Nonprofit hospitals are required to offer free or discounted care to patients who are uninsured or unable to pay, and codify their rules around such discounts in a Financial Assistance Policy (FAP). However, most states do not have minimum requirements for how hospitals implement their FAPs, which means these policies can be very different depending on the hospital. A recent study in Open JAMA Network shows how hospitals changed their DPFs during the Covid-19 pandemic – both for good and bad.
Why are financial aid policies important?
The Low Hospital Index for Social Responsibility shows how much hospitals spend on financial aid (free and discounted care for patients). How much 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. Since hospital costs can be astronomical, getting free care or a discount can mean the difference between a patient entering medical debt or not.
The Affordable Care Act requires nonprofit hospitals to have an FAP, make it public, 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 that hospitals must provide. Therefore, eligibility requirements and available discounts vary widely from one US hospital to another. For example, one hospital may offer free care to anyone up to 400% of the federal poverty level, while another may only offer the same discount to patients earning only 100% of the poverty level. federal.
The impact of Covid-19
Covid-19 has upped the ante when it comes to hospital DPFs. With a new and severe virus, it has become essential for patients to be able to access the hospital care they need without worrying about costs. On the other hand, the Covid-19 threatened the finances of many hospitals, which could have put generous FAP on the chopping block.
To understand how Covid-19 has changed financial aid in US hospitals, Dr. Christopher Goodman of the University of South Carolina School of Medicine and his colleagues to analyse FAPs in 151 large acute care hospitals between 2019 and 2021. Hospitals were chosen based on revenue, number of beds, and geographic diversity.
Of these hospitals, 127 updated their FAPs, resulting in 242 separate policy changes. Of the changes, 135 were more generous, 46 were more restrictive, and 61 had an uncertain impact.
FAP is changing for the better
The good news is that many of the changes made by hospitals have made their policies more generous. Of the 127 hospitals that changed their policies, 47 (31%) expanded their PAFs in some way to allow more patients to access free and discounted care. Here are some examples:
- Sixteen hospitals have expanded their income eligibility for free or reduced-cost care.
- Thirteen hospitals have removed citizenship requirements or expanded their residency requirements.
- Ten hospitals have expanded eligibility to those who are “underinsured” (usually those with high deductibles or other cost sharing).
- Sixteen hospitals have 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 have added restrictions to their financial aid policies. Of the 127 hospitals that made changes, 12 hospitals made their FAP less generous in some way. For instance:
- Seven hospitals added residency requirements, three of which specifically limited financial assistance to US citizens.
- Four hospitals have reduced income eligibility requirements for free care and five have limited requirements for discounted care.
- Five hospitals have restricted the services eligible for financial assistance, e.g. hospital care only.
Some hospitals have changed their policies to be more generous in some respects and more restrictive in others. For example, one hospital increased its free and reduced care income threshold levels and expanded presumptive eligibility, but limited coverage of undocumented immigrants to emergency departments only.
Alongside more generous or more restrictive FAPs, the authors note several…unusual changes. Some of the more bizarre policy changes include:
- A hospital that excluded care services related to self-harm or care while incarcerated.
- A hospital added a co-payment for financial assistance to promote “patient dignity.” (So much for free care!)
- Two hospitals have prohibited policyholders from applying for financial assistance rather than managing their insurance (even if the cash price of care can be cheaper).
- A hospital added a requirement that patients had to live in the United States for 18 months before being eligible for charity care.
- Some hospitals have restricted the eligibility of patients with certain insurances for financial assistance, due to a new contract with this payer.
- One hospital excluded birth control from financial aid eligibility.
- A hospital changed the household income eligibility threshold to include the income of “roommates”. (As if people generally count their roommates’ income against their own income?)
A role for regulation
In most states, hospitals can set their own financial aid policies, including any eligibility requirements or exclusions they want. Given this freedom, it is encouraging that so many hospitals have expanded their DPFs during Covid-19. However, the variation in eligibility requirements between hospitals (and the prevalence of odd restrictions) raises the question of whether there should be a floor of FAP eligibility for tax-exempt hospitals.
The minimum FAP requirements are not unknown. In fact, since 2018, Oregon has obligatory hospitals to provide free care to those earning 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 difficult for patients to find or difficult to interpret, patients will not be able to use them. There is a high risk of confusion when FAPs not only include income requirements, but also 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 of charity care policies – particularly for eligibility criteria – is needed to ensure adequate access to charity care.”
As hospital prices are rising at a rate faster than wage growth, it is more important that hospitals increase their investment in financial aid rather than 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.