“Hospital Uncompensated Care Issues”

1. “Hospital Uncompensated Care Issues” Paul A. Hattis MD, J.D., M.P.H. Acting Concentration Head in Health Policy and Management Tufts University Medical School

2. Background on the term ”Community Benefits” • Origins are from the Internal Revenue service Code rulings interpreting eligibility for tax exemption under Section 501(c) (3) • In 1969, IRS promulgated Revenue Ruling 69-545, replacing an earlier revenue ruling that was more focused on provision of free care • Though “community benefits” has a broader notion than just uncompensated care, a February, 2001 memorandum to IRS field agents suggests that charity care is still tied to the community benefits concept. Paul Hattis

3. State Context • States determine requirements for legal non-profit corporation • 14 states have passed laws,regulations, or guidelines that relate to community benefits • Laws usually directed to hospitals, but in some states include HMOs or other health organizations Paul Hattis

4. State Activity Concerning Hospital Community Benefits. • Usually state legal focus arises after some egregious behavior by a non-profit hospital or need for tax dollars to support local government • Generally, community benefit laws, regulations or guidelines are primarily focused on community benefits reporting to state government. • Texas and Pennsylvania, are the only two states with community benefit benchmarks. In both cases, uncompensated care is included as one of the alternative benchmarks to meet the legal requirements for charitable status. Paul Hattis

5. Hospital Community Benefits in Massachusetts • Attorney General issues guidelines for non-profit hospitals (1994) and all HMOs (1998) • Guidelines require community benefits reporting board actions, community benefits plans and community engagement process • Newest twist: all reports are now on the Web • In Massachusetts, the free care pool mechanism that has a greater impact on the availability of charity care. Paul Hattis

6. What Most Hospitals are Doing Under the Aegis of Their Community Benefit Obligations Where most hospitals direct their efforts…. • Uncompensated care or other services for the poor and uninsured • Public health programs • Not a systematic, planned approach Paul Hattis

7. The Connection Between These Community Benefit Obligations of Hospitals and the Provision of Uncompensated Care • Not entirely clear (IRS memo makes federal expectations more murky; Texas and Penn. Clearer about what needs to be included) • As long as substantial numbers of uninsured, there should be a connection between the two • Key element for improvement: uncompensated care should be part of a more planned community approach by the hospital Paul Hattis

8. Massachusetts Free Care Pool • A state controlled pool to reimburse hospitals for a portion of costs tied to uncompensated care to qualified patients. Currently, $315 million pool comes from near equal contributions of hospitals, insurers and state respectively each year • Distributed to hospitals based on formula that is tied to statewide and hospital specific uncompensated care levels—reducing some of the unequal burdens around provision of uncompensated care. • Currently, hospitals need to make-up pool shortfall--likely to run-up to over $200 million in the next year Paul Hattis

9. CB Obligations for for-profit or governmental hospitals • For for-profits, usually not except in cases where explicit agreement has been reached after a conversion to maintain prior levels of a non-profit provider. • However, for marketing and other reasons for-profits often do provide some levels of community benefit (as they do with UC). • Governmental—usually there is no formal requirement—yet tied to their mission Paul Hattis

10. Conversions • Deals with state overseers are often quite specific about continuing obligations for uncompensated care for a number of years. • In addition, conversion foundations set-up after the conversion use some of their proceeds to pay for uncompensated care or community benefit activities in future years Paul Hattis

11. Other governmental programs affecting levels of Uncompensated Care • Increasingly, some DON obligations tied to capital projects or opening of new services can include commitments around access for the poor or community benefit obligations • State-specific or county indigent care programs Paul Hattis

12. Where is the Community Benefits Movement going? • Ultimate aim is population health improvement—not just around medical/hospital care access • Currently, there concerns are rising over reductions in hospital commitments towards community benefit across the country • CB relationship to UC, a function of whether we make headway on the number of uninsured in the nation or not Paul Hattis