Treasurer Folwell criticizes hospitals over charity care spending

Published 9:49 am Thursday, October 28, 2021

State Treasurer Dale Folwell said Wednesday that the majority of North Carolina nonprofit hospitals are “not fully honoring their charitable mission” by not generating enough charity care spending to exceed 60% of the value of their tax breaks they receive for offering those services.

Folwell referenced an analysis by Johns Hopkins Bloomberg School of Public Health and the North Carolina State Health Plan. Folwell invited the researchers to extend their national study of hospitals’ charity care spending to North Carolina.

“Our analysis suggests that North Carolina’s largest nonprofit hospital systems reaped tax breaks worth more than an estimated $1.8 billion in 2019-2020,” a release from Folwell’s office reads. “Across the majority of these systems, charity care spending did not exceed 60% of the value of their tax breaks.”

Vidant Health is one of the systems mentioned in the report. Vidant’s estimated tax exemption for 2019-20 was $148 million, the report says, and the health system spent approximately $74.2 million on charity care — which is roughly half of the estimated tax exemption.

“Vidant Health serves a vast, underserved region of more than 1.4 million people, many of whom face high rates of chronic diseases, lack access to care and are uninsured,” a statement from the hospital system reads. “As a mission-driven not-for-profit health system, Vidant treats all patients regardless of ability to pay and prides itself on providing charity care to community members in-need. With a reliance on a high government payor mix (Medicare, Medicaid), Vidant operates with a thin margin and any profits realized are reallocated to create access to quality care, hire high-quality doctors and nurses, and create health infrastructure needed to support the communities we are proud to serve.”

The researchers said they drew from bond reports and financial statements while conducting their analysis, but because not all hospitals published bond reports, they relied on 990 tax filings to calculate Vidant’s financials.

The researchers include some recommendations in their analysis: “Policymakers could consider requiring certain levels of charity care spending as well as limiting or even rescinding the nonprofit status of hospitals with insufficient community benefits. There is precedent for states interested in improving nonprofit hospitals’ accountability. Other states have stepped in to enforce the IRS’s expectation that hospitals equal their tax exemption with charity care spending.”

The Associated Press reported that the North Carolina Healthcare Association, which represents for-profit and nonprofit hospitals, said the report didn’t show several of the other benefits hospitals provide, including “research, health worker training, in-kind donations and preparations for local disasters.”

“North Carolina’s nonprofit hospitals annually submit audits to state and federal tax regulators who determine each year that hospitals meet their tax status obligations,” the association said in a statement to the AP.

“Charity care is the heart of what it means to be a nonprofit hospital,” Folwell said. “Our hospital systems justify overcharging state employees and taxpayers by pointing to their charity care costs. But now we know that is not fully accurate. They are profiting on the backs of sick patients.”

The AP noted that Folwell, a Republican, has criticized “large, ever-consolidating hospital systems for what he calls excessive and opaque pricing while he’s working to control plan costs.”

Vidant Health operates nine hospitals, a group that includes the flagship Vidant Medical Center in Greenville as well as eight community hospitals, including Vidant Beaufort Hospital in Washington.