On October 10, 2023, Sen. Bernie Sanders (I-Vt.), Chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee, released a report alleging that certain non-profit hospital systems may not be providing the community benefits required by their tax-exempt status. The report calls on Congress and the IRS to strengthen requirements impacting charity care and financial assistance programs.

Under current IRS rules, non-profit hospitals that provide “benefits to a class of persons that is broad enough to benefit the community” may qualify for certain tax exemptions. IRC § 501(c)(3). As a condition of receiving tax-exempt status, the federal government requires non-profit hospitals to provide a set of community benefits, including free or discounted health services for certain low-income individuals—a practice known as “charity care.” The Patient Protection and Affordable Care Act enacted an array of additional community benefit requirements, among which is maintenance of a publicly-available financial assistance program.

Nearly half of American hospitals enjoy non-profit status, but the HELP Committee’s report alleges many are not providing the community benefits required of them. The report claims that non-profit hospitals spent an estimated $16 billion on charity care in 2020, which is equal to about fifty-seven percent of the value of their tax breaks in the same year.

The report examines sixteen of the largest non-profit hospital systems in the U.S. Per the report, each of these systems earns more than $3 billion in annual revenue, but twelve spend less than two percent of their revenue on charity care. The report further alleges that of those twelve, six dedicate less than one percent of their total revenue to charity care. The report claims that in recent years, non-profit hospitals have provided even less charity care even as they experienced a marked increase in revenue and operating profits.

In addition to denying care, the report challenges what it describes as “aggressive debt collection tactics” by non-profit hospitals to seek payment on unpaid medical bills. These include wage garnishment and liens on personal assets.

The report calls on Congress and the IRS to take certain steps aimed at ensuring that non-profit hospitals provide the required community benefits, including:

• Ensure hospitals are offering appropriate levels of charity care;
• Establish clear and enforceable standards for non-profit hospital financial assistance programs, including requiring hospitals to determine whether a patient is eligible for such assistance and provide it regardless of whether the patient proactively requests information on financial assistance programs or charity care;
• Impose further restrictions on debt collection processes;
• Define the community engagement necessary to justify a hospital’s non-profit status, such as requiring non-profit hospitals to specifically address the needs raised by underserved, low-income, and marginalized communities through community health needs assessments; and
• Increase transparency in reporting of community benefit data to identify the scope of the problem by requiring community benefit data to be reported on a hospital-by-hospital basis, rather than the total for a hospital system.

The HELP Committee’s full report is available here.