NCHA Statement on North Carolina State Health Plan and National Academy of State Health Policy Report

Cary, NC – January 26, 2022 – From free mammogram testing in under-served communities to creating clinics that improve health equity and expand access for under-served populations, feeding the hungry (food as medicine), and partnering to provide affordable housing, North Carolina hospitals are anchors in their communities. In addition to providing essential healthcare services, they invest in, operate, and support a variety of services to expand access to care, train healthcare providers, conduct groundbreaking research, and improve community health and safety. During the pandemic, they have added to that focus by making significant investments in providing masks, testing services and sites, and vaccine clinics. Millions of dollars in un-reimbursed care is provided each year by North Carolina’s hospitals.

Hospitals’ charity care spending and community benefit investment activity is transparent and accountable. Through federal oversight by the Internal Revenue Service, it is regulated, reported, and audited. Enforcement is the responsibility of the secretary of the United States Treasury. North Carolina’s nonprofit hospitals annually submit audits to state and federal tax regulators who determine each year that hospitals meet their tax status obligations. Non-compliance can result in a revocation of a hospital’s tax-exempt status, which has never happened in North Carolina. Instead, hospitals provide immense benefit, both patient- and community-focused, for the people of the state. Hospitals cannot just give everyone a charity care status. Under IRS rules, patients must provide financial information to be qualified. Patients who decide not to work with hospitals through the application process to be considered for charity care cannot be given free care. A list of links to many North Carolina hospitals’ financial assistance policies and community benefit reports is here.

There should be no doubt that nonprofit hospitals are proudly fulfilling their charity care and community benefit commitments to North Carolinians.

Attacking and demonizing hospitals while their exhausted employees are working 24/7 to meet a pandemic peak in hospitalizations is distracting, disrespectful and potentially dangerous.

Throughout this week, North Carolina has seen new pandemic records reached for COVID-19 hospitalizations. For the State Treasurer to decide that now is the time to publicly demonize the state’s hospitals is unconscionable. His press conference, a public relations stunt, shows how out of touch he is with what is going on today in hospitals in every part of the state as medical staff and administrators rise to each new challenge with resolve to provide safe, compassionate care to every patient. In contrast to the Treasurer’s actions attacking hospitals, hospital administrators are finding ways to help strained staff, doing tasks like cleaning floors and delivering food to patient rooms, due to workforce shortages and hospital employees calling out sick with COVID-19. As exhausted hospital teams press on with giving their all to every patient, the Treasurer is now distracting them from their work by causing them to have to take time to explain and correct his half-truths to patients, communities, and media.

Potentially worse, with hospitals seeing more incidents of verbal abuse and workplace assaults similar to airline workers, the Treasurer is leveraging a time of high public anxiety and tension to stoke anger toward the people of North Carolina’s hospitals. His words and actions are deplorable and disrespectful to those who have done so much, and to whom we owe so much. As a state leader, his actions today could encourage acts of ill will against the very people who have taken oaths to protect and restore our health.

The questions that all North Carolinians should be asking the State Treasurer today, are: “Why aren’t you asking hospitals what you can do to help them, instead of using public resources to attack them?  Why are you not advocating for and supporting Medicaid expansion so those North Carolinians without healthcare coverage have access to better health?  Why do you choose the politics of misinformation and division instead of collaboration and solutions?  Why are State Health Plan premiums increasing at double-digit rates while the Treasurer has refused to work with hospitals and health systems on value-based approaches to better manage and support people’s health? And why is the State Health Plan limiting access to telehealth resources amid a global pandemic?”

Setting the record straight: the pandemic isn’t business-as-usual for hospitals. It’s throwing their financial health off-balance and putting it at risk, rather than being a ‘windfall’

The North Carolina Healthcare Association encourages journalists to explain the differences between charity care and community benefit, and to also get the facts from hospitals about their current financial situations. This includes describing the true cost and toll that COVID-19 has taken on hospitals, which have expended more than $3 billion in unforeseeable expenses to fight the pandemic.

Is the hospital affordability, billing, and payment system as a whole broken? Yes, all the stakeholders should work together to improve it. Government programs like Medicare and Medicaid pay hospitals less than the cost of caring for the beneficiaries; insurance companies negotiate deep discounts with hospitals, and many people who are uninsured pay little or nothing at all.

These inequities in payment leave hospitals with an annual balancing act – hospitals must ensure that the payments they receive for care from all sources exceed the costs of providing that care. A hospital cannot continue to lose money year after year and remain open. Hospitals need a positive bottom line to be able to replace or improve old buildings, keep up with new technologies, and otherwise invest in maintaining and improving their services to meet the rising demand for care.

Hospitals are now spending needed reserves to fight the virus, affecting their ability to float their organizations in hard times and invest in new capital and equipment. This is having a ripple effect that could ultimately impact their ability to reinvest in needed improvements or additional services.

According to the American Hospital Association, more than a third of hospitals expected to have negative operating margins through year-end 2021. Credit rating agency Moody’s have given the nonprofit and public health sector a negative outlook, in large part due to rising labor costs, which they said could decrease operating cash flow up to 9%. With national workforce shortages, labor costs now account for over 50% of hospitals’ total expenses. In addition, periodically during the pandemic many hospitals have temporarily shut down elective procedures or units within the hospital for months at a time – the very services that they rely on as their main sources of revenue.

After being hit with significant unexpected expenses needed to respond to a national emergency that has lasted 20 months and is still going, all levels of government should be sitting down with hospitals in appropriate settings to discuss their questions and seek workable solutions. This is not a time for grandstanding for political gain.

Get the facts: hospitals continue to pay more for labor, supplies, drugs and equipment, and they are already one of those most highly regulated businesses in America.

The pandemic has taught us that we need to invest in sustainability for hospitals to be ready for the next disaster or pandemic. Legislation in the next session should consider how to protect hospitals’ ability to be there for all, how to expand coverage, how to help them invest in infrastructure, and importantly how to help retain and expand the workforce so hospitals can care for the state’s growing population.

About NCHA

Founded in 1918, North Carolina Healthcare Association (NCHA) is the united voice of the North Carolina healthcare community. Representing more than 130 hospitals, health systems, physician groups and other healthcare organizations, NCHA works with our members to improve the health of North Carolina communities by advocating for sound public policies and collaborative partnerships and by providing insights, services, support and education to expand access to high quality, efficient, affordable and integrated health care for all North Carolinians.