Half of U.S. hospitals spent 1.4% or less of their total operating expenses on charity care, according to a recent analysis from the Kaiser Family Foundation.
That portion of spending “varied substantially” across the hospitals, with 8% of hospitals spending 0.1% of their operating expenses or lower as 9% of hospitals spent 7% or more of their expenses on financial assistance, the group found.
Just under a third of hospitals landed somewhere between 1% and 2% of their operating expenses, KFF wrote, while the mean average across all hospitals was 2.6%.
KFF credited the substantial differences between hospitals to “differences in hospitals’ missions and business practices; the need for charity care among patients; and federal, state and local policy and regulation.”
To the last point, the group highlighted broad flexibilities—as well as weak oversight—in federal and government’s requirements for nonprofit hospitals to retain their tax-exempt status or other funding benefits.
“Federal regulations do not currently define or set minimum standards for hospitals to determine who is eligible for charity care or the level of assistance to be provided,” KFF wrote. “A 2020 Government Accountability Office (GAO) report also raised questions about whether requirements to provide sufficient community benefits, including charity care, are being adequately enforced.”
Just over half of states have policies in place requiring some or all hospitals to expand charity care to certain patient groups, KFF wrote. Many recent policy updates regarding charity care requirements have primarily been concentrated at the state level, with the report citing updates in California, Washington, Colorado and Illinois all going into effect since 2021.
However, outside of a handful of recent examples, “there is little information about the effectiveness of these regulations or the extent to which they are enforced,” the group wrote.
KFF’s analysis pulled from the 2019-2020 RAND Hospital Data, a processed body of annual cost report data Medicare-participating hospitals are required to report to the Healthcare Cost Report Information System. The analysis sample included 4,279 hospitals from throughout the country.
Also cited in KFF’s brief were recent reports that for-profit hospitals devote a similar or larger share of their operating expenses to charity care, potentially for a favorable tax deduction.
Another analysis from the Lown Institute earlier this year concluded that nonprofit hospital systems’ charity care lagged their tax benefit by $18.4 billion in 2019—though the American Hospital Association contested the methodology of those calculations and later released its own 2019 tax year reports touting $9 in community benefit for every dollar hospitals didn’t pay in taxes.
In a September study, researchers found that hospitals’ charity care policies were adjusted to be more generous from 2019 to 2021. Several months of financial struggles and little relief on the horizon, however, “may make it harder for hospitals to maintain current levels of charity care,” KFF warned.