being pushed into medical debt from nonprofit hospitals' "aggressive practices," according to a June 15 report from Human Rights Watch. 

The group is an independent organization that publishes research and advocates for international human rights. Their work has brought attention to war crimes, political corruption and more. Their latest report on the U.S. healthcare system, titled "In Sheep's Clothing: United States' Poorly Regulated Nonprofit Hospitals Undermine Healthcare Access," takes aim at the national model of subsidizing privately operated hospitals through tax exemptions in exchange for providing charity care.

"The US heavily relies on these privately operated nonprofit hospitals' charity care to increase access to healthcare for patients who cannot pay for hospital services," the report's author, Matt McConnell, a researcher in the Human Rights Watch division of economic justice and rights, wrote. "But given the high prevalence of hospital-related medical debt in the U.S., this system is clearly not working." 

The report draws on a national survey from Kaiser Family Foundation that found 41 percent of adults in the U.S. had some kind of outstanding medical or dental debt in 2022, and 24 percent were either past due or unable to pay healthcare pills at the time they were surveyed. Hospital services are a significant contributor to the country's medical debt crisis, largely due to the wide discretion nonprofit hospitals have over how much they allot to charity care and determining who qualifies for assistance, Mr. McConnell said in the report. 

"Like wolves in sheep's clothing, unscrupulous nonprofit 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," he said. 

The report lays out 17 recommendations for different stakeholders including federal legislators, the IRS, state legislators, the consumer financial protection bureau, CMS and nonprofit hospitals. Among the recommendations are passing federal legislation that ensures nonprofit hospitals provide at least the same amount of charity care to the subsidies they receive, expanding coverage for Medicaid and Medicare, and taking enforcement actions against debt collectors when they have not fully informed and screened patients for financial assistance. 

The AHA and Catholic Health Association criticized the report in a June 15 statement, saying it's based on "research funded by an organization with a track record of bias," and that it does not provide an accurate representation of the community benefits tax-exempt hopsitals provide. The groups noted tax-exempt hospitals provided more than $110 billion in "total benefits to communities in 2019 alone," and that these benefts accounted for nearly 14 percent of hospitals' total expenses. 

In response to the report, Melinda Hatton, general counsel at the American Hospital Association, said in written comments to KFF Health News, "As a field, hospitals provide more benefit to their communities than any other sector in healthcare."

Access the full report here.

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