Examination of charity care and nonprofit hospitals in U.S., Michigan

The Detroit Free Press has a fascinating examination of the free care that nonprofit hospitals provide in Michigan and the rest of the United States. (Source: "Do hospitals offer enough free care?," Oct. 23, 2007.) Nonprofit hospitals are required to provide "an unspecified amount of free care to keep their federal and state tax exemptions." However, politicians and activists around the country are "asking whether health systems provide the level of charity care they should to deserve $12.6 billion in tax exemptions nationwide each year." This year Michigan hospitals received at least $600 million in breaks while claiming $1.7 billion in charity care, up from $883 million six years ago. Some people, though, question that total and "no standards exist about what should be included" or counted as charity care. Other complaints about charity care include high bills sent to poor people, lack of publicity about how patients can receive charity care, and long waits at community clinics.

Hospitals say the tax exemptions allow them to fill a "critical need in the health system as employers reduce or stop health benefits." The IRS requires nonprofit hospitals to "file a yearly statement, but demands little detail about charity care" and "has never revoked a hospital's nonprofit status for failure to provide free care." However, the IRS is now conducting a major review of these rules, proposed changes which many hospitals call "burdensome." A number of community groups around the country, led by Community Catalyst, are proposing that nonprofit hospitals be required to "spend at least 5% of revenues or operating expenses on free care, whichever is greater."