Health Care Bill Cracks Down on Abuses by Charitable Hospitals

March 25, 2010 — -- A little-known effect of the newly-signed health care bill will be sharp new guidelines to prevent so-called "charitable" non-profit hospitals from taking advantage of the people they are supposed to help. Non-profit hospitals have been under fire for years over tactics such as allegedly price-gouging the poor and using aggressive collection tactics to collect debts.

Non-profit hospitals receive a special tax exemption in return for providing community service and charitable care. However, critics say some charitable hospitals rake in millions of dollars a year while providing very low levels of assistance to the poor and uninsured. Because the uninsured don't have the government or large insurance companies to negotiate payment rates on their behalf, patients often have to pay the full "sticker price" for medical services.

ABC Investigation Shines Light on 'Uncharitable' Practices

An ABC News investigation in 2004 detailed how a non-profit hospital in Georgia, Phoebe Putney Memorial Hospital, made tens of millions of dollars in profits while being accused of victimizing some of its own patients. An analysis of the hospital's finances by two whistleblowers, John Bagnato and Charles Rehberg, found that Phoebe charged uninsured patients exorbitant prices for care received. In one instance, ABC News discovered an uninsured patient was charged $3,000 for a medical examination that revealed there was nothing wrong with him. Among his fees was $1,200 for a dye injection for which the supplier only charged the hospital $110.

Phoebe was also accused of using legal but highly aggressive collection practices to collect from people who couldn't pay up. One patient had her wages garnished over a $1,200 hospital bill, even though she was making near minimum wage. Meanwhile, Rehberg and Bagnato discovered that the CEO of Phoebe was pulling in a $600,000 salary and that the hospital spent a combined $2 million yearly in travel expenses, including flying executives by private jet to the Cayman Islands for meetings. Phoebe maintained that it was providing a high level of charity care and according to Georgia Watch, a consumer advocacy group, the hospital has improved its billing practices.

CLICK TO WATCH PART ONE AND PART TWO OF THE ABC NEWS INVESTIGATION

Rehberg and Bagnato said their research discovered that many other non-profit hospitals across the U.S. were also earning millions of dollars while providing scant assistance to the poor. However, an attempt to bring a class action suit against hundreds of hospitals in 23 states ultimately failed.

The health-care bill signed this week by President Obama would for the first time set standards for the tax exemption status of non-profit hospitals. Among the provisions is a requirement that hospitals implement and publicize a financial assistance policy for patients. Hospitals are also prohibited from charging the top rate for medical services for patients who qualify for financial assistance. In addition, charitable hospitals are prevented from using "extraordinary collection actions" if the hospital hasn't notified patient of its financial assistance policy. The bill also calls for the IRS to review a hospital's tax exempt status every three years.

Republican Senator Under Fire for Touting Support for New Provisions

Ironically, the provisions in the health-care bill dealing with charitable hospitals were co-authored by a Republican senator, Chuck Grassley of Iowa, who fought against passage of the final bill. Grassley, former chair of the powerful Senate Finance Committee, has long been the leading voice in Congress calling for tougher standards for non-profit hospitals. In May of 2005, the senator sent a letter of inquiry to 10 hospitals and hospital systems asking them to account for their charitable activities in light of the huge tax breaks received.

Last year, Grassley and Sen. Max Baucus (D-MT) drafted the new standards for non-profit hospitals during the intensive discussions by the "group of six" senators on the Senate Finance Committee who were trying to craft a bipartisan health care bill. However, as the talks stalled, Grassley became a vehement critic of the bill.

Despite that opposition, Grassley issued a statement touting his work on the new provisions on charitable hospitals. "Tax-exempt hospitals don't have many measures of accountability for their special status. The law hasn't given them much direction, and so they've defined standards for themselves. Sometimes that's resulted in providing very little charitable patient care or other community benefits, failing to publicize charitable care to patients, charging indigent, uninsured patients more than insured patients, and using very aggressive collection practices," said Grassley in his statement.

Grassley's release came under sharp criticism by Democrats, who accused the Republican of hypocrisy after his efforts to derail the health care bill. "That Senator Grassley, who infamously declared that health reform would 'kill Grand Ma' and walked away from the negotiating table, would take credit for anything in this legislation is the most extreme form of hypocrisy imaginable," a spokesman for the Democratic National Committee told the Washington Post.

However, Grassley's office strongly defended the senator's taking credit for the charitable hospital provisions. "There's nothing unusual here," said Grassley spokesperson Beth Pellett Levine. "Members of the minority routinely work to get their initiatives in bills. A partisan mindset that a senator can only legislate when he or she is a member of the majority party doesn't do much to serve constituents, reform efforts or good policy-making."

Click Here for the Blotter Homepage.

An ABC News investigation in 2004 detailed how a non-profit hospital in Georgia, Phoebe Putney Memorial Hospital, made tens of millions of dollars in profits while being accused of victimizing some of its own patients. An analysis of the hospital's finances by two whistleblowers, John Bagnato and Charles Rehberg, found that Phoebe charged uninsured patients exorbitant prices for care received. In one instance, ABC News discovered an uninsured patient was charged $3,000 for a medical examination that revealed there was nothing wrong with him. Among his fees was $1,200 for a dye injection for which the supplier only charged the hospital $110.

Phoebe was also accused of using legal but highly aggressive collection practices to collect from people who couldn't pay up. One patient had her wages garnished over a $1,200 hospital bill, even though she was making near minimum wage. Meanwhile, Rehberg and Bagnato discovered that the CEO of Phoebe was pulling in a $600,000 salary and that the hospital spent a combined $2 million yearly in travel expenses, including flying executives by private jet to the Cayman Islands for meetings. Phoebe maintained that it was providing a high level of charity care and according to Georgia Watch, a consumer advocacy group, the hospital has improved its billing practices.

CLICK TO WATCH PART ONE AND PART TWO OF THE ABC NEWS INVESTIGATION

Rehberg and Bagnato said their research discovered that many other non-profit hospitals across the U.S. were also earning millions of dollars while providing scant assistance to the poor. However, an attempt to bring a class action suit against hundreds of hospitals in 23 states ultimately failed.

The health-care bill signed this week by President Obama would for the first time set standards for the tax exemption status of non-profit hospitals. Among the provisions is a requirement that hospitals implement and publicize a financial assistance policy for patients. Hospitals are also prohibited from charging the top rate for medical services for patients who qualify for financial assistance. In addition, charitable hospitals are prevented from using "extraordinary collection actions" if the hospital hasn't notified patient of its financial assistance policy. The bill also calls for the IRS to review a hospital's tax exempt status every three years.

Republican Senator Under Fire for Touting Support for New Provisions

Ironically, the provisions in the health-care bill dealing with charitable hospitals were co-authored by a Republican senator, Chuck Grassley of Iowa, who fought against passage of the final bill. Grassley, former chair of the powerful Senate Finance Committee, has long been the leading voice in Congress calling for tougher standards for non-profit hospitals. In May of 2005, the senator sent a letter of inquiry to 10 hospitals and hospital systems asking them to account for their charitable activities in light of the huge tax breaks received.

Last year, Grassley and Sen. Max Baucus (D-MT) drafted the new standards for non-profit hospitals during the intensive discussions by the "group of six" senators on the Senate Finance Committee who were trying to craft a bipartisan health care bill. However, as the talks stalled, Grassley became a vehement critic of the bill.

Despite that opposition, Grassley issued a statement touting his work on the new provisions on charitable hospitals. "Tax-exempt hospitals don't have many measures of accountability for their special status. The law hasn't given them much direction, and so they've defined standards for themselves. Sometimes that's resulted in providing very little charitable patient care or other community benefits, failing to publicize charitable care to patients, charging indigent, uninsured patients more than insured patients, and using very aggressive collection practices," said Grassley in his statement.

Grassley's release came under sharp criticism by Democrats, who accused the Republican of hypocrisy after his efforts to derail the health care bill. "That Senator Grassley, who infamously declared that health reform would 'kill Grand Ma' and walked away from the negotiating table, would take credit for anything in this legislation is the most extreme form of hypocrisy imaginable," a spokesman for the Democratic National Committee told the Washington Post.

However, Grassley's office strongly defended the senator's taking credit for the charitable hospital provisions. "There's nothing unusual here," said Grassley spokesperson Beth Pellett Levine. "Members of the minority routinely work to get their initiatives in bills. A partisan mindset that a senator can only legislate when he or she is a member of the majority party doesn't do much to serve constituents, reform efforts or good policy-making."

Click Here for the Blotter Homepage.

Rehberg and Bagnato said their research discovered that many other non-profit hospitals across the U.S. were also earning millions of dollars while providing scant assistance to the poor. However, an attempt to bring a class action suit against hundreds of hospitals in 23 states ultimately failed.

The health-care bill signed this week by President Obama would for the first time set standards for the tax exemption status of non-profit hospitals. Among the provisions is a requirement that hospitals implement and publicize a financial assistance policy for patients. Hospitals are also prohibited from charging the top rate for medical services for patients who qualify for financial assistance. In addition, charitable hospitals are prevented from using "extraordinary collection actions" if the hospital hasn't notified patient of its financial assistance policy. The bill also calls for the IRS to review a hospital's tax exempt status every three years.

Republican Senator Under Fire for Touting Support for New Provisions

Ironically, the provisions in the health-care bill dealing with charitable hospitals were co-authored by a Republican senator, Chuck Grassley of Iowa, who fought against passage of the final bill. Grassley, former chair of the powerful Senate Finance Committee, has long been the leading voice in Congress calling for tougher standards for non-profit hospitals. In May of 2005, the senator sent a letter of inquiry to 10 hospitals and hospital systems asking them to account for their charitable activities in light of the huge tax breaks received.

Last year, Grassley and Sen. Max Baucus (D-MT) drafted the new standards for non-profit hospitals during the intensive discussions by the "group of six" senators on the Senate Finance Committee who were trying to craft a bipartisan health care bill. However, as the talks stalled, Grassley became a vehement critic of the bill.

Despite that opposition, Grassley issued a statement touting his work on the new provisions on charitable hospitals. "Tax-exempt hospitals don't have many measures of accountability for their special status. The law hasn't given them much direction, and so they've defined standards for themselves. Sometimes that's resulted in providing very little charitable patient care or other community benefits, failing to publicize charitable care to patients, charging indigent, uninsured patients more than insured patients, and using very aggressive collection practices," said Grassley in his statement.

Grassley's release came under sharp criticism by Democrats, who accused the Republican of hypocrisy after his efforts to derail the health care bill. "That Senator Grassley, who infamously declared that health reform would 'kill Grand Ma' and walked away from the negotiating table, would take credit for anything in this legislation is the most extreme form of hypocrisy imaginable," a spokesman for the Democratic National Committee told the Washington Post.

However, Grassley's office strongly defended the senator's taking credit for the charitable hospital provisions. "There's nothing unusual here," said Grassley spokesperson Beth Pellett Levine. "Members of the minority routinely work to get their initiatives in bills. A partisan mindset that a senator can only legislate when he or she is a member of the majority party doesn't do much to serve constituents, reform efforts or good policy-making."

Click Here for the Blotter Homepage.