What they are saying: Nonprofit hospitals are gaming the system at the expense of patients

These articles and analysis underscore how many nonprofit hospital systems are gaming the system to the detriment of patients.

Headshot of Gabby Migliara
Gabby MigliaraFebruary 21, 2023

What they are saying: Nonprofit hospitals are gaming the system at the expense of patients.

There have been some alarming stories uncovered by the media on ways nonprofit hospitals — many of which participate in the 340B drug pricing program — are taking advantage of the system and their tax-exempt status to boost their bottom lines, at the expense of patients. Here are some recent articles exposing this issue: 

  • “Nonprofit hospitals must have financial-assistance policies for needy patients, under federal requirements tied to an estimated $60 billion in annual tax breaks. They often make that aid hard to get. Hospitals put up obstacles, delay checking eligibility and sometimes press for payments that aren’t refunded even if a patient eventually gets qualified for assistance.” Hospitals Often Don’t Help Needy Patients, Even Those Who Qualify, Wall Street Journal

  • “The Internal Revenue Service requires nonprofit hospitals like NYU, which avoids $250 million a year in taxes, to benefit their communities. A primary way to meet the requirement is to run an emergency room that is open to everyone. But at NYU, poor people sometimes struggle to be seen. For example, ambulance workers said nurses in the emergency room routinely discouraged them from dropping off homeless or intoxicated patients. Instead, they were often shuttled to nearby Bellevue, a strained public hospital that primarily treats the poor." ‘Major Trustee, Please Prioritize’: How NYU’s E.R. Favors the Rich, New York Times 

  • “A major factor in the bed shortage is a years-long trend among hospitals of eliminating pediatric units, which tend to be less profitable than adult units, said Mark Wietecha, CEO of the Children’s Hospital Association. Hospitals optimize revenue by striving to keep their beds 100% full — and filled with patients whose conditions command generous insurance reimbursements. … When Tufts Children’s Hospital closed 41 pediatric beds this summer, hospital officials assured residents that young patients could receive care at nearby Boston Children’s Hospital. Now, Boston Children’s is delaying some elective surgeries to make room for kids who are acutely ill.” Hospital Financial Decisions Play a Role in the Critical Shortage of Pediatric Beds for RSV Patients, Kaiser Health News 

  • “Despite growing evidence of the harm caused by medical debt, hundreds of U.S. hospitals maintain policies to aggressively pursue patients for unpaid bills, using tactics such as lawsuits, selling patient accounts to debt buyers, and reporting patients to credit rating agencies, a KHN investigation shows. … [N]onprofit medical systems must provide financial aid as a condition of not paying taxes, a benefit that saves the industry billions of dollars annually. At many medical centers, however, information about financial assistance is difficult or impossible to find. About 1 in 5 hospitals researched by KHN, including public university systems in five states, don’t post aid policies online.” Hundreds of Hospitals Sue Patients or Threaten Their Credit, a KHN Investigation Finds. Does Yours?, Kaiser Health News

And in case you missed it, the Wall Street Journal took a closer look at how nonprofit hospitals abuse the 340B program in December. As the authors note, “The program doesn’t require participating hospitals to pass on drug discounts to patients, insurers or Medicare. There is no rule limiting how much they can charge for the drugs. They don’t have to report how much they make from such sales, nor do they have to spend any profits to benefit low-income patients.”

A new analysis from Avalere points to another trend that is helping to enrich large hospital systems: consolidation. The analysis looked at the characteristics of hospitals undergoing mergers & acquisitions between 2016 and 2022. Compared to both the national average for all short-term acute care hospitals, as well as the average for hospitals that were purchased, buying hospitals were more likely to be larger (have at least 500 beds), not-for-profit and a 340B hospital. This type of consolidation creates powerful, large hospital systems that raise costs for patients and insurers, exacerbating the financial barrier for patients trying to access health care.

These articles and analysis underscore how many nonprofit hospital systems are gaming the system to the detriment of patients. As 2023 gets underway and policymakers consider ways to ensure patients have timely and affordable access to the treatment and care they need, we urge them to look at the health care system holistically and take action to ensure nonprofit hospitals are meeting their obligation to assist low income or underinsured patients. Learn more about the cost and value of medicines at PhRMA.org/Cost.  



This website uses cookies and other tracking technologies to optimize performance, preferences, usage, and statistics. By clicking “Accept All”, you consent to store on your device the cookies and other tracking technologies that require consent. You can tailor or change your preferences by clicking “Manage My Cookies”. You can check our privacy policy for more information.