Oregon’s hospitals have had a great couple of years.
The Affordable Care Act means a lot more of their patients have insurance — operating margins are growing at a healthy clip.
Tax-exempt hospitals get their enviable status by doing lots of charity care, which is providing free health care to people who can’t afford it and forgiving medical debt.
But because lots more people now have health insurance, the amount of charity care Oregon’s hospitals provide is dropping precipitously.
Between 2014 and 2015, they spent $122 million fewer dollars. That’s a 34 percent drop — or as much as Canada spent to fight ISIS last year.
It has been a windfall for hospitals.
“I think we need to stop and recognize that 430,000 more Oregonians are covered under the ACA, and that was exactly the plan, and we anticipated this increase in financial performance in the short-term,” said Andy Van Pelt, the executive vice president of the Oregon Association of Hospitals and Health Systems.
OPB asked him, at some point, doesn’t all this success begin to call into question the status of tax-exempt hospitals?
“Medicare put in several cuts over a 10 year period, specifically designed to offset some of these gains,” he said.
Those cuts amount to $155 billion — a lot of money. Van Pelt said making up for those smaller government payments is a form of charity care.
But not everyone is convinced.
“Seeing Medicare and Medicaid patients as a community benefits activity rather than as a regular line of business — I think the state does have an interest in looking at that,” said Mitch Greenlick, chair of Oregon’s House Healthcare Committee.
He said pointing to the difference between what Medicare pays for a procedure and what a hospital charges doesn’t work. That is because hospital costs are notoriously variable.
A hip replacement, for example, can be $60,000 in one Oregon hospital and $30,000 in another, even though they’re down the street from each other and there is no difference in quality.
As far as the IRS is concerned, there is no financial threshold that a hospital has to cross to justify tax-exempt status. But it does have to operate to serve the public interest rather than a private interest.
IRS spokesman David Tucker said they’ll be looking at hospitals on a case by case basis.
“The IRS will weigh all facts and circumstances in each case to determine if a specific hospital is tax-exempt. Community benefit is a flexible standard based on a totality of circumstances,” said Tucker.
Quite apart from whether smaller federal payments constitute community benefit, Andy Van Pelt said Oregon hospitals are doing other things to increase charitable care.
For example, his group is telling hospitals to help families with incomes below 200 percent of the federal poverty level instead of the previous level of 139 percent.
He also said hospitals are being asked to spend about the same amount on community benefit in future years, as they did in previous years.
But that figure is not linked to inflation, so its effect will reduce over time. And, any change is voluntary.
“Not every hospital has accepted it,” said Andy Van Pelt. “But over 90 percent have.”
So what does he think about Oregon politicians looking into the community benefit of hospitals?
“Because we are still so early into this transformation, we just have to, in a sense, be patient before we start changing policies when we really don’t know the true impact of what’s going to happen,” he said.
The chair of Oregon’s House Healthcare Committee, Mitch Greenlick, says they won’t be looking into this issue this short legislative session. But the longer session in 2017 is a different matter.