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 greatest “community benefit ” which he provided that year.
Like other nonprofit hospitals across the country, Atrium records losses on the federal health insurance program for the elderly and disabled as a community benefit to meet legal requirements for relief. federal, state and local taxes.
But for the same year that Atrium’s website says it recorded the $640 million Medicare loss, the hospital system claimed $82 million in benefits from Medicare and an additional $37.2 million from Medicare Advantage in a financial document required by the federal government, 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 treating Medicare beneficiaries reflects how heavily the federal government regulates how hospitals calculate their 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 tax exemptions worth billions of dollars a year is not light.
“There is no transparency, no accountability, and no oversight,” said North Carolina State Treasurer Dale Folwell, a Republican who is critical of the business practices of Atrium and other hospitals. “With the hospital cartel, it’s always profit that takes precedence over people.”
Atrium did not make any officials available for interview. In a statement, spokesman Dan Fogleman said the hospital system reported $85 million in unpaid Medicare patient services in its latest cost report to the Centers for Medicare & Medicaid Services.
“And, as labor, equipment, supplies and inflation continue to drive up health care costs, the gap between Medicare payments and the costs incurred to provide health care quality we provide has increased in the post-Covid inflationary environment,” Fogleman said.
More than half of hospitals in the United States are nonprofit or government-run. The federal government requires them to operate emergency rooms that are open to all patients regardless of their ability to pay, to accept Medicare-insured patients, and to use excess funds to improve facilities and patient care to demonstrate that they give back to the community.
Even though their tax-exempt status is based on charitable acts, the nonprofit hospital systems had more than $283 billion in assets from stocks, hedge funds, venture capital, capital -investment and other investments in 2019, according to a 2021 KHN analysis of IRS filings.
Hospital systems used most of it to generate revenue and only classified $19 billion, or about 7% of their total investments, as primarily spent on their nonprofit missions, according to the analysis.
New report from North Carolina describes how hospitals’ self-reported Medicare profit margins differed from the financial picture they provided to the public through IRS records, annual reports and benefit documents community.
Although most hospitals complained of significant Medicare losses, analysis of data from more than 100 North Carolina hospitals found that most made Medicare profits from 2015 to 2020.
IRS audits are supposed to protect the public from fraud and abuse, but the system has major flaws, health economists and federal watchdog groups have said.
Federal law requires the IRS to review community interest activities at least once every three years. Yet the agency lacked “a well-documented process to ensure these activities are reviewed,” said a 2020 report from the Government Accountability Office.
In response to GAO recommendations, IRS leaders updated the system last year to help ensure the agency could identify cases in which hospitals were suspected of not meeting 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 could not determine whether they were related to community benefits. , said the GAO.
The tax agency does not have the authority to determine what activities hospitals must perform to comply with the law, the GAO said. An analysis of IRS data found that 30 hospitals reported no spending on community benefits in 2016, “indicating potential noncompliance,” the report said.
“It may be the result of IRS underfunding,” said Vivian Ho, a health economics professor 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 essential that the government collect accurate information from hospitals because the data relates to all patients, Ho said.
Federal law prohibits IRS employees from discussing tax information submitted to the agency by individuals or organizations, IRS spokesman Anthony Burke said in response to questions about the effectiveness with which the government monitors 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 2021 study by Rand Corp., a nonprofit research organization, hospitals across the country charge private insurers more than they receive from Medicare for the same services.
In the Affordable Care Act, federal lawmakers required that to maintain tax-exempt status, nonprofit hospitals must conduct a community health needs assessment, maintain a written financial assistance policy, set billing and collection limits and setting a limit on fees.
In written responses to KHN, the North Carolina Healthcare Association, which lobbies on behalf of hospitals, said hospitals provided $1.2 billion in charitable care in 2020. It added that these community benefits can include many different activities, such as covering the gap between how much a procedure costs and what a provider is reimbursed for, staff volunteering, and paying for medical outreach programs.
“Providing care to vulnerable populations is part of their nonprofit mission,” the statement read.
Atrium spends millions of dollars a year providing care for people who need behavioral health care “but don’t have a safety net — even from the state,” the association said.
Fogleman, the spokesman for Atrium, said an advisory commission has consistently told Congress that Medicare payments do not cover the full cost of services at most hospitals, including Atrium’s.
In North Carolina, large hospital systems received $1.8 billion in tax relief in 2020, according to the state treasurer’s office.
That same year, North Carolina hospital lobbyists said they collectively lost $3.1 billion on Medicare, according to the bureau’s report. Other data shows that they made a profit of $87 million.
From 2015 to 2020, the report concludes, 35 hospitals saw Medicare benefits 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 far less than it costs to care for Medicare beneficiaries. Unlike private insurers, the federal government does not negotiate prices with hospitals. Medicare bases the amount it pays on hospital locations, labor costs, and other factors.
Melinda Hatton, the association’s general counsel, said in a statement that “underpayments” amounted to more than $75 billion in 2020. “These data show that few, if any, hospitals make even less benefit based on Medicare payments.” she says.
But Glenn Melnick, a professor of health economics and finance at the University of Southern California who reviewed the data from North Carolina, said no one was sure how the nonprofit hospitals calculated their numbers. .
“Not-for-profit hospital systems are becoming so important that we need greater transparency,” Melnick said. “Health care is incredibly expensive, and it will bankrupt us if we don’t get it under control.”
Nonprofit hospitals receive far more tax breaks than they spend on community investments or charitable care, according to a report released this year by the Lown Institute, a Needham, Mass. think tank.
Using 2019 data from the IRS, researchers found that of 275 hospital systems across the country, 227 spent less on community investments or charitable care than they got in tax breaks. The deficit totaled more than $18 billion, according to the report.
Leah Kane is a senior consumer protection attorney at the Charlotte Center for Legal Advocacy, a nonprofit that provides civil legal assistance to people who cannot afford an attorney. She said her agency receives calls from people who have not received charity care from hospitals.
She said her group is concerned that hospitals provide charity care to uninsured patients but not to others, such as the underinsured, who lack the income to pay thousands of dollars for treatments. not covered by their insurance plans.
“People are angry and stressed out,” Kane said. “They don’t know what it is [debt] will mean for their lives.”
KHN correspondent Aneri Pattani contributed to this report.
This article was reprinted from khn.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health policy research organization not affiliated with Kaiser Permanente.
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