Hospitals Said They Lost Money on Medicare Patients. Some Made Millions, a State Report Finds.

CHARLOTTE, N.C. — Atrium Well being, the most important hospital system in North Carolina, has declared publicly that in 2019 it offered $640 million in providers to Medicare sufferers that had been by no means paid for, by far the most important “group profit” it offered that yr.

Like different nonprofit hospitals across the nation, Atrium logs losses on the federal medical insurance program for seniors and folks with disabilities as a group profit to fulfill authorized necessities for federal, state, and native tax breaks.

However for a similar yr that Atrium’s web site says it recorded the $640 million loss on Medicare, the hospital system claimed $82 million in earnings from Medicare and an extra $37.2 million in earnings from Medicare Benefit in a federally required monetary doc, in line with a report launched Oct. 25 by the North Carolina state treasurer’s workplace.

The shortage of readability about whether or not well being programs like Atrium acquire or lose cash treating Medicare recipients displays how loosely the federal authorities regulates the best way hospitals calculate their group advantages.

Consequently, the evaluation of North Carolina hospitals’ monetary knowledge concluded, what taxpayers get from native nonprofit hospitals in return for tax exemptions price billions of {dollars} a yr is unclear.

“There isn’t any transparency, no accountability, and no oversight,” mentioned North Carolina State Treasurer Dale Folwell, a Republican who’s crucial of Atrium and different hospitals’ enterprise practices. “With the hospital cartel, it’s all the time earnings over folks.”

Atrium didn’t make officers obtainable for an interview. In an announcement, spokesperson Dan Fogleman mentioned the hospital system reported $85 million in providers to Medicare sufferers that weren’t paid for in its most up-to-date price report back to the Facilities for Medicare & Medicaid Companies.

“And, as labor, gear, provides and inflation proceed to drive well being care prices increased, the hole between Medicare funds and prices incurred to ship the standard care we offer has grown within the post-Covid inflationary atmosphere,” Fogleman mentioned.

Greater than half of the hospitals in the USA are nonprofits or government-run. The federal authorities requires them to function emergency rooms open to all sufferers no matter their potential to pay, settle for sufferers insured by Medicare, and use surplus funds to enhance amenities and affected person care to exhibit they’re giving again to the group.

Though their tax-exempt standing is predicated on charitable acts, nonprofit hospital programs sat on greater than $283 billion in belongings from shares, hedge funds, enterprise capital, and personal fairness and different investments in 2019, in line with a 2021 KHN evaluation of IRS filings.

The hospital programs used most of that to provide earnings and labeled solely $19 billion, or about 7% of their whole investments, as principally dedicated to their nonprofit missions, the evaluation discovered.

The brand new North Carolina report describes how hospitals’ self-reported Medicare revenue margins differed from the monetary image they offered to the general public via IRS information, annual reviews, and group profit paperwork.

Though most hospitals have complained of serious Medicare losses, the evaluation of information from greater than 100 North Carolina hospitals discovered that the majority made earnings on Medicare from 2015 to 2020.

IRS audits are supposed to guard the general public from fraud and abuse, however the system has main gaps, mentioned well being economists and federal watchdog teams.

Federal regulation requires the IRS to evaluation group profit actions a minimum of as soon as each three years. But the company didn’t “have a well-documented course of to make sure that these actions are being reviewed,” mentioned a 2020 report from the Authorities Accountability Workplace.

In response to GAO suggestions, IRS leaders up to date the system final yr to assist make sure the company might establish instances wherein hospitals had been suspected of not assembly necessities.

The IRS referred practically 1,000 hospitals nationwide to its audit division for violations of the Reasonably priced Care Act from 2015 to 2019, however the IRS couldn’t establish in the event that they had been associated to group advantages, the GAO mentioned.

The tax company has no authority to find out what actions hospitals should carry out to adjust to the regulation, the GAO mentioned. An evaluation of IRS knowledge discovered 30 hospitals that reported no spending on group advantages in 2016, “indicating potential noncompliance,” the report mentioned.

“Maybe that is the results of the IRS being underfunded,” mentioned Vivian Ho, a well being economics professor at Rice College in Houston, who labored on the North Carolina report. “They don’t have the sources to rethink what info they need to search.”

It’s crucial that the federal government collects correct info from hospitals as a result of the info impacts all sufferers, Ho mentioned.

Federal regulation forbids IRS workers from discussing tax info submitted to the company by folks or organizations, IRS spokesperson Anthony Burke mentioned in response to questions on how successfully the federal government displays hospitals.

Hospitals have lengthy used what they report as losses on Medicare to justify charging sufferers with personal insurance coverage increased costs. In accordance with a research launched in 2021 by the Rand Corp., a nonprofit analysis group, hospitals throughout the nation cost personal insurers greater than what they obtain from Medicare for a similar providers.

Within the Reasonably priced Care Act, federal lawmakers mandated that to take care of their tax-exempt standing, nonprofit hospitals should conduct a group well being wants evaluation, keep a written monetary help coverage, set billing and collections limits, and set a restrict on expenses.

In written responses to KHN, the North Carolina Healthcare Affiliation, which lobbies on behalf of hospitals, mentioned hospitals offered $1.2 billion in charity care in 2020. It added that these group advantages can embody loads of completely different actions, akin to masking the hole between how a lot a process prices and what a supplier is reimbursed, volunteering by workers, and paying for medical outreach applications.

“Offering care to weak populations is a part of their nonprofit mission,” the assertion mentioned.

Atrium spends hundreds of thousands of {dollars} per yr to offer care to individuals who want behavioral well being care “however haven’t any security web — even from the state,” the affiliation mentioned.

Fogleman, the Atrium spokesperson, mentioned an advisory fee has persistently informed Congress that Medicare funds don’t cowl the complete prices of providers at most hospitals, together with Atrium’s.

In North Carolina, massive hospital programs acquired $1.8 billion in tax breaks in 2020, in line with the state treasurer’s workplace.

The identical yr, lobbyists for North Carolina hospitals reported collectively shedding $3.1 billion on Medicare, in line with the workplace’s report. Different knowledge exhibits they made $87 million in revenue.

From 2015 to 2020, the report concludes, 35 hospitals posted earnings from Medicare annually.

Different hospitals listed within the report didn’t reply to requests for remark.

The American Hospital Affiliation contends that the federal authorities reimburses suppliers considerably lower than it prices to take care of Medicare recipients. Not like personal insurers, the federal authorities doesn’t negotiate costs with hospitals. Medicare bases the quantity it pays on hospitals’ places, labor prices, and different elements.

Melinda Hatton, the affiliation’s common counsel, mentioned in an announcement that “underpayments” totaled greater than $75 billion in 2020. “These knowledge present that few, if any, hospitals break even a lot much less make a revenue on the premise of Medicare funds,” she mentioned.

However Glenn Melnick, a well being economics and finance professor on the College of Southern California who reviewed the North Carolina knowledge, mentioned nobody is definite how nonprofit hospitals are calculating their numbers.

“The nonprofit hospital programs are getting so massive, we’d like higher transparency,” Melnick mentioned. “Well being care is amazingly costly, and it’ll bankrupt us if we don’t get it underneath management.”

Nonprofit hospitals obtain considerably extra in tax breaks than they spend on group funding or charity care, in line with a report launched this yr by the Lown Institute, a suppose tank in Needham, Massachusetts.

Utilizing 2019 knowledge from the IRS, researchers discovered that out of 275 hospital programs throughout the nation, 227 spent much less on group investments or charity care than they received in tax breaks. The deficit totaled greater than $18 billion, the report mentioned.

Leah Kane is a senior lawyer for shopper safety on the Charlotte Heart for Authorized Advocacy, a nonprofit that gives civil authorized help to individuals who can’t afford an lawyer. She mentioned her company receives calls from individuals who weren’t supplied charity care from hospitals.

She mentioned her group is anxious that hospitals are providing charity care to uninsured sufferers however to not different folks, just like the underinsured, who don’t have the earnings to pay 1000’s of {dollars} for remedy not coated by their insurance coverage.

“Persons are offended and stressed,” Kane mentioned. “They don’t know what this [debt] will imply for his or her lives.”

KHN correspondent Aneri Pattani contributed to this report.