Financial assistance policies: The good, the bad, and the bizarre

Nonprofit hospitals are required to have offer free or discounted care for uninsured patients or those unable to pay, and to codify their rules around these discounts in a financial assistance policy (FAP). However, most states do not have minimum requirements for how hospitals implement their FAPs, which means that these policies can be wildly different depending on the hospital. A recent study in JAMA Network Open shows how hospitals changed their FAPs during the Covid-19 pandemic — both in good and bad ways.

Why do financial assistance policies matter?

The Lown Hospitals Index for Social Responsibility shows how much hospitals devote to financial assistance (free and discounted care for patients). The amount hospitals spend depends on their financial assistance policy (FAP), which outlines the discounts patients are eligible for based on their income level, insurance coverage, and other considerations. Given that hospitals costs can be astronomical, getting free care or a discount may be the difference between a patient going into medical debt or not.

The Affordable Care Act requires nonprofit hospitals to have a FAP, make it publicly available, and refrain from taking extraordinary debt collection actions before determining FAP eligibility. However, there is no federal requirement for a minimum level of financial assistance hospitals must provide. As a result, eligibility requirements and available discounts vary considerably across US hospitals. For example, one hospital might offer free care to anyone making up to 400% of the federal poverty level, while another may only offer the same discount to patients making only 100% of the federal poverty level.

The impact of Covid-19

Covid-19 raised the stakes when it comes to hospital FAPs. With a new and serious virus, it became essential for patients to be able to access needed hospital care without worrying about costs. On the other hand, Covid-19 threatened the finances of many hospitals, which could have put generous FAPs on the chopping block.

To understand how Covid-19 changed financial assistance at US hospitals, Dr. Christopher Goodman at the University of South Carolina School of Medicine and colleagues analyzed the FAPs at 151 large acute care hospitals between 2019 and 2021. Hospitals were chosen based on their revenue, bed count, and geographic diversity.

Among these hospitals, 127 updated their FAPs resulting in 242 distinct policy changes. Among the changes, 135 were more generous, 46 were more restrictive, and 61 had unclear impact.

FAP changes for the better

The good news is that many of the changes from hospitals made their policies more generous. Among the 127 hospitals that changed their policies, 47 (31%) expanded their FAPs in some way to allow more patients to access free and discounted care. Here are a few examples:

• Sixteen hospitals expanded their income eligibility for free or discounted care.
• Thirteen hospitals removed citizenship requirements or otherwise expanded their residency requirements.
• Ten hospitals expanded eligibility to those who are “underinsured” (typically those with high deductibles or other cost-sharing).
• Sixteen hospitals added criteria that make patients automatically eligible for financial assistance (eg. homelessness, unemployment, incarceration).

FAP changes for the worse

At the same time, several hospitals added restrictions onto their financial assistance policies. Out of the 127 hospitals that made changes, 12 hospitals made their FAP less generous in some way. For example:

• Seven hospitals added residency requirements, three of which specifically limited financial assistance to US citizens.
• Four hospitals reduced the income eligibility requirements for free care, and five limited the requirements for discounted care.
• Five hospitals limited the services eligible for financial assistance, eg. inpatient care only.

Some hospitals changed their policies to be more generous in some ways and more restrictive in others. For example, one hospital increased their free and discounted care income cutoff levels and expanded presumptive eligibility, but limited coverage of undocumented immigrants to emergency services only.

FAP head-scratchers

Along with the more generous or more restrictive FAPs, the authors noted several changes that were…unusual. Among the most bizarre policy changes were:

• A hospital that excluded services for care related to self-harm or care while incarcerated.
• One hospital added on a co-pay for financial assistance to promote “patient dignity.” (So much for free care!)
• Two hospitals prohibited insured patients from applying for financial assistance rather than running their insurance (even though the cash price for care may be cheaper).
• One hospital added a requirement that patients had to be living in the US for 18 months before being eligible for charity care.
• Some hospitals restricted patients with certain insurance from being eligible for financial assistance, due to a new contract with that payer.
• One hospital excluded birth control from financial assistance eligibility.
• One hospital changed income eligibility cutoff for household to include the income of “housemates.” (As if people usually count their roommates’ income as part of their own income?)

A role for regulation

In most states, hospitals can make their own financial assistance policies, including any eligibility requirements or exclusions they wish. Given this freedom, it is encouraging that so many hospitals expanded their FAPs during Covid-19. However, the variation in eligibility requirements among hospitals (and the prevalence of strange restrictions) raises the question of whether there should be a floor for FAP eligibility for tax-exempt hospitals.

Minimum FAP requirements are not unheard of. In fact, since 2018, Oregon has required hospitals to offer free care to those making 200% or less of the federal poverty level and discounted care up to 400% of the federal poverty level.

Even when FAPs are relatively generous, if the policies are hard for patients to find or hard to interpret, patients won’t be able to make use of them. There is a high chance of confusion when FAPs include not just income requirements but residency requirements, asset requirements, restrictions on certain types of services and more. This confusion itself is a barrier to access.

The study authors write, “Our findings suggest that greater transparency and simplification in charity care policies—especially for eligibility criteria—are needed to ensure adequate access to charity care.”

As hospital prices rise at a rate beyond the growth of wages, it’s more important that hospitals expand their investment in financial assistance, not restrict it. If hospitals can’t create FAPs that are transparent, simple, and protect patients from financial harm, they may need a nudge from policymakers to do so.