Report Calls Out N.C. Hospitals to Fix Medical Debt and Charity Care Options

Almost one-third of the total amount of bad debt incurred at hospitals in North Carolina is attributable to individuals who would have otherwise qualified for charity care — three times higher than the national average, according to a report that has been released by the state’s Office of the Treasurer. The report was quickly criticized by the state hospital association, who accused the Treasurer of “demonizing hospitals” while also saying the report was “distracting, disrespectful, and potentially dangerous.”

The amount of bad debt attributable to patients who were actually eligible for charity care spiked during the early months of the pandemic, which, if extrapolated, could “fuel enormous disparities,” according to the report.

On average, one-in-five families in North Carolina has a medical debt in collections, and that figure rises to one-in-two when looking at low-income and minority families in the state’s rural communities.

Nonprofit hospitals in North Carolina granted nearly $150 million in charity care in 2019, but that figure is an “underestimate” because it represents the charity care offerings at only 16% of the state’s hospitals. But some hospitals reported billing as much as 80% of their bad debt to “disadvantaged” patients who were likely eligible for charity care in 2019 and 2020.

The report calls on the state’s Attorney General to step in and protect patients who should be receiving charity care, but are not. The report also criticizes the Internal Revenue Service for not setting charity care benchmarks and for not demonstrating “that it is consistently reviewing hospitals’ community benefits.”

Concluded the report: “Without standards and accountability, it has become difficult to tell nonprofit hospitals apart from for-profits. Nonprofit hospitals billed millions of dollars to impoverished patients who should have been eligible for charity care under their own policies. Nonprofit status rarely guarantees sufficient charity care spending — but it can be associated with huge executive pay and profits. North Carolina policymakers should take action to protect patients and taxpayers. The state is in desperate need of better oversight and stronger accountability. The disparities between hospitals’ charity care and bad debt prove the need for a benchmark level of charity care spending.”