Demystifying Medicine One Month at a Time

Whither Charity Care?

The Illinois Supreme Court issued a fascinating ruling last week, upholding a decision to strip a downstate non-profit hospital chain of its tax-exempt status for failing to provide sufficient charity care to its patients.

Provena Covenant Medical Center is a chain of six Catholic hospitals. Provena will now in effect owe millions of dollars in property taxes having lost said tax-exempt status. USA Today ran both a story and an editorial on the decision. From the story:

The justices found that Provena Covenant is not a charitable organization because the vast bulk of its income comes from charging for medical services, not from charitable donations; because it didn’t dispense charity care to all who needed and applied for it; and because it placed obstacles in the way of those seeking charity by not advertising its charity program while aggressively pursuing unpaid bills.

The justices also found the hospital’s campus was not used for charitable purposes because both the number of patients and the dollar value of the free care those patients received were minuscule compared to the hospital’s revenues and patient population.

I will leave it to my legal experts to tell us if this is unprecedented or not, but the implication for other non-profit hospitals around the state is clear: Providing less than one percent of revenue in free or reduced-fee charitable care will no longer meet the standard .

The decision does not set any standard threshold for charitable care, leaving it to lawmakers (perhaps) to figure out what constitutes a just amount.

I previously posted on some of the mysteries inherent in hospital finances, using the analogy of “Blue plans” and “Red plans” to represent private insurances (Aetna, Cigna, Blue Cross Plans) vs. public insurance (taxpayer-financed plans like Medicare and Medicaid). Rest assured though, loyal GlassHospital readers, that whether you have a Blue plan or a Red plan, it’s vastly superior to having no plan.

The uninsured, estimated at two million in Illinois and forty-eight million in the U.S., routinely avoid interacting with the MIC (Medical-Industrial Complex) because when they do, huge bills usually follow. And unlike the negotiated rates secured by Medicare and private insurances, uninsured folks ironically are billed at full rates. Hence the need for charity care–those that can least afford to pay full freight are most often asked to do so.

Dear readers, did you know that illness and injury cause a plurality of personal bankruptcies in the U.S.? You might find it unsurprising that uninsured individuals who amass large medical debts are pushed into bankruptcy. But what if I told you that three-quarters of those declaring bankruptcy due to medical debt had health insurance at the onset of their illnesses?

You can see where I’m going with this: You have insurance, you get sick; no problem. You stay sick or have chronic illness, you lose your job, you therefore lose your insurance, and now you’re uninsured.

If you’re uninsured, you’re overwhelmingly likely not to have a primary care doctor, or what we now call a medical home.  You might go the very type of ER at a hospital involved in this lawsuit: “A Catholic hospital will surely show mercy and compassion,” you reason. It might feel unseemly to ask about charity care up front. But as this case demonstrates, if you’re uninsured in the United States, it behooves you to ask proactively about a hospital’s charity care policies.

You may not like the Health Care Reform package out there getting voted on as I publish this. From the Right it’s another example of the federal government overstepping its bounds, at great expense to the nation’s treasury. From the Left, the package doesn’t do nearly enough in terms of coverage or reigning in profligate pharmaceutical firms or health insurers.

But if it doesn’t pass, I truly fear for our nation’s future.


editor’s note: The photo attached of course shows the U.S. Supreme Court, not the Illinois Supreme Court. I chose it because I think this is an issue of national import (i.e. the charitable obligations of non-profit hospitals), not unique to Illinois. I also really liked the crane in the back of the photo–indicating that interpreting our nation’s laws is a work-in-progress [or perhaps in need of some reconstruction?].


  1. JZ

    Fascinating case — I look forward to reading the opinion. I’m watching the debate on the nat’l health care bill on C-SPAN as I type. Amazing how much of the debate is about process, and how little the representatives on both sides seem to know the process — they’re reading from prepared texts to joust over such things.

    Did you think the Medicare Part D prescription drug coverage passed by W (and now said to be a huge hit on the deficit) was a good idea, or was it merely a gift to the pharma industry?

  2. Samson Blackwell

    For me the crane in the photo exemplified our unwillingness to address deep structural issues, instead focusing time and resources on repairing the facade—perpetuating a lie by maintaining an illusion.

  3. PeterW

    The study that purported to show that the plurality of bankruptcies are caused by medical fees is suspect at best; I have never seen a study with such a high ratio of political impact to substantive validity.

    See here:

    • glasshospital

      Peter: I agree with you that it has had a big impact. As to its validity, the methodology and results (not to mention the publication source) were I think fairly novel and combined to broaden the impact of the study.

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