US Nonprofit Hospitals Have Widely Varying Criteria To Decide Who Qualifies For Free And Discounted Charity Care

Abstract

US nonprofit hospitals are required by law to have a charity care policy, but hospitals have significant discretion in determining specific eligibility criteria. Using a novel national database, this analysis revealed that nonprofit hospitals have chosen widely varying charity care eligibility guidelines. Among hospitals that offered free care, income limits ranged from 41 percent to 600 percent of the federal poverty guideline. Many hospitals considered assets when determining eligibility for charity care, and a significant minority also had residency requirements and restrictions for insured patients. Hospitals generally allowed charity care in cases of hardship, with a median cutoff of a given hospital bill being 20 percent of the patient’s income. Hospitals in counties with lower levels of poverty and uninsurance had more generous eligibility policies. The wide variation in requirements for hospital financial assistance poses barriers to equitable access to care.

Medical debt affects many US households and reduces patients’ access to health care.¹ A 2022 survey estimated that 100 million Americans carry medical debt,² and nearly 80 percent of medical debt is held by households with zero or negative net worth.³ Most medical debt is incurred for hospital services.⁴ Hospital charity care, also known as financial assistance, plays an important role in mitigating medical debt for low-income patients and may improve their access to care, particularly for diagnosing and preventing common chronic but treatable conditions.⁵

Hospital charity care is the provision of free or discounted services to low-income patients.⁵ Historically, a large part of the justification for nonprofit hospitals’ tax-exempt status rests on their provision of charity care to low-income patients. The Affordable Care Act required nonprofit hospitals to have a written and publicly available financial assistance policy but did not specify how much charity care a hospital must provide, or what the eligibility policy should be. Recent analyses demonstrate that private nonprofit hospitals are particularly miserly in their charity care spending. Ge Bai and colleagues used data from the 2018 Medicare Hospital Cost Reports to show that private nonprofit hospitals spent 2.3 percent of total expenses on charity care, which is less than either government hospitals (4.1 percent) or for-profit hospitals (3.8 percent).⁶ Recently, nonprofit hospitals’ low charity care spending has received substantial attention from federal lawmakers.⁷ Although there remains no quantitative requirement with respect to charity care at the federal level, to date, twenty states (California, Colorado, Delaware, Georgia, Illinois, Indiana, Kansas, Maine, Maryland, Nevada, New Jersey, New Mexico, New York, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, Virginia, and Washington) have enacted mandatory minimum income limits for free or discounted care.⁸

The literature to date has shown that nonprofit and government hospitals use varied and changing criteria to determine eligibility for charity care. Christopher Goodman and colleagues, in an article published in 2020, used financial assistance policies from a representative sample of 170 hospital websites from 2018 to demonstrate that a majority offered free care for patients with incomes of 200 percent or more of the federal poverty level. The authors also found that many had additional criteria for eligibility, including residency requirements (25.4 percent requiring state residency and 28.5 percent requiring service area residency) and eligibility only for uninsured patients (4.2 percent). This study also found a number of other commonly stipulated requirements, including asset investigations, although it did not quantify their frequency.⁹ In an article published in 2022, Goodman and colleagues used a similar sampling technique to show that charity care eligibility criteria generally became more generous between 2019 and 2021 through increases in income cutoffs and less stringent additional criteria, such as asset investigations.¹⁰ However, this study did not specify the overall frequency or median levels of these nonincome criteria.

Studies of charity care and, more broadly, hospitals’ community benefit spending usually use small representative samples rather than comprehensive national databases.^3,4,10 Studies also tend to use Internal Revenue Service Form 990 Schedule H data,¹¹ which are, in comparison to financial assistance policies drawn from hospital’s own websites, both less detailed and less up-to-date. For instance, those data do not always include details on criteria for “hardship” or “catastrophic” assistance when a patient’s bills exceed a certain percentage of income. An example of this is the University of Pittsburgh Medical Center’s current financial assistance policy, which includes mention of hardship assistance, whereas the university’s Schedule H form does not mention it.¹² There are also lags in preparing tax returns and filing them with the Internal Revenue Service, and then between filing and processing and online publication.¹³

Our study adds to the existing literature in multiple ways. First, we used a novel data source of financial assistance policies for private nonprofit hospitals with a larger sample size and more comprehensive data than was the case with previous studies. Using the largest and most up-to-date existing database of income criteria for hospital charity care—a database that allows for the inclusion of smaller hospital systems than earlier analyses—we measured the state-level and national median income limits for both free and discounted care and demonstrated how these limits compared with state median income levels. Our analysis also provided the first update in nearly a decade on the frequency of residency and insurance limitations, as well as specific documentation requirements. To our knowledge, our study was also the first to estimate the share of hospitals with other restrictions on charity care eligibility, including minimum bills, asset investigations, and citizenship requirements.

Study Data And Methods

DATA

Our sample was defined by 2,989 nonprofit acute care hospitals in the 2021 American Hospital Association (AHA) Annual Survey. We excluded rehabilitation hospitals, long-term care facilities, and psychiatric hospitals, as this study focused on acute care hospitals. In addition, we excluded military, tribal, Indian Health Service, Department of Justice, Veterans Affairs, and state and municipal public hospitals, as they operate under different financing models. For-profit hospitals and hospitals in US territories, which are not subject to Internal Revenue Service 501(r) provisions, were also excluded.¹⁴

We obtained information on hospitals’ charity care eligibility criteria from a proprietary database maintained by Dollar For, a 501(c)(3) nonprofit. Since 2019, the group has helped patients submit more than17,000 financial assistance applications, yielding more than $60 million in medical debt relief.¹⁵ Patients self-screen for charity care eligibility using Dollar For’s online tool,¹⁶ which is based on its database of hospitals’ charity care policy information. Dollar For personnel have constructed this database by manually accessing and reviewing the financial assistance policies on hospital websites in the fifty states and Washington, D.C. (hereafter referred to as “states”). The database includes income limits for free and discounted care, as well as other frequently mentioned criteria for eligibility, including minimum bills, consideration of assets, and residency and citizenship requirements. Although the database includes data on government hospitals and for-profit hospitals, our analysis focused on private nonprofit hospitals, as these are the private institutions that receive tax exemptions on the basis of their community benefits, including charity care.

ANALYSIS

Every quarter, Dollar For uses a software program to check hospital websites for any updates to their financial assistance policies, which are sometimes posted as text on web pages or as PDF documents. If any updates have been made, the policy is examined for any changes to eligibility criteria for charity care. In rare cases when a patient asks for help in applying from a particular hospital and financial assistance policy information is not available online, Dollar For will call the hospital, and if the call yields new any new information, Dollar For will update its database accordingly. Each financial assistance policy is reviewed by two researchers at Dollar For, with results compared and discrepancies resolved by consensus after discussion. If any uncertainty remains about ambiguous or unclear language in a policy, the researchers consult an attorney with expertise in hospital financial assistance to review the language. Our data were drawn from Dollar For’s database as of March 14, 2024.

For income eligibility criteria, which arenearly universal and are relatively simple to obtain, Dollar For has data from 2,770 hospitals, which make up more than 92 percent of private nonprofit hospitals in the AHA database. For criteria aside from income, Dollar For’s database is slightly more limited. Dollar For has thus far collected data on a subset (2,277, 76.2 percent) of private nonprofit hospitals in the AHA database. These data include most systems with three or more hospitals, with the remainder collected by hospital name in alphabetical order, beginning at the start of the alphabet. As a result, this subset overrepresents the larger health systems and includes a smaller number of private nonprofit hospitals. Still, this sample is nearly twice as large as those used in previous studies, which included, at most, 1,200 hospitals.¹⁰

For each hospital, the charity care eligibility policy contains two income limits: the upper limit of income at which a patient would qualify for any discounted care and the upper limit of income at which a patient would qualify for free care, with both variables measured as a percentage of the federal poverty guideline. We examined the distribution of income limits for hospitals’ discounted and free charity care and provided summary statistics including national mean and median levels as multiples of the federal poverty guideline.We ranked and mapped all states on the basis of the median income limit for free charity care for a one-person household as a percentage of that state’s median income according to the 2021 American Community Survey.¹⁷

We also analyzed the frequencies of seven frequently used eligibility criteria beyond income. First, we measured the frequency of eligibility limitations for insured patients. Some financial assistance policies had no mention of different rules for the insured, meaning that both insured and uninsured patients qualified for charity care at the same income and hardship levels. Some financial assistance policies allowed for insured patients to be eligible, but with different income or hardship criteria. For other financial assistance policies, insured patients were subjected to a variety of other criteria restricting eligibility, although no mention of different income or hardship criteria was made. These categories did not include the requirement that patients must use any type of government assistance (Medicaid, Medicare, and state programs) before charity care can apply, as this requirement is almost universal among financial assistance policies.

Second, we measured the frequency of an allowance for “hardship” (that is, eligibility for charity care offered in cases of “catastrophic” expenses, when a given hospital bill exceeded a certain share of household income), as well as the median share of household income that qualified a patient for hardship among these hospitals.

Third and fourth, we measured the frequency of residency requirements and citizenship requirements. Residency requirements were classified by whether they were based on residence in a county, state, ZIP code, or service area. The latter is a category that usually includes a number of local counties or a group of ZIP codes. A hospital was classified as having a citizenship requirement if its financial assistance policy contained any mention of investigating or requesting documentation of citizenship or legal residency.

Fifth, we measured the frequency of hospitals requiring a minimum bill amount and, among these, the median amount of this minimum bill. Sixth, we measured the frequency of any mention of investigating patients’ assets as a criterion for charity care. Seventh, we measured the frequency of requiring certain types of documentation, including tax returns and proof of income, assets, residency, or identity.

LIMITATIONS

This study had several limitations. We did not compile detailed schedules of discount levels, given the variation in these sliding scales from institution to institution. Some hospitals also excluded charity care coverage for certain services not deemed “medically necessary” or for certain providers, but these were not included in our analysis. We also did not collect or analyze data on how long charity care eligibility lasts after an initial determination. In addition, our analysis of nonincome eligibility criteria used a large subset of hospitals that slightly overrepresents large hospital systems and that has a less-than-ideal alphabetical sampling strategy. The data set used in this study was initially built as a pragmatic instrument to aid patients, not a tool for academic research, and this limitation is a reflection of this fact.

Study Results

Among 2,989 nonprofit acute care hospitals in the 2021 AHA Annual Survey, 2,963 (99.1 percent) were successfully linked to the Dollar For database, and 2,770 (92.7 percent) had some type of documentation of charity care eligibility policy available. Eighty-four hospitals stated that they offered charity care but did not provide details on their income eligibility policies. For example, some would only advise patients to contact the hospital to find out whether they qualified. Forty-nine hospitals’ charity care policies could not be located on their websites, and eighty-six hospitals had not yet undergone a charity care policy search by Dollar For. A table summarizing these data is in online appendix 1.¹⁸

Exhibit 1 shows the distribution of income cutoffs for free and discounted care. Of the 2,989 nonprofit acute care hospitals in the sample, 2,657 (88.9 percent) specified a free care income limit, with the mean income limit being 216 percent of the federal poverty guideline. The median value of the free care income limit was 200 percent of the federal poverty guideline. Values for this limit ranged from 41 percent to 600 percent of the federal poverty guideline. Eighteen (0.6 percent) hospitals stated that they did not offer any free care, although they did offer discounted care (see appendix 1).¹⁸ A total of 2,304 (77.1 percent) hospitals specified an income limit for discounted charity care, with the mean income limit being 373 percent of the federal poverty guideline. The median discounted care income limit was 400 percent of the federal poverty guideline. Values for this limit ranged from 100 percent to 1,000 percent of the federal poverty guideline, although exhibit 1 omits values above 600. A total of 263 (8.8 percent) of hospitals did not offer discounted care, although they did offer free care (see appendix 1).¹⁸

EXHIBIT 1. Distribution of US nonprofit hospitals’ income limit for charity care as percent of federal poverty guideline, 2024.

source Authors’ analysis of data from the 2021 American Hospital Association Annual Survey and the 2024 Dollar For database.

notes Values above 600% were omitted for the sake of presentation. For the cutoff for discounted care, there was a value of 1 for 650%, a value of 2 for 700%, a value of 1 for 800%, and a value of 1 for 1,000%.

Nonprofit hospitals in Montanahad the lowest median income limit for free charity care, at 130 percent of the federal poverty guideline, whereas California, Alaska, Oregon, and Washington had the highest, at 300 percent of the federal poverty guideline (appendix 2).¹⁸ Hospitals in states in the South, Mountain West, and Midwest had lower income cutoffs for free charity care, whereas hospitals on the West Coast and Northeast had higher cutoffs. Similar patterns of geographic variation were evident for the state-level median discounted charity care income limits. However, when we normalized by state median income, the states of the South appeared more generous, whereas the states of the Northeast appeared less generous. Exhibit 2 displays the median income limit for free care among the hospitals in each state as a percentage of state median income.

EXHIBIT 2. US nonprofit hospitals’ median free charity care income eligibility cutoffs as proportion of state median income, by state, 2024.

sources Authors’ analysis of data from the 2021 American Hospital Association Annual Survey and the 2024 Dollar For database. State median income figures are from the 2021 American Community Survey.

To further analyze the determinants of charity care income eligibility criteria, we measured the associations between hospitals’ income limits for free care and the county-level percentage of population living below 150 percent of the federal poverty guideline and percentage uninsured, respectively (appendix 3).¹⁸ The estimated slopes were negative and statistically significant, which implies that as either a county’s population below 150 percent of the federal poverty guideline or its population that was uninsured increased, the income limit for the hospital located in that county declined. These associations were qualitatively similar to the associations between these outcomes and the income limit for discounted charity care.

Exhibit 3 summarizes the prevalence of criteria beyond income for the subset of hospitals for which these data were collected. The first of these criteria involved restrictions on charity care to insured patients. A small proportion of hospitals (3.2 percent) stated that insured patients were never eligible for charity care. Roughly one in ten hospitals (11.7 percent) allowed insured patients to qualify for charity care, but with different income or hardship limits. For instance, 4.1 percent of hospitals deemed insured patients to be eligible only if they met hardship criteria. Another 10.0 percent of hospitals allowed insured patients to receive charity care but required various other terms for eligibility. The distribution of these criteria for insured patients is presented in exhibit 4. Hospitals that stated income eligibility criteria for charity care for insured patients had a median cutoff of 200 percent of the federal poverty guideline for free care and 400 percent for discounted care (exhibit 3).

EXHIBIT 3.

Summary of US nonprofit hospitals’ financial assistance eligibility criteria beyond income, 2024

Criteria	No.	% or median
Eligibility rules differ for insured patients?
Insured patients never eligible	74	3.2%
Insured patients eligible, but different income or hardship terms	267	11.7%
Insured patients sometimes eligible if meeting various other terms	227	10.0%
Policy makes no mention of different rules for insured population	1,709	75.1%
Maximum income for free care for insured patients (median as % of FPG)	245	200%
Maximum income for discounted care for insured patients (median as % of FPG)	242	400%
Insured patients only eligible if meeting hardship criteria?
Yes	94	4.1%
No	2,183	95.9%
Financial assistance offered when bills exceed hardship limit?
Yes	1,608	70.6%
No	669	29.4%
Bills at what percent of income qualify as hardship? (median)	1,053	20%
Patient must be resident of specified area for eligibility?	1,509	46.5%
County	48	4.5%
State	337	31.8%
ZIP code	5	0.5%
Service area	549	51.8%
Other	120	11.3%
Patient must be a citizen or have legal US residency?
Yes	192	8.4%
No	2,085	91.6%
Bills must exceed minimum threshold for eligibility?
Yes	178	7.8%
No	2,099	92.2%
Bill minimum amount before eligibility threshold (median)	178	$10
Policy mentions investigating patient’s assets?
Yes	1,457	64.0%
No	820	36.0%
Specific documentation required?
Income	2,240	98.4%
Assets	1,239	54.4%
Tax return	1,220	53.6%
Residency	404	17.7%
Identity	287	12.6%

source Authors’ analysis of data from the 2021 American Hospital Association Annual Survey and the 2024 Dollar For database. note FPG is federal poverty guideline.

EXHIBIT 4. Distribution of US nonprofit hospitals’ charity care criteria for insured patients, 2024.

source Authors’ analysis of data from the 2021 American Hospital Association Annual Survey and the 2024 Dollar For database. note Hospitals with both different income and hardship criteria for insured patients and other criteria for the insured are listed as “Insured patients eligible with different hardship or income criteria.”

The notion of hardship was used by some hospitals to help determine eligibility. Most (70.6 percent) stated that hardship discounts were offered when bills exceeded a certain limit. Among those hospitals that defined such a limit, 20 percent of the patient’s income was the median. Some hospitals considered bills owed only to them, whereas others included the patients’ total bills from all providers (exhibit 3).

A smaller proportion of hospitals (7.8 percent) specified that bills must exceed some minimum amount to qualify for assistance. Among these hospitals, the median was $10, and the interquartile range was between $10 and $300 (exhibit 3; IQR data not shown).

Almost one-half (46.5 percent) of hospitals had a residency requirement for assistance. Among these hospitals, the geographic unit of the residency requirement was most often the hospital’s service area (51.8 percent) or state (31.8 percent) (exhibit 3).

Approximately one in twelve (8.4 percent) hospitals stated that they required or investigated citizenship or legal residency for patients to qualify for charity care. Almost two-thirds of hospitals (64.0 percent) mentioned the patient’s assets as a determinant of charity care eligibility (exhibit 3). As previous studies have noted, the way in which assets are included in determinations of eligibility is often stated without great precision. For this reason, we attempted to determine only whether any mention of asset investigation was made in the financial assistance policy.

Financial assistance policies also varied in the documentation that they required to make determinations of eligibility. Almost all (98.4 percent) required documentation, such as a paystub, to verify income. More than one-half required evidence of the patient’s assets (54.4 percent) or a tax return (53.6 percent). Fewer policies stated that they required documentation of residency (17.7 percent) or identity (12.6 percent) (exhibit 3).

Discussion

In this nationwide analysis of private nonprofit hospitals’ charity care policies, we found that in the absence of any federal regulations specifying charity care eligibility criteria, hospitals have chosen numerous and widely varying criteria to decide who qualifies for free and discounted charity care. This large variation results in disparities in access to charity care and warrants attention from state and federal policy makers interested in improving both nonprofit hospitals’ accountability to taxpayers and low-income patients’ access to charity care.

Our analysis updated and largely confirmed earlier studies showing widely varied income eligibility criteria, with a national mean income cutoff of 216 percent of the federal poverty guideline for free care and 373 percent of the federal poverty guideline for discounted care. This is similar to the 2020 findings by Goodman and colleagues, who used a sample of financial assistance policies from larger hospital systems in 2018.⁹ Our sample was larger and included smaller hospitals while excluding government hospitals, but our study arrived at similar conclusions. Our study also adds state-level context to our understanding of income eligibility criteria. When we corrected for state median income, income cutoffs for free and discounted care were most generous on the West Coast and in the South. In no state in the country, however, was the median income level for hospital free care greater than the state median income, and in some states it was only half of the state median income.

Our analysis adds to the existing literature by demonstrating the frequency of a number of non-income-based eligibility criteria for charity care. We found that a majority of hospitals (54 percent) investigated assets in determining eligibility for charity care. Some hospitals did take steps to mitigate potential harm from this requirement by excluding necessities such as primary residence, retirement savings, and vehicles used for basic transportation when measuring assets.

Most hospitals also reported significant documentation requirements. Such requirements are likely part of the reason why, in a survey of 1,600 patients, Dollar For found that roughly one-quarter of patients who had applied for charity care believed the application to be “somewhat hard” or “very hard.”¹⁹ Patients convalescing from hospitalizations are particularly vulnerable to administrative burdens such as documentation, which still must often be submitted in hard copy through the mail or by using a fax machine.

A sizable minority of hospitals reported residency requirements and restrictions on charity care for insured patients. Although hospitals did generally allow charity care in cases of hardship, this criterion tended to be rather strict. The median hospital required a bill to amount to 20 percent of the patient’s income before consideration was granted on this basis.

Nearly one in ten (8.4 percent) hospitals required proof of citizenship.

One of the less common criteria for charity care was a minimum bill amount, which was included in only 7.8 percent of hospitals. Even when it was listed, the amount was often trivial, with a median value of $10. A minimum this small may be included for the purposes of administrative efficiency, to prevent processing of charity care applications for very small amounts. Some hospitals had significantly larger minimum bill requirements; at the seventy-fifth percentile of those hospitals with minimum bill requirements, the bill must be at least $300 to qualify.

Hospitals’ charity care policies appeared to be somewhat responsive to demand in their local market. Hospitals in counties with lower percentages of people living below 150 percent of the federal poverty guideline and hospitals in counties with lower percentages of uninsured population tended to have higher income limits for free and discounted charity care. This in turn implies that hospitals with less wealthy patient populations and less favorable payer mixes had less generous charity care eligibility policies. One potential explanation for this is that hospitals in lower-income communities and communities with higher rates of uninsured patients likely face relatively higher demand for charity care and thus may attempt to impose more stringent eligibility policies to contain spending. The conclusion that nonprofit hospitals with more uninsured patients face a higher demand for charity care is supported by the finding by Gary Young and colleagues that hospitals in areas with higher shares of uninsured residents devoted more spending to charity care (and less to other community health benefits) than hospitals in areas with lower shares of uninsured residents.²⁰

Mandating modest minimum income eligibility criteria or community benefit spending levels might not be enough to make charity care more available to patients.⁶ In Texas, after a 1995 law required hospitals to spend a minimum of 4 percent of net patient revenue on charity care, many hospitals spending above the threshold decreased their charity care spending.²¹ Given that charity care can only be a small step in addressing the larger societal problems of unaffordable care and medical debt, expanded insurance coverage and decreased out-of-pocket spending must be a part of the solution. Indeed, Bai and colleagues found that hospitals in states that expanded Medicaid eligibility after the passage of the Affordable Care Act increased income eligibility for discounted care more than hospitals in states that did not expand Medicaid.²²

In addition to the eligibility criteria examined in our study, there are additional obstacles to applying for charity care, including the availability and accessibility of information about charity care and the ease (or difficulty) of working with hospital offices tasked with administering charity care. As investigative journalists and state attorneys general have demonstrated, some large nonprofit hospital systems have quite deliberately endeavored to make it harder for eligible patients to receive financial assistance.²³

For hospitals that wish to make it easier, rather than harder, for eligible patients to receive financial assistance, policy avenues exist today to alleviate hospital administrative costs as well as the hurdles faced by eligible patients when applying. The Internal Revenue Service has data on the income and size of virtually every household through tax return filings, and it has the authority to allow hospitals to quickly verify patient income at the point of care, with patient authorization (more detail on this authority appears in 26 US Code 6103).¹⁹ The onerous burdens imposed by the current labyrinth of requirements for hospital financial assistance could quickly become a thing of the past. ▪