This hospital system denied care to patients with medical debt. But they’re not the only ones…
Author’s Update: According to KFF Health News, spokespeople for Ascension and Indiana University Health said that care denials are allowed, but not current practice. Following publication of this post, Indiana University Health contacted us to indicate that they do not deny non-emergency care to people due to outstanding debt.
Author’s Update: Allina Health System announced on June 9, 2023 they would be pausing the practice of withholding care from those with medical debt.
A recent New York Times investigation found that Allina Health System, a nonprofit health system in the Midwest, has been rejecting patients for appointments if they have unpaid medical bills. If patients amass at least $1,500 in medical debt three separate times, they may not be allowed to come back to a clinic or hospital until they pay up. In many cases, Allina’s electronic health record system precludes doctors from making new appointments with patients that have unpaid debt.
The policy, which was started in 2006, applies to patients struggling with chronic conditions like diabetes and depression, and is even applied to children. The Times heard from doctors and patients who described being unable to complete medical forms that children needed to enroll in day care or show proof of vaccination for school. Allina’s dominance in the region also means that patients who are rejected for care–especially patients in rural areas–may have trouble finding other providers.
Allina is not an anomaly
How is a nonprofit system allowed to deny needed care for patients with debt? While nonprofit hospitals are required by federal law to accept any patient for emergency care regardless of ability to pay, the same requirement doesn’t apply to non-emergency care.
Because there aren’t regulations against this practice, Allina is not alone in rejecting patients with debt. According to a 2022 KFF Health News investigation of 528 hospitals sampled nationwide, 55 indicated in their written policy that they do allow deniels of non-emergency care for patients with medical debt, 22 said this is allowed but not current practice, and 85 others had no information in their policy on whether or not they do this. (Allina Health Faribault Medical Center was included in this last group, but no other Allina hospitals were included in the study). Among the hospitals that allow for care denials are within some of the largest nonprofit systems in the country, including Ascension, Indiana University Health, Cedars-Sinai Medical Center, Mayo Clinic, Trinity Health, and more.
Medical debt and fair share deficits
Not only has Allina Health System been refusing care for patients with medical debts, they may also be contributing to medical debt with their financial assistance policies.
Nonprofit hospitals are required to offer financial assistance to patients who can’t afford care. But there aren’t federal regulations around how much hospitals must spend on financial assistance or whom they make eligible for free or discounted care. It’s partly because of these lax requirements that nonprofit hospitals don’t offer significantly more financial assistance as a share of expenses, compared to for-profit hospitals.
When hospitals create very generous financial assistance policies that presume people are eligible and offer free care upfront, patients have less of a medical debt burden. On the other hand, when hospitals choose not to mention financial assistance to patients or put up obstacles like burdensome applications, this makes it harder for patients to get assistance and can increase medical debt.
Allina Health System spends very little on financial assistance compared to other hospital systems. From 2018-2021, the system spent less than $1 of every $100 in total expenses on financial assistance, according to CMS hospital cost reports. In comparison, nonprofit hospitals spent $2.3 of every $100 in total expenses on financial assistance, government hospitals spent $4.1, and for-profit hospitals spent $3.8 in in 2018.
The Times cited Lown Institute data showing that Allina avoided $266 million in taxes in 2020 from their nonprofit status. That year, Allina spent $57 million on financial assistance and community investment, meaning they could have spent $209 million more on their community to reach their tax exemption value– what the Lown Institute calls a fair share deficit.
In Minnesota, where most Allina hospitals are located, there were about 109,000 people with medical debt on their credit reports in 2020. The total medical debt in the state is $148 million. Theoretically, Allina Health System could have erased all of the medical debt in the state if they filled their fair share gap by offering free care.
Allina Health System may be one particularly bad actor, but the issues with the hospital community benefit standard are systemic. We need all hospitals — especially nonprofits that benefit from billions in tax breaks — to align their financial assistance policies with community need and vastly increase their investment in this arena. And if hospitals won’t do it on their own, we’ll need policymakers to give them a nudge.