Unseen Savings: Charity Care, Community Benefit and the Safety Net

For hospitals across Texas, the work of improving health goes beyond just treating patients who can afford care – and even beyond hospital care itself.

These hospitals provide billions of dollars each year in charity care and community benefit programs that protect financially and physically vulnerable residents – and, in doing so, strengthen the health of the entire state.

Community benefits encompass hospital-led programs and partnerships that promote wellness, prevention and access to care, such as chronic disease management programs, free vaccinations and affordable prescription drugs. Charity care is a form of community benefit that provides free or discounted care to patients who are unable to afford payment.

These efforts reach beyond hospital walls – from patient-tailored financial assistance and preventive screenings to health education programs and mobile vaccination sites.

For instance, at the nonprofit United Regional Health Care System in Wichita Falls, financial assistance programs offer access to inpatient and outpatient services, including specialty and primary care. The transition clinic serves to help patients without a primary care provider and high-risk patients who require closer follow-up post-treatment.

“We’re able to see them in a clinic to address their needs [holistically],” said Dori Dockery, United Regional’s Senior Director of Health Improvement.

“We have [a] nurse-led navigation program in [the transition] clinic. We address social determinants of health; we do education. We really focus on the long-term success of the patient, helping them have the skills and resources they need to be successful and independent in health care.”

These initiatives are essential in a state where about 5 million Texans lack health insurance. By addressing the social and environmental factors that impact health and preventing more serious outcomes, nonprofit hospitals are reducing costs across the system.

“We’re really partnering with the community to address things that are non-medical drivers of health, in order to go to the root cause of some of our health issues so that they don’t become more acute services that are needed in the hospital,” noted Winjie Miao, senior executive vice president and chief operating officer at Texas Health Resources, a nonprofit health system serving the greater Dallas-Fort Worth metroplex and surrounding counties.

Hospitals show their work

Hospitals have worked against a perception in recent years that the tax benefits nonprofit hospitals receive outweigh the value of the community benefits they provide, including charity care. The American Hospital Association has tackled this perception at the national level, such as when it responded to a report on nonprofit hospitals issued by U.S. Sen. Bernie Sanders (I-Vt.) in 2023. Last year, an AHA-commissioned report from EY found that every dollar in tax exemptions for nonprofit hospitals returns nearly $10 in community benefits.

Meanwhile, the Texas Hospital Association has worked diligently to educate policymakers on how nonprofit hospitals across Texas not only meet their charity care obligations, but exceed them with room to spare. In fact, Sen. Sanders’ 2023 report also suggests Congress consider adopting a framework similar to Texas’, noting: “Tax breaks could be limited to the value of community benefits the hospital provides. Texas provides an example of this kind of structure.”

Texas law holds its nonprofit hospitals to some of the highest community benefit standards in the nation, requiring them to meet one of several standards that go above and beyond the federal requirements of the Affordable Care Act. The most common way hospitals meet state requirements is by investing at least 5% of their annual net patient revenue in community benefits, including 4% dedicated to charity care and government-sponsored indigent health care. Every nonprofit hospital subject to the law met this standard in 2023, the latest year for which data is available. That year alone, Texas hospitals provided $14.8 billion in total community benefits, including $3.8 billion in unreimbursed charity care.

But the billions of dollars devoted each year to caring for the most vulnerable are more than a legal requirement – they are visible proof of an enduring mission to care for every Texan. Every three years, nonprofit hospitals conduct Community Health Needs Assessments to identify the most pressing health needs of their local populations. These assessments often reveal challenges such as food insecurity, chronic disease and barriers to preventive care – issues that hospitals address through targeted community programs.

“First and foremost, hospital community benefits ensure the immediate health care and health-related social needs of low-income patients are met regardless of ability to pay,” said Anna Stelter, THA’s vice president of policy. “Community benefits also support cutting-edge research, innovation and technology that will improve care for all populations, [expanding] clinical training opportunities for Texas’ next generation of health professionals.”

“Regardless of the specific service or activity, community benefits almost always fill resource or access gaps not otherwise met by other public or private-sector programs [and] serve as a force-multiplier for existing efforts in partnership with other community organizations.”

They also help alleviate burdens for insured patients and the health care system as a whole.

“With high-deductible health plans becoming the norm, insured patients are bearing unaffordable out-of-pocket expenses when they are hospitalized,” Stelter added. “The hospital is at risk when patients cannot pay deductibles and copays amounting to thousands of dollars. Rather than pursue payment, some hospitals may choose to forgive those amounts as a charitable expense for patients who demonstrate financial hardship.”

Fostering future health – and health savings

Community benefit investments support reaching patients with the right care in the right place at the right time, preventing future and advanced illnesses that lead to more expensive emergency care. Without hospital-provided charity care and community programs, it would be difficult for many Texans to attend to their health, leading to more severe health conditions, higher local government costs and a broader strain on the public safety net.

Texas hospitals continue to undertake these programs in the face of mounting financial pressures. Rising operating costs, workforce shortages and uncompensated care levels are stretching hospital budgets thin. THA intends to continue acting as a resource to help the public and legislators better understand the pressures hospitals routinely face.

“We will continue to work to educate legislators on the various data points that continuously show that Texas hospitals provide an extraordinary amount of charity care across the state, and that our nonprofit hospitals continuously meet and exceed the state’s minimum requirements related to charity care,” said Sara González, THA’s vice president of advocacy, public policy and political strategy.

“Texas hospitals have a good story to tell on charity care, and it is our hope that we can continue to showcase that work.”

More information on charity care and community benefit, including a one-page explainer and detailed FAQ document, are available on THA’s Charity Care and Community Benefit issue webpage.