Special to Iredell Free News
RALEIGH — An analysis by Johns Hopkins Bloomberg School of Public Health and the North Carolina State Health Plan revealed that the majority of North Carolina nonprofit hospitals are not fully honoring their charitable mission. Although nonprofit hospitals reap lucrative tax breaks in exchange for serving the poor, their charity care spending varies wildly and with little accountability.
State Treasurer Dale R. Folwell invited researchers from Johns Hopkins Bloomberg School of Public Health to extend their national study of hospitals’ charity care spending to North Carolina. Together with the North Carolina State Health Plan, these researchers found troubling disparities in North Carolina hospitals’ charity care spending.
Fewer than 25 hospitals exceeded the value of their tax exemption with the amount of their charity care spending in North Carolina. The analysis suggests that North Carolina’s largest nonprofit hospital systems reaped tax breaks worth more than an estimated $1.8 billion in 2019-2020. Across the majority of these systems, charity care spending did not exceed 60 percent of the value of their tax breaks.
“Charity care is the heart of what it means to be a nonprofit hospital,” Folwell said. “Our hospital systems justify overcharging state employees and taxpayers by pointing to their charity care costs. But now we know that is not fully accurate. They are profiting on the backs of sick patients.”
On average, North Carolina hospitals were far more profitable than the national average. But one in five families in North Carolina has medical debt in collections.
“With tax subsidy comes social responsibility,” said Ge Bai, professor at Johns Hopkins Carey Business School and Bloomberg School of Public Health. “Nonprofit hospitals must demonstrate distinctive charitable behaviors to deserve their tax-exempt status and the public’s trust.”
“North Carolina officials should examine the amount of charity care being provided and carefully assess the tax advantages they are providing to nonprofit hospitals,” added Gerard Anderson, professor at Johns Hopkins Bloomberg School of Public Health. “The community is giving the nonprofit hospitals considerable tax breaks. The hospitals should respond by offering community and charity care that is commensurate with their tax advantages.”
Folwell is calling on elected leaders to hold hospitals accountable for how they treat the most vulnerable members of their communities. In North Carolina, there is little oversight and no enforcement of charity care spending.
“It appears that no one is holding hospitals accountable for the way they treat the poor,” Folwell said. “Instead, North Carolina enables bad actors to pocket their tax breaks instead of paying them back to their communities. We must support the hospitals who do serve their communities and require the others to step up.”
Key findings from the study include:
♦ North Carolina’s largest hospital systems benefited from federal, state and local tax exemptions worth more than an estimated $1.8 billion in 2020.
♦ The majority of those large systems’ charity care failed to exceed 60 percent of the worth of their tax exemptions.
♦ Multiple systems inflated their community benefits by claiming controversial “underpayments” from government programs.
♦ There are huge disparities in charity care spending across hospitals.
♦ Even for-profit hospitals operating in the red have provided higher levels of charity care than some profitable nonprofit hospitals in the state.
♦ Some nonprofits dedicated less than 0.5% of their total expenses to charity care, despite enjoying tax breaks equal to an estimated 5.9% of total expenses. For 25 nonprofits, charity care accounted for less than 2% of expenses.
♦ On average, North Carolina’s hospitals were three times more profitable than the national average operating profit margin in 2019.
♦ After nonpatient revenue like investments, North Carolina hospitals enjoyed a 10.91% average excess profit margin — triple the margins in agriculture, higher than Cable TV and almost equal to the margins of the alcoholic beverage industry.
♦ The burden of charity care spending often falls hardest on those hospitals least able to bear it.
♦ In North Carolina, the two most generous hospitals in providing charity care lost money in 2019.
♦ Only four of the state’s 15 most profitable hospitals delivered enough charity care to exceed the value of their tax exemption. All of these hospitals enjoyed profit margins greater than 20%, with six hospitals surpassing 30% margins in 2019.
♦ No state official currently actively enforces charity care spending and tax exemptions. There is little active oversight and no enforcement.
♦ Other states require hospitals to equal the value of their tax exemption with charity care spending.
Read the report HERE.