Nonprofit hospitals not proving enough charity required for tax-exempt status, Sanders says

Sen. Bernie Sanders (I-Vt.), chair of the Senate Committee on Health, Education, Labor and Pensions (HELP), blasted nonprofit hospitals in report issued on Tuesday for charging patients large fees despite the expectation that they provide medical care at free or reduced costs.

In his report, Sanders cited the case of a Memphis woman in 2007 who received a bill of $12,019 following a procedure, which she was not able to pay with her wages at that time. The bill subsequently accrued interest and was sent to collections, and the woman was left with a bill of more than $33,000.

Sanders lamented how stories like this are “far too common.”

“Nearly half of American hospitals are non-profits, a status that affords them an incredible benefit: exemption from federal, state, and local taxation,” he noted.

“In return for the tax benefits, the federal government requires those hospitals to operate for the public benefit by providing a set of community benefits, which includes ensuring low-income individuals receive medical care for free or at significantly reduced rates — a practice known as ‘charity care.’”

Under federal law, hospitals are permitted to establish their own charity care policies and criteria, leading to variations in who can receive financial assistance. In a KFF report issued last year, the organization noted that hospitals reported $28 billion in charity care costs in 2019.

In 2020, charity care costs represented 2.6 percent of operating expenses on average. Nonprofit hospitals are required to provide some degree of charity care or other community benefits in order to retain their tax exempt status. On the lower end of the spectrum, charity care costs represented 0.1 percent of operating costs or less for some hospitals.

The Vermont senator criticized hospitals for making information on their charity care programs difficult to access while providing substantial compensation to their top executives. He cited studies that indicated most nonprofit hospitals spend less on charity care than the amount of tax benefits they received.

Sanders called on Congress and the IRS to hold nonprofit hospitals accountable for providing “accessible health care in their communities.” He urged Congress to ensure that these hospitals are providing charity care that is “consistent” with the level of tax breaks they receive as well as establish “enforceable standards” for hospital financial assistance programs.

Without directly citing Sanders’s report on Tuesday, the American Hospital Association (AHA) issued a press release in defense of tax-exempt hospitals. Citing a new analysis it had conducted, the AHA stated that “tax-exempt hospitals provided more than $129 billion in total benefits to their communities in 2020 alone.”

“Hospitals are committed to ensuring access to care is available to all who need it, regardless of ability to pay, while also working to address the greatest health challenges within specific communities, particularly medically underserved, low-income and minority populations,” the group said in its statement.

“As part of that commitment, hospitals strive to assure low-income patients have regular access to care through programs like Medicaid, which helps provide the routine and preventative care so important for health and wellness.”

—Updated at 2:24 p.m.

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