Tax breaks save nonprofits millions

In return, hospitals are expected to provide benefits to community

aalexander@charlotteobserver.comApril 22, 2012 

  • How generous are they?

    Most hospitals extend charity care on a sliding scale based on federal poverty guidelines, which are annual income of $11,170 for an individual and $23,050 for a family of four.

    The most generous policy is Novant Health’s. The company forgives the entire bill at 300 percent of the poverty guidelines. Sampson Regional Medical Center is at the other end of the spectrum, forgiving the entire bill for income at 125 percent or less of the poverty guidelines.

    Who’s eligible for Medicaid?

    Medicaid pays for health care for the disabled, poor children and their caregivers, and pregnant women.

    A family of four, including parents or caregivers, qualifies for Medicaid with a monthly income of $594 or less.

    Children under 6 qualify for Medicaid if their family of four has a monthly income of $3,725 or less. Children ages 6 to 18 qualify if the monthly income of their family of four is $1,863 or less.

    A pregnant woman qualifies for Medicaid if her family of four (including the unborn child) has a monthly income of $3,446 or less.

    Proving need is no easy task

    At some North Carolina hospitals, qualifying for charity care can be onerous. Among the pieces of information that Carolinas Medical Center-Pineville, south of Charlotte, requested in its 2010 charity care application:

    • Details on all forms of income, including alimony, child support and unemployment.

    • The tax values and loan amounts on all vehicles and real estate owned.

    • The account numbers and amounts deposited in all checking and savings accounts, CDs, stocks and bonds – along with the last deposit in each.

    • The cash value and face values of any life insurance and burial insurance contracts.

    When people are sick or recovering from serious medical problems, providing all that information can be daunting, patient advocates say.

    “We’ve talked with some people who, when confronted with an application like that, said ‘I didn’t even bother applying,’ ” said Mark Rukavina, executive director of the Access Project, a Boston-based nonprofit working to improve access to health care. “It seemed like they were trying to just get assets.”

    Some hospitals make it easier for patients to qualify. Novant, for instance, does “soft” credit checks on uninsured patients to determine whether they’re eligible for charity care.

    Who pays for the patients’ care?

    North Carolina hospitals say they lost $424 million in 2010 treating Medicaid patients, and they also lost money on Medicare and uninsured patients. Therefore, they say they have to charge more to those who are insured. Here’s a look at each group’s share of billed care, according to the N.C. Hospital Association:

    • Medicare, 45%
    • Private insurance, 27%
    • Medicaid, 16%
    • Uninsured, 9%
    • Other groups, 3%

All but eight of North Carolina’s general hospitals are nonprofits.

That means they pay no state or federal income taxes and no real estate taxes on hospital-related properties.

They also get a full rebate from the state for all sales taxes they have paid.

Collectively, those tax breaks save them hundreds of millions of dollars each year.

Contrary to what the name suggests, most nonprofit hospitals bring in more money than they spend. They’re required to put the extra money back into their operations.

In exchange for their tax exemptions, nonprofit hospitals are expected to provide benefits to the communities they serve.

“There’s a high expectation that nonprofits belong to the public,” says Jessica Curtis, who heads Community Catalyst’s Hospital Accountability Project in Boston.

Federal rules don’t spell out precisely what benefits hospitals must provide.

Some states do provide guidelines, but North Carolina does not.

Most nonprofit hospitals – as well as for-profit hospitals – provide charity care to patients who are poor or uninsured.

Both kinds of hospitals also lose money treating Medicaid patients and uninsured patients who don’t pay their bills.

They typically make up for those losses by marking up charges for patients with private health insurance.

Some nonprofit hospitals, such as Carolinas HealthCare System, are also government entities that can issue tax-exempt bonds, a power that allows them to borrow money at low rates.

These public hospitals also have the power of eminent domain, which means they can demand that property owners sell at a fair market value to make room for hospital projects. CHS officials say they’ve never used that power.

For-profit hospitals do pay taxes. They’re expected to generate profits and to return much of that money to shareholders.

Charlotte Observer staff writer Karen Garloch contributed.

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