Medical Debt Soars, Despite 340B Purchases Passing $100 Billion

By: Marcus J. Hopkins, Health Policy Lead Consultant, ADAP Advocacy

Drug purchases under the 340B Drug Pricing Program exceeded $100 billion for the first time in 2025—an increase from 2024 of 22.8%—according to the Health Resources and Services Administration (HRSA), with hospitals accounting for a combined $83,936,162,423 (83.9%) across all hospital types (HRSA, 2026). Yet despite this program’s explosive growth and its inherent promise to expand access to care and treatment for low-income patients, medical debt in the United States now tops $220 billion (Macsata, 2025). Could this be the true reason why patient advocates increasingly find themselves aligned with drug manufacturers on the need to rein in and reform the 340B Program?

Photo Source: ADAP Advocacy | YouTube

Among hospital covered entities (CEs), Disproportionate Share Hospitals (DSHs)—hospitals that serve low-income patients and receive payments from the Centers for Medicare & Medicaid Services (CMS) to cover the costs of providing care to uninsured patients—accounted for $79,235,079,126 (79.2%). Yet despite this influx of cash, nearly two-thirds of adults who carry past-due medical bills owe money directly to hospitals (Macsata, 2025).

By comparison, all Ryan White HIV/AIDS Program (RWHAP) CEs combined accounted for just $3,092,689,404 (3.1%) of all 340B Program drug purchases. State AIDS Drug Assistance Programs (ADAPs) are widely regarded as the Gold Standard among these CEs, and most have operated under a rebate model for decades.

On the heels of HRSA’s new data release, Patients Rising—a national patient advocacy and education group based in Washington, DC—released a report in which they examined over 900 bankruptcy filings across six states (Colorado, Louisiana, Maine, Virginia, Washington, and Wisconsin) and found that 45% of filings listed verified 340B hospitals as creditors, totaling $6.62 million in debt. In some filings, debt accrued at a single 340B hospital accounted for as much as 98% of the household’s total debt. In that specific example, the household's monthly income was just $1,800, while the total debt from Christus Highland was $386,758 (Patients Rising, 2026).

Upon seeing these data, Dr. Adam J. Fein, President of Drug Channels Institute, argues that, due to the unwieldy, undermanaged, and largely unregulated nature of the 340B Program, reform may, in fact, never occur (Fein, 2026).

Dr. Fein argues that this monstrous growth in 340B drug purchases has reached a compound annual growth rate of ~22% per year over the last 15 years (Figure 1), while manufacturer sales have grown by just 7.3%, making 340B the single largest source of manufacturer discounts in the U.S.

Figure 1 – 340B Drug Program Prices: Purchases by Covered Entities, 2010 to 2025

 

Photo Source: Drug Channels Institute

While Dr. Fein does show that pharmaceutical list prices have also grown exponentially, he points to peer-reviewed research that used price-volume-mix decomposition to examine the relative importance of list prices vs. drug utilization (i.e., the number of pills, capsules, syringes, etc. purchased and distributed) to determine whether price increases or utilization were driving the growth of the 340B Program. Zeng et al. found that utilization accounted for an average of 79.6% of 340B growth based on list price, and nearly 100% of growth based on 340B drug prices (Zeng et al., 2025).

Similar to Dr. Fein, ADAP Advocacy has recently argued that CMS, rather than HRSA, should assume control of the 340B Program, in no small part because it has significant regulatory and enforcement staffing resources on hand to administer a program the size of 340B.

But while Dr. Fein’s concern is that Congress will not adequately take up the mantle of reform in the face of the program's enormity, ADAP Advocacy believes it is imperative that they do so. Since March 2025, we've argued that the program is now too big to fail.

In our recent policy paper, "340B Program: The Glue That Should Hold Our Healthcare System Together", we argue that Congress should reform the 340B program to implement a system-wide rebate model (similar to those currently working for state ADAPs), as well as mandating wholly transparent reporting, clearly defining who qualifies as a “patient” eligible to receive 340B discounted drugs, and establishing compliance and enforcement standards that require all covered entities to open disclose how much in rebates they receive and how those revenues are spent in alignment with both the letter and the spirit of the 340B statute.

Photo Source: ADAP Advocacy

ADAP Advocacy stands firmly in our conviction that the 340B Program must be fundamentally reformed. To be clear, no one side—save for patients in need of care—is faultless in allowing this program to spin wildly out of control. There is culpability to go around; but only one side—drug manufacturers—is required to provide discounted prices and rebate revenues to covered entities, and it is far easier for pundits, politicians, and even patients to paint pharmaceutical companies as the bad guys for drug pricing while holding hospitals and other covered entities blameless.

Disclaimer: All funders of the ADAP Advocacy Association are publicly listed on our website. 

Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association; rather, they provide a neutral platform for the author to promote open, honest discussion of public health-related issues and updates.

References:

[1] ADAP Advocacy. (2026, July 27). ADAP Advocacy Calls for CMS to Oversee 340B Drug Pricing Program. Washington, DC: ADAP Advocacy. Press Room. https://www.adapadvocacy.org/s/2026_ADAP_Press_340B_Oversight_CMS_072726.pdf

[2] Fein, A. J. (2026, July 15). The 340B Program Hit $100 Billion in 2025: Has It Become Too Big to Reform? Philadelphia, PA: Drug Channels Institute: Drug Channels. https://www.drugchannels.net/2026/07/the-340b-program-hit-100-billion-in.html

[3] Health Resources and Services Administration. (2026, July). 2025 340B Covered Entity Purchases. Rockville, MD: United States Department of Health and Human Services: Health Resources and Services Administration: Office of Pharmacy Affairs: 340B Drug Pricing Program: Program Updates. https://www.hrsa.gov/opa/updates/2025-340b-covered-entity-purchases

[4] Macsata, B. M., Laws, J., Hopkins, M. J. & Sosa, J. (2025, April). Patient Medical Debt: Findings from Quantitative Patient Survey in the United States. Washington, DC: ADAP Advocacy. https://static1.squarespace.com/static/698f8fa09fc8884466a1becd/t/69d85991b19c033c07b2a52b/1775786385556/2025_ADAP_Project_RW_340B_Asset_17_Medical_Debt_Survey_Report_04-23-25.pdf 

[5] Macsata, B. M., Anthony, G., Hopkins, M. J., & Sosa, J. (2026, July 08). 340B Program: The Glue That Should Hold Our Healthcare System Together. Washington, DC: ADAP Advocacy: Policy Center: 340B: Policy Papers. https://www.adapadvocacy.org/s/2026_ADAP_Project_RW_340B_Asset_32_340B_Glue_Should_Hold_Healthcare_Together_061526.pdf

[6] Patients Rising. (2026, July). Medical Bankruptcy in the United States. Washington, DC: Patients Rising. https://6015202.fs1.hubspotusercontent-na1.net/hubfs/6015202/01-PatientsRising-u4m/Research%20Papers/Medical-Bankruptcy-in-America-and-340B_6-State-Analysis-White%20Paper-email..pdf

[7] Zeng, S., Sarraille, W., & Martin, R. (2025, May 21). What is driving 340B growth: utilization or price? Health Affairs Scholar, 3(6), qxaf104. https://doi.org/10.1093/haschl/qxaf104

Are Nonprofit Hospitals' Community Benefit Tax Breaks Truly Serving Communities in Need?

By: Ranier Simons, ADAP Blog Guest Contributor

Nonprofit hospitals are supposed to be primarily focused on the communities they serve. They exist, in theory, to provide quality, equitable access to care for all, regardless of the ability to pay. The mission should be community service and improving the healthcare outcomes and well-being of their communities. Unlike for-profit hospitals, which concentrate on generating profits for private shareholders or owners, nonprofit hospitals are mandated to use their profits to invest in the community. Unfortunately, data shows that many nonprofit hospitals are not fiscally operating to properly benefit their communities despite the significant tax exemptions they are afforded, referred to as community benefits. In fact, some nonprofit hospital systems are exploiting their tax incentives and adding to patient and community medical debt. As such, many stakeholders and policymakers are increasingly scrutinizing nonprofit hospitals' tax-exempt status.

Photo Source: Third Way

Over half of the hospitals in the United State are designated by the Internal Revenue Service (IRS) as nonprofit.[1] According to the American Hospital Association (AHA), there are approximately 6,120 hospitals in the United States, with 2,987 of them categorized as nongovernment not-for-profit community hospitals.[2] The nonprofit designation means the entities are tax-exempt from most federal, state, and local taxes. A recent study conducted by researchers at Johns Hopkins Bloomberg School of Public Health, Johns Hopkins Carey Business School, and Texas Christian University found that in 2021, nonprofit hospitals received $37.1 billion in tax benefits.[3] Over the next decade, estimates indicate that the federal revenue lost from nonprofit tax breaks will be approximately $260 billion.[1] The significant tax deductions should spawn considerable community benefits. Nevertheless, the reality paints a different picture.

In turn, for the designation as a charitable non-hospital, these entities are required to use the funding generated from the tax breaks to provide for the needs of the patients served. This help is referred to as community benefit obligations. These obligations can be fulfilled with endeavors such as health education programs, community health improvement initiatives, charity care, and financial assistance programs.[1] Unfortunately, data shows that many nonprofit hospitals are not adequately fulfilling their community benefit requirements and, in some cases, operate like for-profit institutions. In some cases, they even fall short of the level of community benefit given by for-profit institutions. 

One of the most quantifiable and identifiable metrics of community benefit is charity care. Charity care is defined as providing free or significantly discounted medical care for patients who cannot afford it. Many patients who face medical affordability challenges are significantly impacted by emergency room or inpatient hospitalization expenses.[4] Both uninsured/underinsured and insured patients present a need for charity care. 

There is a growing chorus amongst stakeholders invested in improving public health calling for reforms to the lucrative 340B Drug Pricing Program, which was initially designed to "stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services." According to a recent report by IQVIA, the 340B Program ballooned to $124B in 2023, yet another report found 85% of disproportionate share hospitals (DSH) earn more in 340B profit than they spend on charity care. The special interests fighting 340B reform claim clear guidelines already exist for community benefit requirements. 

The IRS first issued guidance for hospitals designated as 501(c)(3) nonprofit entities regarding the specific charity care requirement in 1956.[1] This was before Medicare and Medicaid when there was a dire need for a means to help those in need. It directly specified that nonprofit hospitals could not deny care to those who couldn’t pay if they wanted to maintain their nonprofit status. After the advent of Medicare and Medicaid, the IRS pivoted to the community benefits standard concept of required activity in 1969.[5] This broader definition is part of the present dilemma with qualifying the community help nonprofit hospitals provide.

Whether specifically charity care or community benefit, data shows that most nonprofit hospitals are not adequately utilizing their savings from tax-exempt status to reinvest in the community. According to a March 2024 policy brief issued by the nonpartisan Lown Institute, in 2021, “about 80% of [nonprofit] hospitals spent less on meaningful community investment compared to the value of their tax breaks.”[6] For charity care specifically, in 2018, Johns Hopkins University research data showed that overall, nonprofit hospitals provided charity care valued at only 2.3% of their total operating expenses compared to the valuation of their tax exemption, which was 4.3% of total operating expenses.[7] A 2023 United States Senate HELP Committee report indicated similarly trending 2021 data. The report examined 16 major nonprofit hospital chains, all of which had more than $3 billion in annual revenue. Twelve of the 16 allotted less than two percent of their total revenue to charity care, with six of those twelve allotting less than one percent.[8]

In contrast to most nonprofit hospitals with poor levels of tax break investment, the Lown Institute identified a few positive anomalies for the 2021 fiscal year. Data was taken from information on IRS Form 990. Ten hospitals and ten hospital systems were identified as having community investments that exceeded their tax breaks.[9] The analysis was based on metrics deemed to have a “direct and meaningful impact on community health.”[9] These metrics included financial assistance, community health improvement services, cash and in-kind contributions, community-building activities, and subsidized health services.[9] 

Lakeland (Fla.) Regional Medical Center and Summit Healthcare Regional Medical Center (Show Low, Ariz.) topped the hospital list with high community investment spending at $194 million and $159 million, respectively.[9] Hackensack Meridian Health (Edison, N.J.) and Nebraska Medicine (Omaha) topped the health system list at $358 million and $119 million, respectively.[9] It is unusual for nonprofit entities to have community investments that exceed their tax exemptions. Usually, for-profit entities would have more of an incentive to have high levels of charity expenditures as for-profit entities can write them off to lower their tax burden, unlike nonprofits.

Photo Source: Health Affairs

The actions of nonprofit hospitals that do not adequately satisfy their charity care and community benefit are damaging in multiple ways. Some of the bad actors have low levels of revenue spent on charity care yet aggressively pursue bills of patients who cannot afford their needed care. Nonprofit hospitals have sold patient debts to for-profit collection agencies, garnished wages, put liens on property, and even denied non-emergent care to low-income individuals with insurmountable medical debt.[10] This is in bad faith and not in the community's best interests when there is ample revenue from the tax-exemption profit that can and should be used for charity care. Data shows that many low-income patients who are victims of aggressive debt collection practices are eligible for free and discounted care. Despite the protections put in place by the Affordable Care Act (ACA), many nonprofit hospitals make it difficult for patients to find out they are eligible for charity care, in addition to making the process challenging to navigate.[8]

Some nonprofit hospitals operate more like for-profit entities, especially regarding acquisition. Nonprofit hospitals have merged, acquired for-profit hospitals and insurers, and even opened for-profit businesses in other countries.[11] Several nonprofit hospitals with low percentages of revenue spent on charity care also have high CEO compensation. For example, in 2021, Allina Health System in Minneapolis, Minnesota, paid its CEO a salary equal to 21% of the total charity care provided by the entire hospital system.[8] New York Presbyterian Hospital paid its CEO $10.9 million while only allotting $68.5 million in charity care when the total 2021 hospital system revenue was almost $10 billion.[8]

Reform is needed to ensure nonprofit hospitals operate in the manner for which they were intended. Reforms suggested by the Committee for a Responsible Federal Budget include transparency and refining reporting, clearly delineating what community benefit means, and setting minimum community benefit spending levels.[8] The form entities use to report their community benefit activities is IRS Form 990 Schedule H. That form needs to be revised to require nonprofit hospitals to give significantly more details of categories and amounts of community benefit spending.[8] Moreover, rules should be updated to require reporting at the facility level, not the health system parent organization level.[8]

Community benefit should be more explicitly defined. Currently, it is too nebulous and includes metrics that are hard to measure and do not necessarily provide direct community or patient benefit.[8] Things like physician education and Medicaid shortfall should no longer be considered. Most importantly, things like Medicaid shortfall expenditures are already offset by funding, such as disproportionate share hospital payments.[8]

Federally, Congress should consider setting minimum levels of community benefit spending. Some states have already instituted this. Texas, for example, has stringent state laws around nonprofit hospitals. If an entity is not designated as a Medicaid Disproportionate Share Hospital (DSH), it can fulfill the required charity care levels by: providing charity care and community benefit equaling at least five percent of the entity or system’s net patient revenue with four percent of that being charity care and government-sponsored indigent care, provide charity care that exceeds the amount of funding generated by tax-exempt status, or prove that charity care is being given at proportionate levels corresponding to the community needs and entity’s ability.[12]

Photo Source: NPR

As a part of the continuing examination of the burden of medical debt, this week, ADAP Advocacy launched an online survey to collect data on patient perspectives and experiences with medical debt. It is available nationwide for anyone in the United States to participate. It is also anonymous with the option of providing personal information if you wish to be contacted for additional follow-up.

The ADAP Advocacy-sponsored Ryan White Grantee 340B Patient Advisory Committee commissioned the study to support patient-centered reform. Many hospitals, as recipients of drug rebates under the 340B Drug Pricing Program, are notoriously bad actors. Data from the survey will add color to patients’ lived experiences with medical debt’s whole-person effect on their lives.

Medical debt continues to adversely affect patients' healthcare outcomes and cause stresses on other aspects of daily living. Nonprofit hospitals are supposed to operate in a manner that benefits anyone who needs care regardless of the financial means to pay for it; however, that is not the status quo. Reform is necessary since data shows many nonprofit hospitals are focused on generating profits instead of providing robust investment into their communities.

Senator Bernie Sanders succinctly described the dire situation when he expressed, “At a time when 85 million Americans are uninsured or underinsured, over 500,000 people go bankrupt because of medically-related debt, and over 60,000 Americans die each year because they cannot afford to go to a doctor when they need to, nonprofit hospitals should be providing more charity care to those who desperately need it, not less….And if they refuse to do so, they should lose their tax-exempt status.”

Read our related blog, In the United State, is Medical Debt is Truly Hospital Debt?

[1] Committee for a Responsible Federal Budget. (2024, June 12). The Federal Tax Benefits for Nonprofit Hospitals. Retrieved from https://www.crfb.org/papers/federal-tax-benefits-nonprofit-hospitals

[2] American Hospital Association. (2024, January). Fast facts on U.S. Hospitals. Retrieved from https://www.aha.org/statistics/fast-facts-us-hospitals

[3] Johns Hopkins Bloomberg School of Public Health. (2024, September 26). U.S. Nonprofit Hospitals Received More than $37 Billion in Total Tax Benefits in 2021. Retrieved from https://publichealth.jhu.edu/2024/us-nonprofit-hospitals-received-more-than-37-billion-in-total-tax-benefits-in-2021

[4] Levinson, Z., Hulver, S., Neuman, T. (2022, November 3). Hospital Charity Care: How It Works and Why It Matters. Retrieved from https://www.kff.org/health-costs/issue-brief/hospital-charity-care-how-it-works-and-why-it-matters/

[5] Bai, G., Letchuman, S., & Hyman, D. A. (2023). Do nonprofit hospitals deserve their tax exemption? New England Journal of Medicine, 389(3), 196–197. https://doi.org/10.1056/nejmp2303245

[6] Lown Institute. (2024, March). Hospital Community Benefit Spending: Improving transparency and accountability around standards for tax-exempt hospitals. Retrieved from https://lownhospitalsindex.org/wp-content/uploads/2024/03/lown-institute-fair-share-policy-brief-20240321.pdf

[7] Zare, H., Eisenberg, M. D., & Anderson, G. (2021). Comparing the value of community benefit and Tax‐Exemption in nonprofit hospitals. Health Services Research, 57(2), 270–284. https://doi.org/10.1111/1475-6773.13668

[8] United States Senate HELP Committee. (2023, October 10). Executive Charity Major Nonprofit Hospitals Take Advantage of Tax Breaks and Prioritize CEO Pay Over Helping Patients Afford Medical Care. Retrieved from https://www.sanders.senate.gov/wp-content/uploads/Executive-Charity-HELP-Committee-Majority-Staff-Report-Final.pdf

[9] Gooch, K. (2024, March 26). 20 hospitals, systems where charity care exceeds tax breaks. Retrieved from https://www.beckershospitalreview.com/finance/20-hospitals-systems-where-charity-care-exceeds-tax-breaks.html?oly_enc_id=8229J1560589D4S

[10] Thompson, I. (2023, September 5). Nonprofit Hospitals Pursue Aggressive Medical Debt Collection. Retrieved from https://nonprofitquarterly.org/nonprofit-hospitals-pursue-aggressive-medical-debt-collection/

[11] Rosenthal, E. (2024, July 22). Why many nonprofit (wink, wink) hospitals are rolling in money. Retrieved from https://www.washingtonpost.com/opinions/2024/07/22/nonprofit-hospital-health-care-industry/

[12] Texas Hospital Association. (2024, September). Charity Care and Community Benefit in Texas: Frequently Asked Questions. Retrieved from https://www.tha.org/wp-content/uploads/2024/09/Charity-care-FAQ-September-2024-FINAL.pdf

[13] Muoio, D. (2023, October 11). Sanders: Nonprofit hospitals 'should lose their tax-exempt status' if they 'refuse' to increase charity care. Retrieved from https://www.fiercehealthcare.com/providers/sen-sanders-nonprofit-hospitals-should-lose-their-tax-exempt-status-if-they-refuse

Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association, but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about public health-related issues and updates.   

In the United States, is Medical Debt is Truly Hospital Debt?

By: Ranier Simons, ADAP Blog Guest Contributor

Medical debt continues to be a crippling financial burden to many Americans, with most of the debt being owed to hospitals in the United States. Approximately 100 million adults have medical debt ranging from $500 to over $5,000.[1] Despite changes credit reporting agencies made in 2022, 15 million Americans still have more than $49 billion in unpaid medical collections on their credit reports.[2] Medical debt is a financial hindrance to many aspects of people’s lives and can even result in poor healthcare outcomes and denial of care. The evolution of medical debt relief efforts continues to move forward on the federal and state levels in hopes of unsaddling Americans of debt that they had no choice in incurring.

Photo Source: Rhode Island Currant | Getty Images

In response to a 2022 report conducted by the Consumer Financial Protection Bureau (CFPB), three nationwide credit reporting bureaus - Equifax, Experian, and TransUnion – voluntarily made changes to reduce the number of reported medical bills in collections. They increased the time span that trigger reporting of medical bills in collections from 180 days to one year, stopped reporting and removed bills less than $500, and stopped reporting bills that were previously bad debt in collections but had been paid, thus resolved.[2] Despite these actions, 15 million Americans are still plagued with unpaid medical collections on their credit reporting.

In an attempt to further help Americans, CFPB proposed new rules in June 2024 that would be significant if finalized. The rules would eliminate the special medical debt exception, establish guardrails for credit reporting companies, and ban repossession of medical devices.[3] The CFPBs intent is “to end the senseless practice of weaponizing the credit reporting system to coerce patients into paying medical bills that they do not owe.”[3] These rules would help close existing loopholes that leave medical debt accessible to creditors. Additionally, since much of the collection activity reported is inaccurate, it would prevent predatory collections on false claims. Most of the people who have medical collections on their reports do not have any history of other types of credit problems.[4] It is unfair for creditors to block people from the things that they need when the CFPB found that a medical bill on a credit file is not a good indicator of the likelihood a person will repay a loan.[3]

The Urban Institute has done a great deal of work aggregating medical debt data. They created an interactive mapping tool, which shows the geography of debt in America and the debt differences that can reinforce the wealth gap between white communities and communities of color. Nationwide, roughly five percent of Americans have unpaid medical debt based on their credit reports.[5] However, the South and people of color carry a disproportionate amount of that debt. For example, in North Carolina, 8.5% of the population has medical debt in collections compared to 5% nationally. In terms of demographic distinction, 10.5% of communities of color in North Carolina have bad medical debt in contrast to 7.8% of white communities.[5]

Photo Source: Carolina Journal

Following the trajectory of other states, the administration of Governor Roy Cooper in North Carolina created a plan to alleviate medical debt in the state. With the federal government's support, Governor Cooper created the model for a plan that would link Medicaid expansion dollars to patient debt. Medicaid expansion provides billions in funding for hospitals through state-directed payments that states use to pay hospitals to care for low-income patients.[6] Governor Cooper created a plan that penalizes hospitals, reducing the Medicaid expansion funds they would receive if they do not agree to his debt-relief plan. 

Hospitals would have to expand financial aid criteria to allow more patients to qualify for aid to stave off a future of debt, in addition to eliminating old debts of low-income patients.[6] Eliminating debt would occur via debt buy-back in the manner non-profits such as Undue Medical Debt have succeeded.[6] In essence, bad debt is purchased at extreme discounts and then written off. By agreeing to the plan, hospitals would gain almost twice as much funding as they would if they did not. Atrium Health would receive roughly $1.7 billion by participating, compared to $900 million if they did not.[6] Atrium Health has been historically very aggressive with debt collection efforts against patients. In agreement with Cooper’s plan, Atrium Health announced it would nullify all existing judgments and liens against patients for unpaid bills, some going back as far as twenty years.[7]

Numerous reports have showcased how some large hospital systems have practiced aggressive collection and billing activity against vulnerable low-income patients in conflict with their fiduciary requirements to exercise charity care and institute patient financial assistance. Most of the medical debt is specifically hospital debt.[8] According to a report published by the Robert Wood Johnson Foundation, nearly 75% of adults with medical debt owe some or all of it to hospitals.

Photo Source: Urban Institute | RWJF

Brenda Miller with the Lown Institute previously argued in a blog, "Hospitals have the choice to offer robust financial assistance, set reasonable prices, not sue patients, and pay their fair share in community benefits if they are nonprofit. By adjusting their policies, hospitals have the power to alleviate the long-term financial suffering caused by our broken healthcare system."[9]

As a part of the continuing examination of the burden of medical debt, this week, ADAP Advocacy launched an online survey to collect data on patient perspectives and experiences with medical debt. It is available nationwide for anyone in the United States to participate. It is also anonymous with the option of providing personal information if you wish to be contacted for additional follow-up.

The ADAP Advocacy-sponsored Ryan White Grantee 340B Patient Advisory Committee commissioned the study to support patient-centered reform. Many hospitals, as recipients of drug rebates under the 340B Drug Pricing Program, are notoriously bad actors. Data from the survey will add color to patients’ lived experiences with medical debt’s whole-person effect on their lives.

Many types of consumer spending are voluntary. Most medical spending is not. When one’s health and well-being are threatened, potential financial ruin should not add stress to decisions nor influence them. Capitalism-driven financial toxicity has no place in healthcare. Hospitals should be institutions of optimal healing for all. As Jen Laws (he/him/his), CEO of Community Access National Network, points out, “...equity-minded persons and entities prioritizing impact over intent is a very real thing.”[10]

Read our related blog, Are Nonprofit Hospitals' Community Benefit Tax Breaks Truly Serving Communities in Need?

[1] Vankar, P. (2024, January 31). Medical debt in the U.S. - Statistics & Facts. Retrieved from https://www.statista.com/topics/8219/medical-debt-in-the-us/#topicOverview

[2] Consumer Financial Protection Bureau. (2024, April 29). CFPB Finds 15 Million Americans Have Medical Bills on Their Credit Reports. Retrieved from  https://www.consumerfinance.gov/about-us/newsroom/cfpb-finds-15-million-americans-have-medical-bills-on-their-credit-reports/

[3] Consumer Financial Protection Bureau. (2024, June 11). CFPB Proposes to Ban Medical Bills from Credit Reports. Retrieved from https://www.consumerfinance.gov/about-us/newsroom/cfpb-proposes-to-ban-medical-bills-from-credit-reports/

[4] Pollitz, K. (2015, Jan 8). Medical Debt Among Insured Consumers: The Role of Cost Sharing, Transparency, and Consumer Assistance. Retrieved from https://www.kff.org/health-costs/perspective/medical-debt-among-insured-consumers-the-role-of-cost-sharing-transparency-and-consumer-assistance/

[5] Urban Institute. (2024, July 10). The Changing Medical Debt Landscape in the United States. Retrieved from https://apps.urban.org/features/medical-debt-over-time/

[6] Levey, N., Alexander, A. (2024, September 23). How North Carolina Made Its Hospitals Do Something About Medical Debt. Retrieved from https://kffhealthnews.org/news/article/north-carolina-hospitals-medical-debt/?utm_campaign=KHN%3A%20First%20Edition&utm_medium=email&_hsenc=p2ANqtz-9_BieSj5YKhMJyyO8tuHpBuD1MMqvTUIH1qbLMpxBqXd2wLyVlWUhNZuMd1TjH99Epf8GJEgAie1fXAtiopyrJGRkkQg&_hsmi=325818163&utm_content=325818163&utm_source=hs_email

[7] Crouch, M., Ledger, C. (2024, September 20). Atrium Health cancels thousands of past medical debt judgments

[8] Karpman, Michal. (March 2023). MOST ADULTS W ITH PAST-DUE ME DICAL DE BT OWE MONEY TO HOSP ITAL. Robert Wood Johnson Foundation. Retrieved from https://www.rwjf.org/en/insights/our-research/2023/03/most-adults-with-past-due-medical-debt-owe-money-to-hospitals.html

[9] Miller, Brenda. (2023, March 28). Are Hospitals Driving Medical Debt? The Lown Institute. Retrieved from https://lowninstitute.org/are-hospitals-driving-medical-debt/

[10] Laws, J. (2023, June 19). The Necessity of Patient-Centered 340B Reform. Retrieved from https://www.hiv-hcv-watch.com/blog/june-19-23

Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association, but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about public health-related issues and updates.   

Provider ‘Smash and Grab’ Tactics Fueling Medical Debt, Hurting Patients

By: Ranier Simons, ADAP Blog Guest Contributor

In the United States, healthcare is one universal expense incurred by everyone, regardless of their station in life. Approximately 100 million people in this country, including 41% of adults, have some sort of medical debt.[1] Some people can manage it, but many struggle. As a result of medical debt, people have had to cut spending on food and necessities, deplete savings, delay purchasing a home, work multiple jobs, or even declare bankruptcy.[1]

Photo Source: iStock (purchased)

Most of the medical debt is actually hospital debt, and that debt is owed to large hospitals, not small private practices. In the United States, there are two different types of hospitals: for-profit and nonprofit. There are 5,139 community hospitals, with 1,228 being for-profit, 951 being state and local government-run hospitals, and 2,960 being non-governmental nonprofit health facilities.[2] For-profit hospitals are business-oriented and owned by investors and shareholders; thus, they are focused on making money for their stakeholders. Nonprofit hospitals are not beholden to any shareholders or investors. In theory, their profits are to be reinvested into the hospitals for their operations. Additionally, nonprofit hospitals are tax-exempt and required to provide more community health services and serve patients regardless of whether they can afford care. Unfortunately, some nonprofit hospitals are the worst offenders when it comes to saddling patients with debt.

Nonprofit hospitals do not pay any federal and state income, property, or sales taxes and receive other tax breaks.[2] In 2020, the nation’s nonprofit hospitals received an estimated $28 billion in tax benefits, accounting for 44% of their net income.[3] In return for the tax benefits, the federal government requires nonprofit hospitals to provide community benefits such as charity care. Charity care is providing services to low-income people for free or at significantly reduced rates.[3] The Affordable Care Act (ACA) also mandates that they must maintain a transparent and available financial assistance program and refrain from taking “extraordinary collection actions” against patients eligible for charity care.[4] The reality of some of the largest nonprofit hospitals is a travesty of the concept of charity care.

Photo Source: National Nurses United

Some nonprofit hospitals aggressively pursue patients over their bills. They garnish paychecks and sell patient accounts to collection agencies (debt buyers) that harass and intimidate. Lawsuits are filed against patients for outstanding balances. Some of them are filed against people who qualify for charity care. These lawsuits attach legal fees and late payment interest, multiplying the original outstanding debt amounts. Moreover, some hospitals pursue family members for a patient’s medical debts and even place property liens on patients’ homes. Many do not find out about property liens until a relative has passed. Property liens lower the value of homes and adversely affect the transference of intergenerational wealth.

Federal tax law mandates that nonprofit hospitals spend some of their revenues as community benefit and defines the kind of spending that qualifies but does not stipulate the amount. Charity care is just one of the defined categories of spend. In 2020, nonprofit hospitals had approximately $28 billion in tax exemptions but provided only $16 billion in free or discounted services through charity care.[5] 

U.S. Senator Bernie Sanders, chair of the Senate Committee on Health, Education, Labor & Pensions (HELP), filed a congressional report on nonprofit hospitals and their tax exemptions. The committee examined 16 of the largest nonprofit health systems in the U.S., finding that they spent less than 60% of the estimated value of their tax breaks on charity care.[6] The 16 hospital chains examined took in more than 3$ billion in annual revenue. Twelve of the 16 chains dedicated less than two percent of their total revenue to charity care, with 6 of those 12 having less than 1% of their total revenue dedicated to charity care.[3] Between 2012 and 2019, nonprofit hospitals increased their average operating profit by more than 36% and almost doubled their cash reserves. In the same timeframe, charity care spending dropped from only $6.7 million to $6.4 million.[3] Ironically, in 2021, of the 16 nonprofit hospital chains in the report, the average CEO compensation was $8 million, with a collective total of more than $140 million.[3]

Photo Source: WRAL

Editor's Note: ADAP Advocacy recently called into question 340B Drug Discount Program practices with an examination focused on growing 340B revenues, increasing executive compensation, declining charity care, and the exploding medical debt.

Sen. Sanders feels that Congress should specifically define the level of charity care and financial assistance required of nonprofit hospitals. One suggestion is that tax breaks be limited to the amount of charity care provided. Additionally, Sanders feels that hospital financial assistance programs should have defined standards. For example, some of the hospitals do not transparently explain, advertise, or actively facilitate entering qualified patients into the programs. Instead, some hospital systems, such as Atrium in North Carolina, steer patients towards loans to pay their outstanding bills that sometimes have interest rates as high as 13%.[7]

Hospital groups pushed back against the analyses by Sen. Sanders, but they also tend to oppose any accountability or transparency reforms.. The American Hospital Association states that nonprofit hospitals' community benefit is comprehensive and encompasses more than just charity care. It says that community benefit includes research, medical innovation, absorbing underpayments from Medicaid, health education, and housing assistance.[6,8] That sentiment is misleading and flawed. For example, a good deal of research is funded by taxpayers’ dollars.

Jen Laws, President & CEO of the Community Access National Network (CANN), isn't buying the AHA's argument. According to Laws, financial assistance and community benefit are different line items on the Internal Revenue Service's Form 990 for a reason. In fact, CANN has been quite vocal on the need for reforms to programs designed to help indigent patients, yet are falling short of that intended goal.

According to Laws, community assumption is a "good faith" definition, but loopholes surrounding hospital-related nonprofit status tax rules inevitably can lead to bad faith in this space, or even abuse. He believes the overwhelming body of evidence surrounding the decline in hospital charity care is in direct opposition of the IRS' intention, namely providing a benefit to needy persons, families, and communities.

Laws said, "For example, our government, namely the IRS, hasn't updated 'community benefit' rules in decades and many no longer apply, like having an open Emergency Room. This gets to the core of CANN's position - honesty is not part of that muddy language. And we need to be frank about that lack of honesty."

It is crucial that community benefit standards are revamped with a focus on charity care that directly benefits those in need. In some states, the difference between the amount of funds spent on charity care and the total tax exemptions the nonprofit hospitals receive is greater than the recorded debts listed on patients' credit reports.[3] Change must come so that needy patients' lives are no longer ruined by being sued by hospitals for outstanding balances as low as $500 or less that they can’t afford to pay.

[1] Levey,N. (2022, June 16). 100 Million people in America are saddled with health care debt. Retrieved from https://kffhealthnews.org/news/article/diagnosis-debt-investigation-100-million-americans-hidden-medical-debt/

[2] Modi, J. (2023, March 21). Nonprofit vs. for-profit hospitals: what’s the difference? Retrieved from https://www.buzzrx.com/blog/nonprofit-vs-for-profit-hospitals-whats-the-difference

[3] United States Senate Health, Education, Labor, and Pensions Committee. (2023, October 10). Mahority Staff Report: Major Nonprofit Hospitals Take Advantage of Tax Breaks and Prioritize CEO Pay Over Helping Patients Afford Medical Care. Retrieved from https://www.sanders.senate.gov/wp-content/uploads/Executive-Charity-HELP-Committee-Majority-Staff-Report-Final.pdf

[4] 26 U.S.C 501(r)(4), (6); Internal Revenue Serv, Billing and Collections – Section 501(r)(6) (Jul. 13, 2023), https://www.irs.gov/charities-non-profits/billing-and-collections-section-501r6. 

[5] Miller, A., Hawryluk,M. (2023, July 11). As Nonprofit hospitals reap big tax breaks, states scrutinize their required charity spending. Retrieved from https://kffhealthnews.org/news/article/nonprofit-hospitals-tax-breaks-community-benefit/

[6] Wilkerson,J. (2023, October 10). Bernie Sanders bashes nonprofit hospitals over their tax breaks. Retrieved from https://www.statnews.com/2023/10/10/bernie-sanders-nonprofit-hospitals/

[7] Levey,N. (2023, August 16). North Carolina hospitals have sued thousands of their patients, a new report finds. Retrieved from https://kffhealthnews.org/news/article/north-carolina-hospitals-patient-debt-lawsuits/

[8] American Hospital Association. (2023, October). Tax-exempt hospitals provided nearly $130 billion in total benefits to their communities. Retrieved from https://www.aha.org/system/files/media/file/2023/10/Results-from-2020-Tax-Exempt-Hospitals-Schedule-H-Community-Benefit-Reports.pdf

Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association, but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about public health-related issues and updates.