July 7, 2023
Profit Over Patients: Common Signs of “Bad Actor” Hospitals
Hospitals continue to be in the spotlight as America grapples with high costs of care, increased supply shortages, and potentially catastrophic medical bills. While health insurers aren’t off the hook, not-for-profit hospitals have particularly been the focus of media scrutiny—and not without reason. “Bad actor” hospitals have a severe misalignment between their mission and their business choices, sometimes willfully flouting price transparency requirements or resorting to coercive debt collection practices. These bad actors poison hospitals’ reputation overall and contribute to providers’ current advocacy challenges. While the definition of what’s a “bad actor” continues to be debated, there are some common characteristics highlighted by legislators and the media.
Bad actor hospitals engage in predatory debt collection practices to avoid providing charity care. Some hospitals, even some not-for-profit ones, actually erode families’ financial health in an effort to protect the hospital’s bottom line. Bad actor hospitals sue patients who are unable to pay, put liens on their houses to absorb the debt, and even initiate civil arrests—all contrary to their patient-centered mission statements.
Providence Health System landed itself in hot water last fall when such practices were discovered. The system partnered with a consulting firm to make its collection practices even more aggressive. The plan directed its staff to pressure patients for money even when they had proof that these families couldn’t afford it, despite the system already providing less charity care than its peers. As a result, thousands of low-income patients were saddled with an aggregate $73 million in crippling debt while Providence’s revenues soared into the billions.
Bad actors also don’t provide sufficient charity care or invest enough in community benefit. What’s considered to be “sufficient” continues to be debated. A Colorado bill defined it as at least 3% of a hospital’s net patient revenue. In some studies, not-for-profit bad actors’ charity care actually decreases as the hospitals’ net income increases. The Government Accountability Office has raised concerns about whether federal requirements for community benefit are being adequately enforced, as federal regulations don’t set minimum standards for hospitals when it comes to charity care eligibility or amount.
The media has also begun suggesting that bad actors show a bias to serving wealthier communities over poorer ones. Because not-for-profit hospitals are required by law to provide certain kinds of care regardless of people’s ability to pay, it is sometimes suggested that bad actors intentionally avoid poor communities, even when those communities are shortage areas. Some academic studies suggest there may be some truth to this, as not-for-profit hospitals do tend to be in communities with less poverty and higher incomes.