Caring for the entirety of a large state with a large uninsured population requires a huge collective effort by Texas hospitals – one that runs in the billions of dollars each year.
Charity care – free or discounted care for patients who are unable to pay – is a perennial staple in a state where 5 million people don’t have health insurance. So, too, are community benefits: hospital activities, programs or services that improve the health of the people a hospital serves, of which charity care is one piece.
To a greater degree than any other state, Texas holds its nonprofit hospitals and systems accountable to deliver those vital pieces of community support. Joe Bob Burgin is one hospital veteran who knows the difference they can make. Burgin serves on the board of trustees for the Hopkins County Hospital District and on the board of directors for Christus Trinity Mother Frances Northeast Texas.
He says those hospitals serve their communities through free clinics in underserved areas, offering preventive services like free mammograms for women and calcium studies for men.
“We want to be an integral part of the community, but there are so many uninsured people that don’t have the money to have a mammogram or have a calcium study,” Burgin said. “So that’s a way that we can contribute. We contribute millions of dollars of uncompensated care every year to our county.”
Despite recent scrutiny of hospital charity care and community benefits by both state and congressional policymakers – including at least one national report asserting that hospitals are falling short of their obligations – the numbers tell a different story. That story is one the Texas Hospital Association and other hospital advocates are making sure to tell as another year of lawmaking approaches both for Congress and for the Texas Legislature.
“An investment in the community”
Although the federal Affordable Care Act (ACA) establishes basic requirements for nonprofit hospitals to deliver charity care, state laws governing its delivery vary widely.
Texas law offers robust standards well above the ACA’s relatively bare-bones mandates. And with 17% of Texas residents uninsured, nonprofit hospitals exceed their obligations under the law. Nonprofits and certain other hospital types alike eat billions in unreimbursed charity care and community benefits each year – and that’s just from hospitals that are required to report their charity care under state law.
Aside from the 445,000-plus people employed at hospitals statewide, there’s perhaps no greater illustration of Texas hospitals’ inherent value to the localities they serve.
“Hospitals can be the center of most communities,” notes Winfred Parnell, M.D., a board member for the Parkland Center for Clinical Innovation in Dallas. “They’re sometimes one of the largest employees, besides sometimes the school districts. But I imagine it the same way as [the relationship to] a school district – how a school district is responsible to the community, the hospital is responsible to the community. … “So the hospital should be connected to the community and have that identity of, ‘What does our community need?’”
Overall, hospitals in Texas need consistently go beyond what the law requires to address their communities’ needs. Most commonly, nonprofit hospitals meet their charity care/community benefit obligations through crossing a simple threshold of their annual net patient revenue: at least 5% devoted to charity care and community benefit, including 4% devoted to charity care and government-sponsored indigent health care. (For a full look at how the Texas law works, read THA’s FAQ document on charity care and community benefit.)
While government payments reimburse hospitals for a portion of their charity care, those payments don’t come close to squaring hospitals’ collective output. In 2022, the most recent year for which data by hospital is available, all 127 nonprofit hospitals that were required to meet the state’s charity care minimums did so – and delivered $9.1 billion in total unreimbursed community benefits, including $2.4 billion in unreimbursed charity care. These hospitals delivered 32% more charity care than would have been required to meet the 4% minimum.
Including certain public and investor-owned hospitals that are also required to report their charity care, the unreimbursed tally for 2022 grows to $3.8 billion in charity care – and $14.8 billion in all community benefits.
“Really, the hospitals see that as an investment in the community,” explains Sara González, THA’s vice president of advocacy and public policy. “So the more you provide in community benefits and in charity care by keeping people as healthy as [they] possibly can be, that’s good for the patient. It helps keep the patient from coming back to the hospital potentially, if you can prevent a disease or prevent an injury from getting exacerbated.”
“Everybody’s feeling it”
For over a year, the question of whether hospitals meet their obligations for charity care and community benefit has lurked on both the state and national radars. THA and the American Hospital Association have worked toward collecting relevant information on the subject – and making sure data aren’t distorted, misinterpreted or painting an incomplete picture.
For example, a report released in October 2023 by U.S. Sen. Bernie Sanders (I-Vt.) made assertions encapsuled by the report’s title: “Major Non-Profit Hospitals Take Advantage of Tax Breaks and Prioritize CEO Pay Over Helping Patients Afford Medical Care.” AHA quickly responded that the “tunnel-visioned” report didn’t “fully account for the wide range of community benefits that hospitals provide,” and cited 2020 data showing hospitals spent more than 15% of hospital expenses on community benefits – nearly $130 billion in all.
More recently, a report prepared for AHA by EY Reporting, released late in September, showed that for every dollar nonprofit hospitals and health systems received in federal tax exemptions in 2020, they delivered $10 in community benefits. That was an increase from $9 per dollar of exemption in 2019, despite pandemic-related challenges.
Even the 2023 Sanders report, however, noted Texas as a potential example for Congress to follow, saying: “Tax breaks could be limited to the value of community benefits the hospital provides. Texas provides an example of this kind of structure.”
As the Texas Legislature prepares to gavel in its 89th session on Jan. 14, 2025, lawmakers need to be mindful that “Texas hospitals are a piece of the safety net that is absorbing the full force of our low-income, uninsured, Medicaid and indigent care populations,” said Anna Stelter, THA’s vice president of policy.
She adds that the totality of all recent report data on charity care “absolutely bear out high totals of charity care [and] community benefit that are well in excess of the nonprofits’ tax exemptions.” For-profit hospitals and public hospitals also deliver billions of dollars in unreimbursed charity care, she notes.
“Everybody’s feeling it, everybody’s doing a lot of it,” Stelter said. “And until we confront the problem of access to care and our uninsured rate, that’s not going to change.”
More information is available on THA’s Charity Care and Community Benefit webpage, including the FAQ and a one-page white paper on nonprofit charity care.
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