CHARLOTTE – Most of North Carolina’s hospitals spend less than 3 percent of their total budgets on charity care at the same time profits and pay for their top executives are increasing.
About a third of the state’s hospitals spend less than 2 percent of their budgets forgiving all or some of patients’ bills, with most of those in rural areas where medical centers struggle to turn a profit, according to a series of stories in The Charlotte Observer and The News & Observer of Raleigh (http://bit.ly/J0sZaH).
North Carolina has no rules on how much charity care a nonprofit hospital must provide, meaning a facility that sets aside almost no money for charity care gets the same tax breaks as a nonprofit hospital such as Thomasville Medical Center, which spent about 13 percent of its budget forgiving bills for the poor.
“I feel like the hospitals are breaking the contract they made,” said Adam Searing, director of the North Carolina Justice Center’s Health Access Coalition.
The newspapers estimate that most of the nonprofit hospitals in the state are also getting more back in tax breaks than they spend on charity care. Using tax figures from large for-profit hospital systems, they estimate nonprofit hospitals without the breaks would have to pay about 4.4 percent of their expenses in taxes.
“It’s almost a blatant disregard for the needs of the poor,” said Jessica Curtis, director of Community Catalyst’s Hospital Accountability Project in Boston, which works to improve access to health care.
But many of the hospitals with the lowest rates of charity care are struggling in poor areas themselves. Vidant Duplin hospital spent about $245,000 on charity care in 2010 — less than 1 percent of its budget. The hospital also reported losing more than $400,000 that same year.
The CEO of the Duplin County hospital said his facility helps the poor in more indirect ways. In 2010, the hospital reported losing about $1.1 million on Medicaid patients and about $4.3 million on patients who never paid their bills. The hospital also plans to improve efforts to let uninsured patients know about their charity care policy.
“I do believe our charity care could be a lot higher,” said Lucinda Crawford, Vidant Duplin’s vice president of financial services. “It’s sometimes a challenge for folks to bring in financial information and to follow up on a charity care application.”
The newspapers also found healthy profits among many North Carolina hospitals, which averaged a profit margin of 9.3 percent in 2010, according to data from the American Hospital Association. That margin is 2 percentage points more than the national average and an increase from a decade ago when the economy was stronger.
But hospital officials said they are simply saving money so they can survive what they expect are big changes in the health care system.
“The trajectory that we are on in health care spending is not sustainable,” said Michael Tarwater, CEO of Carolinas HealthCare.
North Carolina has no laws limiting how much money nonprofit hospitals can make, nor how much they pay their executives.
The newspapers report 25 nonprofit hospital executives made total compensation exceeding $1 million in 2010 or 2011. Most worked for Novant Health or Carolinas HealthCare System in the Charlotte area.
Hospital systems with high profits are making a choice, deciding to spend excessively on new buildings, new services and high salaries instead of making health care affordable, said Kevin Schulman, director of Duke University’s Center for the Study of Health Management.
“They have more margin than meets the mission,” Schulman said. “What are they going to do with all the money they made? They can’t give it to shareholders. They put it all into infrastructure. . It leads the managers of the hospitals to build an ever more expensive delivery system.”