As has been noted in this space, not-for-profit hospitals have recently been spotlighted for practices related to their level of and approach to charity care. Concerns about when and how patients are notified about their eligibility for free or reduced-price care and debt collection practices have raised the profile of the topic, and are leading many in the public, the media, and board rooms to ask questions.

At the same time, increasing attention is being paid to the overall level of medical debt in the country and its disproportionate impact on different communities. Almost one in ten, or 23 million, American adults currently hold medical debt, with Black and other people of color, low-income individuals, and veterans among those most affected. An increasing number of those with health insurance are exposed to medical debt due to the rise in high-deductible plans and between eight and nine percent of Americans remain uninsured. Even as there is growing agreement that getting sick shouldn’t prevent you from renting an apartment or getting a job, and national credit agencies are revising their approach to the treatment of medical debt on credit reports, many Americans are facing financial ruin after illness.

In the face of these trends, and mounting evidence that current practices may not be producing the intended outcomes, hospital and health system leaders should ask themselves three questions:

  1. Do our policies and procedures related to financial assistance, community benefit, charity care, and bad debt comply with current rules and regulations?
  2. Are those policies and procedures being followed?
  3. Is the impact of those policies on our patients and communities equitable?

Understanding the answer to these questions requires organizations to take a purposeful approach to assessing their current situation.

The first step is to review existing policies and procedures related to financial assistance, charity care, and bad debt to confirm that they are up to date and comply with all federal and state requirements. Are those policies and procedures aligned with the organization’s mission and vision? If not, those policies and procedures should be updated.

The second step is to determine whether the organization is adhering to those policies and procedures in the “real world.” To do this, the organization should review accounts identified for charity care, treated as uninsured/self-pay, and/or sent to collections for a selected period of time (six months to a year). Was the treatment of those accounts aligned with the organization’s policies and procedures?

Step three is to review the actual outcomes and impact of these policies and complete an equity analysis of the results. Evaluate patient accounts for the period based on key attributes: demographics (race and ethnicity, age, income, veteran status); insurance status and coverage type (Medicare, Medicaid, uninsured, high-deductible plans, etc.); and balance/bill amount. Were the patients offered charity care or sent to collections treated similarly on the basis of these characteristics? Are the results of the organizations’ policies disproportionately affecting certain communities or patient types? Are the results and effects on these groups consistent with the organization’s mission and vision?

If the answer to any of those questions is no, then a review and update of policies and procedures through those lenses is likely warranted. By going through this process of understanding and evaluating the intent, practices and the de facto results that are being generated, health systems can create more purposeful policies and procedures that have the impact they intend.

As Ken Kaufman recently noted, not-for-profit hospitals are working hard to do the right thing and to make a difference in their communities. However, all organizations experience instances in which real-world execution and effects are imperfect, and unintended consequences can result from even the best formulated policies. Evaluating and understanding those gaps in execution and unintended outcomes may help organizations stay off the front-page of newspapers, but more importantly, they can help organizations live out their missions to help the most vulnerable in their communities.

Meet the Author
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Sarah Wiley

Managing Director
Sarah Wiley is a Managing Director with Kaufman Hall in the firm’s Strategy Practice. Sarah has more than 25 years of healthcare industry experience, working across a spectrum of areas...
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