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.   

Fed-Up with Medical Debt Owed to Hospitals, States and Municipalities Respond

By: Ranier Simons, ADAP Blog Guest Contributor

Medical debt is a significant financial burden in the United States. It affects both insured and uninsured adults. Medical debt encompasses the high bills consumers are saddled with, in addition to the credit card and other personal loan debt incurred while trying to pay the medical bills.[1] Approximately 100 million Americans hold $195 billion in medical debt, with most owing less than $1,000.[2] A previous ADAP Advocacy blog discussed how patients are even being failed by what is supposed to be charity care by nonprofit hospitals. Nonprofit and for-profit hospitals send patients into financial ruin using predatory collection agencies and other tactics.[3] Medical debt is unavoidable debt, often from singular emergent occurrences, dissimilar to other consumer debt incurred by choice. Realizing the need to help communities, cities have taken innovative measures to relieve their citizens' medical debt woes.

Photo Source: Urban Institute

According to the Urban Institute, over 74% of medical debt is owed to hospitals.[10] Hospital debt has become big business. Noam Levey, senior correspondent for KFF Health News, explains, “Our healthcare system is now generating medical debt on an industrial scale…And a good part of that is coming from not-for-profit health care.”[11] About two-thirds of hospitals will take legal action against outstanding debt, including collections, with some even denying non-emergent care for unpaid debt. Patients’ best interests are not at the forefront when a hospital denies access to needed care due to bills in arrears. Some hospitals have even placed liens on patients’ homes. Liens are an additional financial burden and affect generational wealth since one cannot sell or pass down a property saddled with liens.[3]

One route being utilized by cities is to take advantage of the existing system. Patients' unpaid medical debts are sold to collection agencies as bad debt for small fractions of the actual amounts. Customarily, collection agencies buy this second market debt cheaply and then try to collect as much as possible as profit. Several cities, including Washington, D.C., New Orleans, Louisiana, and Toledo, Ohio, have used funds to buy patients medical debt and forgive it.[2] A large portion of the funding municipalities have used to erase the debt is pandemic relief money. Some municipalities, such as Cook County, Illinois, have partnered with a nonprofit named RIP Medical Debt to purchase medical debt.[2,4]

Photo Source: KFF

Since 2014, RIP Medical Debt has abolished over $11.8 billion in medical debt for over seven million people.[5] With donations, they have purchased large bundles of medical debt at pennies on the dollar and then canceled the debts instead of trying to make a profit. They are contracting with cities and counties to do the same. RIP Medical Debt helps municipalities analyze their hospital systems' medical debts. They identify those with medical debts that are five percent or more of their income and or patients who are at or below 400% of the poverty level.[6] People cannot apply for assistance, nor do they have to. Once it is verified that criteria are met, qualified purchased medical debts are canceled, and beneficiaries are sent letters notifying them of their debt forgiveness. Over 16 cities, 12 counties, and seven states have expressed interest in collaborating with RIP Medical Debt.

Utilizing medical debt erasure is a significant relief to many. However, funding is limited, and it does not address the deeper issues. Many Americans are uninsured or underinsured. Many people with insurance have high-deductible plans, which place them in the guillotine of runaway medical expenditures. Additionally, many people can’t afford their high co-payments or coinsurance payments when they are stuck with receiving out-of-network care. Allison Sesso, President & CEO of RIP Medical Debt, expressed, “Across all health care services, the pricing is just way too high for people to afford, and we need transparency on pricing to make informed health care decisions.”[7]

Legislation is another avenue states are using to help with medical debt. While it’s not debt forgiveness, Maryland has laws that raised the income threshold for hospital care and prohibited wage garnishment or home liens in certain medical debt judgments.[2] There is a current bill being considered in Maryland, HB328, that “expands the number of patients receiving free and low-cost hospital care by ending arbitrary asset and geographic tests used by 27 hospitals to bar patients who were eligible for low-cost care’.[8]

Photo Source: CNN

States are also working towards preventing medical debt from ruining individuals’ credit. California Attorney General Rob Bonta is a sponsor of Senator Monique Limón’s bill, SB-1061, which would block healthcare entities and associated collections agencies from sharing bad medical debt with credit bureaus. If it becomes law, California would be the third state to remove medical bills from credit reports, following Colorado and New York, which enacted laws in 2023.[9] Hospitals and collection agencies have used credit reporting to force people to pay bad debts. However, credit reporting can result in the denial of housing and job applications and disrupt families’ financial lives with repercussions that lower quality of life and social mobility.[3]

Medical debt is not going away in the foreseeable future, nor are the high costs of medical care. The challenges of medical debt disproportionately hinder the lives of the poor, ethnic minorities, and other marginalized groups. Creating solutions to shield consumers from the ravages of medical debt is essential. However, dismantling the root causes of unregulated and disparate medical services pricing is paramount. Band-Aids of temporary relief do not override the foremost requirement of systemic change.

[1] Lopes, L., Kearnet, A., Montero, A., Hamel, L., Brodie, M. (2022, June 16). Health care debt in the U.S.: The broad consequences of medical and dental bills. Retrieved from https://www.kff.org/report-section/kff-health-care-debt-survey-main-findings/

[2] Biron, C. (2023, July 21). Americans owe billions in medical debt. Can cities help? Retrieved from https://www.reuters.com/article/idUSL8N38W2UP/

[3] Simons, R. (2023, November 30). Provider ‘smash and grab’ tactics fueling medical debt, hurting patients. Retrieved from https://adapadvocacyassociation.blogspot.com/2023/11/provider-smash-and-grab-tactics-fueling.html

[4] MacDougall, H., Tuttle, M., Henning-Smith, C. (2024, March 18). To address the crisis of medical debt, lawmakers should focus on Greater Minnesota. Retrieved from https://www.minnpost.com/community-voices/2024/03/to-address-the-crisis-of-medical-debt-lawmakers-should-focus-on-greater-minnesota/

[5] RIP Medical Debt. (2024). https://ripmedicaldebt.org/

[6] Walsh, J. (2023, April 25). Cleveland City Council approves medical debt relief; here's what that means. Retrieved from https://www.news5cleveland.com/news/local-news/investigations/cleveland-city-council-approves-medical-debt-relief-heres-what-that-means

[7] Vollers, A. (2024, February 22). Governments can erase your medical debt for pennies on the dollar — and some are. Retrieved from https://www.thelundreport.org/content/governments-can-erase-your-medical-debt-pennies-dollar-and-some-are

[8] End Medical Debt Maryland. (2024, February 14). Testimony to the House Health & Government Operations Committee. Retrieved from https://mgaleg.maryland.gov/cmte_testimony/2024/hgo/1bQYmcYDHBKw2yjI4-IgapCig5mvNIusH.pdf

[9] Work, M. (2024, March 11). California attorney general boosts bill banning medical debt from credit reports. Retrieved from https://kffhealthnews.org/news/article/california-attorney-general-medical-debt-ban-on-credit-reports/

[10] Urban Institute. (2023, October 10). Debt in America: An interactive map. Retrieved from https://apps.urban.org/features/debt-interactive-map/?type=medical&variable=medcoll

[11] Thompson, I. (2023, September 5). Nonprofit hospitals pursue aggressive medical debt collection. Retrieved from https://nonprofitquarterly.org/nonprofit-hospitals-pursue-aggressive-medical-debt-collection/

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.   

340B Covered Entities’ Revenue Witnessed Huge Executive Compensation Increases, Alarming Charity Care Decreases

By: Marcus J. Hopkins, ADAP Blog Guest Contributor, and Founder & Executive Director of the Appalachian Learning Initiative (APPLI)

Research conducted by ADAP Advocacy, as part of its ongoing 340B Project, and its newly minted Ryan White Grantee 340B Patient Advisory Committee found executive compensation increased significantly at 340B Covered Entities after they became eligible for 340B drug rebates as a source of revenue. In the same period, hospitals receiving 340B rebates almost uniformly saw nearly universal decreases in the percentage of charity care they provided as a percentage of revenues.

Read the ADAP Advocacy press release, here.

Photo Source: CANN

ADAP Advocacy examined total annual revenues for select Covered Entities participating in the 340B Drug Pricing Program—including executive compensation (only Chief Executive Officers, or CEOs)—charity care totals, and charity care as a percentage of annual revenues. The analysis identified trends across 340B Covered Entities, breaking them into two groups: hospitals and non-hospital grantees. It compares the year before each organization was deemed 340B eligible, one year after, five years after, ten years after, and the most recent year on file.

Across the non-hospital grantees, executive compensation increased at an average rate of 391.3%. When excluding outliers, that average was 320.2%. Across the hospitals, CEO compensation increased at an average rate of 224.9%, including outliers, and 186.8% when accounting for outliers.

Photo Source: Vistage.com

Of the hospitals examined, just three hospitals—Ascension’s St. Francis, Bon Secours’ St. Francis Xavier Hospital, and Wellstar’s Piedmont Athens Regional Medical Center—increased the charity care they provided as a percentage of overall revenues by 114.9%, 86.7%, and 13.2%, respectively. An additional two hospitals provided no charity care information. Overall, charity care as a percentage of revenues decreased across all hospitals at an average rate of 29.7%. When accounting for outliers, the average decrease was 36%.

These decreases in charity care as a percentage of total revenue come at a time when there are mixed reports about the number of Americans and households with medical debt in the United States. Different agencies and outlets report vastly different perspectives and analyses of medical debt, highlighting the need for more clarity and transparency about how medical debt is calculated and counted.

According to the Biden Administration, the number of Americans with medical debt on their credit reports fell by 8.2 million from the first quarter of 2020 to the first quarter of 2022. They attribute this decrease to streamlining by the Department of Veterans Affairs (VA) to improve access to medical debt relief for veterans with lower incomes, the purchasing and forgiveness of medical deb from hospitals and other sources using funds from the American Recovery Plan (ARP) by individual municipalities and counties, and the development of a new credit score that excludes medical debt.

Photo Source: National Foundation for Credit Counseling

Conversely, a report released by the Consumer Financial Protection Bureau in 2022 found that there was roughly $88 billion in medical debt on consumer credit reports. Since that report, credit agencies have voluntarily removed debts of less than $500, debts less than a year old, or those that have been marked as ‘Paid’ (Goldberg, 2023). Additionally, Kaiser Family Foundation (KFF) found that one out of every ten adults has medical debt and that the amount owed is at least $195 billion. 

According to Goldberg’s article in Politico, the real issue is that total medical debt is impossible to quantify in the United States “…because it hits people in incalculable ways.” Medical debt doesn’t always take on the form of debt sent to collections that will be reported on credit reports:

• Patients may be actively paying on debts owed, meaning that the only people aware of the medical debt are the holder and the patient.
• Patients may have paid medical debts using credit cards or personal loans, which again, so long as the patient remains current on their payments, would not be reflected on credit reports.
• Patients may have borrowed from family or friends and are repaying them.

These represent just a few of the potential scenarios that make the true total of medical debt impossible to quantify.

What is clear when looking at maps of households with medical debt released by the Urban Institute is that the communities where the percentage of households with medical debt in collection are largely located in the American South, including almost every county in West Virginia and South Carolina, as well as a plurality of counties in Oklahoma, North Carolina, and Texas. It is therefore important to evaluate which hospitals serving those communities are living up to their obligations of using 340B funds to improve patient care and access to care and treatment.

Editor’s Note: At the request of ADAP Advocacy’s CEO, Brandon M. Macsata, to demonstrate transparency, we’re sharing some information about compensation paid to his firm, Purple Strategy Group, Inc. (PSG). PSG is paid a monthly management fee, which covers the work Brandon does on administrative, accounting, governance, marketing, and programs. The monthly fee is $8,000 per month, which has remained at that level since 2013 without an increase. Based on budget and net revenue year-end numbers, Brandon is also eligible to receive a performance bonus up to $6,500. Additionally, Brandon gives back to the organization annually, with his annual financial contributions ranging between $2,500 and $15,000+. No fringe benefits are paid, since Brandon is a 1099 contractor and not an employee. He is eligible to receive additional compensation for special projects that fall outside the scope of work, although most years there are no such projects.

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. 

340B Hypocrisy: The Inconvenient Truth Behind Why We Need to Reform This Vital Safety Net Program

By: Brandon M. Macsata, CEO, ADAP Advocacy
       Jen Laws, President & CEO, Community Access National Network

The 340B Drug Pricing Program (“340B”) is probably one of the most transformative public health programs providing lifesaving supports and services to people living with HIV in the United States, second only to the Ryan White HIV/AIDS Program (“RWHAP”). As such, rigorous debate about the future of the program is not only healthy, but it is also paramount to its success. As patients (and patient advocates), it is our responsibility to demand accountability, transparency, and stability. There is universal agreement about the vital role 340B plays in improving access to healthcare. But for many – including ADAP Advocacy and the Community Access National Network – we contend that the program could be doing more…and better! The focus of the program should be on the patients, and not the Covered Entities, medical or service providers, or any other business enterprises making lots of money off it. That is the inconvenient truth behind why we need to reform this vital safety net program.

Photo Source: CANN

Section 340B of the Public Health Service Act (PHSA) is a Drug Pricing Program established by the Veterans Health Care Act of 1992. That year, Congress struck a deal with pharmaceutical manufacturers to expand access to care and medication for more patients; if pharmaceutical manufacturers wanted to be included in Medicaid’s coverage, then they’d have to offer their products to outpatient entities serving low-income patients at a discount. The idea was brilliantly simple. Drug manufacturers could have a guaranteed income from participation in the Medicaid program and Covered Entities could have guaranteed access to discounted medications. Congress set-up a payment system by way of rebates and discounts affording certain healthcare providers a way to fund much needed care to patients who could not otherwise afford it. 

“…to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” 

H.R. Rep. No. 102-384(II), at 12 (1992)

THAT is the legislative intent behind 340B. THAT is where some of us want to return 340B’s focus. THAT is why reform is coming!

Ironically, critics of the 340B reform movement – often motivated by self-preservation and protecting their ever-expanding budget and geographic footprint – are quick to attack the idea of the need for reforms. Sadly, they’re also quick to turn their criticism into personal attacks, including questioning the intentions, morals, and character of the people supporting reform. They charge, using Inspector Clouseau “gotcha” style rhetoric, that we’re in the “pockets” of the drug manufacturers because we accept their money to help with our patient advocacy and education (yet there is no “gotcha”, since this information is quite publicly available on our websites, annual tax returns, Guidestar, as well as frequent public commentary). 

Isn’t it funny how the “gotcha” mentality cannot accept the obvious, that maybe our interests align with the drug manufacturers because it is in the best interest of the patients. Drug manufacturers make products patients want and need. Ensuring funding flows in a way that expands patient access to medications does indeed benefit both patients and the drug manufacturers. It should be noted, this criticism tends to also neglect mentioning the interests of the entities challenging reform: anti-competitive consolidation among hospitals and pharmacies (leaving whole areas without services), increasing profits, paying for salaries unrelated to healthcare, and increasing administrative salaries are all excellent examples of why we’re left asking “Who is actually benefiting from this program?”

The truth of the matter is, aside from a growing list of patients, patient advocacy organizations, and drug manufacturers, there is a growing chorus calling for reform. Academia wants it (NEJM, Penn LDI, USC Schaeffer), economists want it (Nikpay, Gracia), national trade associations want it (NACHC, NTU), policy think tanks want it (CMPI, NAN), and even multiple news media outlets are suggesting it (Forbes, NYT, WSJ). Local activists are also increasingly fed-up with what they’re witnessing (Dinkins, Feldman, Winstead).

Dr. Diane Nugent, Founder & Medical Director of the Center for Inherited Blood Disorders, recently noted an opinion piece in the Times of San Diego, “A September 2022 analysis by the Community Oncology Alliance revealed that some hospitals participating in 340B price leading oncology medications nearly five times more than the price they paid. Another study found that hospital systems charge an average of 86% more than private clinics for cancer drug infusions.”

But speaking of deep pockets, isn’t it also an inconvenient truth that the very folks fighting reform, and fighting improving the program so patients can benefit more directly from it, are the same folks financed by big hospital systems, and mega service providers abusing 340B intent?

A question often asked by advocates learning about 340B: “So, exactly how much money are we talking about here?”

Photo Source: Business 2 Community

Well, we don’t really know…sort of. For Federal Grantees covered under 340B, their grant contracts require accounting of 340B rebates as part of their programmatic revenues. Those revenues are required to be re-invested in the program, which generated the income. This level of transparency is pretty much a “gold standard” that other Covered Entities (less maybe hemophiliac centers) in the 340B space are required to meet. That’s part of why we, and other advocates, are calling on minimum reporting requirements for hospitals, contract pharmacies, and pharmacy benefit managers (insurers covering medications) to begin providing some data. Clearing up the murkiness, if you will. What we do know is drug manufacturers reported more than $100 BILLION in 340B-related sales last year.

That’s concerning especially because “charity care” is declining and medical debt is a growing issue for more and more patients and their families. The Affordable Care Act mandated “charity care”, or “financial assistance”, to be offered by non-profit hospitals seeking to qualify as 340B entities but did not place any definitions behind the mandate, including any “floor” of how much charity care a hospital has to offer. 

Now, in all rhetoric opposing any type of transparency in 340B, hospitals tend to conflate their “uncompensated care” and “unreimbursed care” or “off-sets” for public health programs – these don’t necessarily reflect any “charity” being provided to patients. These things should be separated when considering what benefit hospitals provide a community. And under that lens, things get kind of ugly with far too many of the 340B hospitals reporting providing less than 1% of their operating costs as charity. When reviewing how much hospitals write off in bad debt, or going after patients who can’t afford care, often far exceeding those charity care levels, we’re left asking if the “non-profit” designation is really a declaration of concentrating “profits” by way of salaries to top executives rather than formal shareholders?

That bad debt shows up for patients as medical debt. And we need to be very specific here: according to the Urban Institute, some 72% of patients with medical debt owe some or all of that debt to hospitals. Meaning, what we call medical debt is really hospital debt. The situation is unarguably bad. This year alone the Los Angeles County Office of Public Health issued a report outlining for policymakers the role and responsibility hospitals have in driving medical debt and how increasing charity care might stem this problem. 

Photo Source: Business Insider

As patients, and frankly as patient advocates who represent thousands like us, medical debt isn’t an issue that can be swept under the carpet. Entire communities avoid necessary care to protect their financial interests. We’ve personally watched our friends open GoFundMe accounts to cover medical expenses. We’ve helped our loved one’s cover food and light bills to not miss a medical bill. We also well recognize how negative credit reporting from medical debt can hurt people from getting rental housing or a car loan, or even simple necessities. And when thinking about how much we don’t know about what’s behind that $100 billion price tag, the fact that patients face these concerns on the regular is pretty obscene.

We do know there are plenty of good actors in the 340B space. Particularly, Federal Grantee Covered Entities, like Ryan White Clinics and AIDS Drug Assistance Programs (ADAPs). And we know they’re generally great actors because of that transparency in reporting and the oversight offered by their grant contracts. Ultimately, we’re not necessarily asking for a whole lot more than that for literally everyone else who stands to make a buck in the chain between drug manufacturers and patients. Indeed, that trust on Federal Grantees, particularly Ryan White Clinics and ADAPs, is part of why drug manufacturers restricting 340B sales held a carve out for these Federal Grantees. (To be fair and without much public fanfare, years ago, we – as in ADAP Advocacy and CANN – helped to negotiate these carve-outs as part of our advocacy. Our relationship with drug manufacturers isn’t a one-way street as detractors might try and sell you on. 

$100 billion is a lot of money! Is it too much to ask, “Why aren’t patients benefiting more directly from this ever-growing healthcare program?” Facts show that 340B revenues are soaring year after year, yet against the grim backdrop of consistently declining charity care in the impoverished communities needing the most help. To make matters worse, rising medical debt is crushing families. Patients deserve better. People living with HIV who depend on the RWHAP and 340B deserve better! And THAT is why we need reform.

Read our policy reform suggestions here.

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.

Medical Debt is a Severe Financial Burden in the United States

By: Ranier Simons, ADAP Blog Guest Contributor

Medical debt is a major financial crisis in the United States. It is a major barrier to financial health and even physical health. Studies show that medical debt is negatively correlated with health issues. People who have problems paying their medical bills have a shorter life expectancy, poorer mental health, health issues like hypertension, and lower self-reported health status.[1] 

Photo Source: The Sycamore Institute

Even though over 90 percent of the U.S population has some semblance of health insurance, medical debt is still a pervasive and debilitating issue.[2] Present-day medical insurance plans have many cost-sharing requirements that saddle patients with bills they cannot pay. With high monthly premiums, these requirements, such as high deductibles and co-payments, result in bad life decisions. People face juggling basic needs such as food, clothing, and housing with paying medical bills generated by necessary care. Moreover, people borrow from family or even financial institutions, going into even further debt to take care of their medical bills.

The Kaiser Family Foundation published a brief shining light on the burden of medical debt in the United States. The overall finding was that the burden of medical debt is stratified along racial and economic lines, age cohorts, strength of insurance coverage, and health status. The data source was the Survey of Income and Program Participation (SIPP). Significant medical debt was defined as people who owed more than $250 in unpaid medical bills as of December 2019.[2]  The survey shows that people in the United States owe, at the minimum, approximately $195 billion in medical debt. Roughly six percent of adults have over $1,000 in medical debt, and one percent (about 3 million people) owe over $10,000.[2]

Photo Source: KFF

Along racial lines, African-Americans are reported to be more likely to have significant medical debt. Of the 9 percent of adults surveyed who meet the study threshold of high debt, 16 percent of those are non-Hispanic African-American. This contrasts to 9 percent of non-Hispanic White Americans and 4 percent of non-Hispanic Asian-Americans. Regarding gender, more women report having high medical debt than men; 11 percent and 8 percent, respectively. Part of this discrepancy could be attributed to women having lower incomes and increased healthcare expenditures associated with childbirth.

Unsurprisingly, older adults are more likely to have significant medical debt than younger people. However, there is a distinction apparent among those later in life. The report shows that the percentages decrease when older adults reach Medicare age. Twelve percent of adults aged 50-64 report significant medical debt, in contrast to 6 percent of those aged 65-79.[2] 

In terms of income, those with lower or moderate incomes are more likely to have high medical debt. Twelve percent of adults with incomes below 400% of the federal poverty level have such debt. Income is essential because some do not have liquid assets to pay out of pocket maximums, deductibles, and co-insurances, even with insurance. Sixteen percent of adults stated they would need to take on credit card debt to meet an unexpected $400 expense.[2] Four hundred dollars could easily be an emergency room visit co-pay for a privately insured person or even an urgent care visit for someone who was not insured.

Health status in combination with income is another relationship leading to medical debt. Those with more medical issues, by definition, have more medical expenditures due to chronic health maintenance needs, and higher utilization of services generates more bills that accumulate over time. Those with more serious medical issues cannot earn as much income being hindered physically by their medical problems in both ability and maintaining consistent employment.

Geography was also shown to be a factor by the report. People living in rural states in the South reported as being 12% of those reporting high medical debt, as opposed to 10% in the Midwest, 6% in the West, and 8% in the northeast. Related to this geographical distribution is Medicaid. Twelve states that have not expanded Medicaid under the Affordable Care Act are Alabama, Florida, Georgia, Kansas, Mississippi, North Carolina, South Carolina, South Dakota, Tennessee, Texas, Wisconsin, and Wyoming.[3]

The KFF report is proof that expanding coverage is not a panacea to alleviating the financial burden associated with medical debt. Effective change will come with restructuring healthcare finance, socioeconomic infrastructure, wholistic population needs assessment, and re-examining the country’s value system.

[1] Pellegrin, M. (2021, May 19). How medical debt affects health. Retrieved from https://www.sycamoreinstitutetn.org/how-medical-debt-affects-health/
[2] Rae, M., Claxton, G., Amin, K., Wager, E., Ortaliza, J., & Cox, Cynthia. (2022, March 10). The burden of medical debt in the United States. Retrieved from https://www.healthsystemtracker.org/brief/the-burden-of-medical-debt-in-the-united-states/
[3] Holahan, J., Buettgens, M., Banthin, J., & Simpson,M. (2021, June 30). Filling in the gap in states that have not expanded Medicaid eligibility. Retrieved from https://www.commonwealthfund.org/publications/issue-briefs/2021/jun/filling-gap-states-not-expanded-medicaid

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.