Rachael Shehan has no health insurance and virtually no income. But when serious respiratory problems strike, her hospital has never provided financial help, she said.
Instead, the 39-year-old Lenoir resident says, Caldwell Memorial Hospital has sent bill collectors who have hounded her for payment and ruined her credit.
Now, she sometimes bursts into tears when medical problems arise. I know the hospital isnt going to help me with my bills, says Shehan, who relies on food stamps and the help of friends.
Nonprofit hospitals such as Caldwell Memorial are exempt from property, sales and income taxes. In return, they are expected to give back to their communities, largely by providing care to those who cant afford it.
Like Caldwell, most North Carolina hospitals are devoting a fraction of their expenses to help the poor and uninsured, an investigation by the Charlotte Observer and The News & Observer of Raleigh found.
In 2010, most of the states hospitals spent less than 3 percent of their budgets on charity care the practice of forgiving all or part of a patients bill.
Mecklenburg Countys hospitals perform better than average, with all spending more than 4 percent of their budgets on charity care. They are among the states most profitable hospitals.
In North Carolina, no government rules dictate how much charity care a nonprofit hospital must provide. Not even the IRS takes action. The result: A nonprofit hospital can spend virtually nothing on charity care and receive the same tax breaks as a hospital that sets aside as much as 10 percent of its budget to help the poor.
The newspapers findings raise questions about whether some hospitals are earning their nonprofit status, experts say.
The investigation found:
• About a third of North Carolina hospitals including Caldwell Memorial spent less than 2 percent of their budgets on charity care in 2010. Most of these are small hospitals in rural areas, and many report they are losing money.
• Some of the hospitals with the lowest percentages serve counties where the needs are high. Vidant Duplin Hospital, for instance, caters to a high-poverty county where one in four people lack health insurance. It spent less than 1 percent of its budget on charity care.
• Hospital practices vary widely. While the least generous hospitals are giving less than 1 percent to free care, the most charitable hospital Thomasville Medical Center spent about 13 percent.
• Many uninsured patients are never offered financial assistance. More than a third of hospitals in the state provide no details about their charity care policies on their websites. And more than 20 uninsured patients interviewed say they were never informed about charity care policies when they sought treatment.
• Most hospitals appear to be getting more in tax exemptions than theyre giving back in the form of charity care.
No agency or group calculates the value of hospital tax exemptions, so the newspapers derived estimates from publicly available data.
Based on the taxes paid by large for-profit hospital systems, North Carolinas nonprofit hospitals get tax breaks worth roughly 4.4 percent of their expenses, the newspapers estimated. About two-thirds of those hospitals spend less than that on charity care.
Adam Searing, director of the N.C. Justice Centers Health Access Coalition, questions whether many hospitals are doing enough charitable work to earn their tax exemptions.
I feel like the hospitals are breaking the contract they made, he said.
Jessica Curtis, director of Community Catalysts Hospital Accountability Project, said the Observers findings echo what she sees happening elsewhere in the country. Its almost a blatant disregard for the needs of the poor, said Curtis, whose Boston-based group works to improve access to care.
To be sure, charity care medical treatment provided for free or at reduced rates to low-income patients is just one of many ways that hospitals help their communities.
They absorb millions in losses from treating Medicare and Medicaid patients because government reimbursement doesnt cover their costs. They also train doctors and nurses, sponsor wellness programs and support community clinics.
But experts say charity care is by far the most important way hospitals can help the needy. Its particularly crucial in North Carolina, where the unemployment rate is among the nations highest and where roughly one in five residents under 65 lacks health insurance.
Officials with the N.C. Hospital Association, the group that lobbies for the states hospital industry, say their members work hard to help the poor. Charity care spending in North Carolina rose to about $853 million in fiscal 2010 almost twice the amount spent in the pre-recession days of 2006, the NCHA estimates.
But some of the hospitals that spend the least on charity care simply cant afford to do more, says NCHA spokesman Don Dalton. Thats because theyre among the states most financially challenged hospitals. Many are in rural areas.
The resources available for them to do vastly more charity care are probably not there, Dalton says.
But experts say it generally doesnt hurt a hospitals finances to become more charitable.
When hospitals sue patients or turn their accounts over to collection agencies, their actions often damage patients credit. Hospitals are losing money on those patients anyway and would likely experience little financial harm if they forgave more of the bills, experts say.
A 2005 study by the Center for Studying Health System Change found that bad debt at hospitals declined as charity care policies became more generous. Such changes, the study found, had little impact on hospital bottom lines.
Large needs, little help
Some of the least generous hospitals serve counties where numerous residents are poor and uninsured.
North of Wilmington, many families in Duplin County work demanding, low-wage jobs in poultry plants or farm fields. But advocates for Duplin Countys poor say it has been difficult to get financial help for uninsured people with large hospital bills.
Sonia Royes, a social worker for Catholic Charities, said she has tried about six times to get financial assistance for uninsured clients who had bills from Vidant Duplin and has never succeeded.
She called the hospital in January 2011, asking if there was help available for one uninsured client. The official told her the hospital had no charity care policy, she said.
Duplin spent about $245,000 on charity care in 2010 less than 1 percent of its budget.
Curtis, of Community Catalyst, said its unacceptable that any nonprofit hospital spend less than 1 percent of its budget on charity care. A hospital spending that little on charity care in a community with high needs raises questions about that hospitals commitment to the community, she said.
According to Vidant Duplins policy, uninsured patients who cant pay their bills can qualify for free care if their income is less than 200 percent of the poverty level and their household net worth is less than $25,000. For an individual, 200 percent is equivalent to making about $22,000 a year.
Officials for Vidant Duplin say many patients simply dont provide the documentation that the hospital requires to prove that theyre eligible for charity care.
I do believe our charity care could be a lot higher, said Lucinda Crawford, the hospitals vice president of financial services. Its sometimes a challenge for folks to bring in financial information and to follow up on a charity care application.
Hospital CEO Jay Briley said that his hospital outstrips most others when judged by a different measure the amount of unreimbursed care it provides. In 2010, the hospital reported losing about $1.1 million on Medicaid patients and about $4.3 million on patients who never paid their bills.
Duplin, like many other hospitals, routinely sends collection agencies to recover some of that money a practice that can damage a patients credit.
Duplins officials say theyve beefed up efforts to make uninsured patients aware of their charity care policy.
Until recently, Crawford said, patients who came through the emergency department didnt routinely interact with a counselor who explained the policy. But the hospital changed that last year, so those patients now have a chance to talk with a counselor before theyre discharged.
With so many of its patients poor and uninsured, Duplin has struggled financially in recent years, losing more than $400,000 in 2010.
In North Carolina, as in most other states, hospitals arent required to spend even a single dollar on charity care. Federal rules require nonprofit hospitals to provide some community benefit, but they dont specify what those benefits should be.
In 2007, the U.S. Senate Finance Committee proposed requiring nonprofit hospitals to spend at least 5 percent of their budgets on charity care a standard that only about a fifth of North Carolina hospitals met in 2010.
That proposal never became law.
In Illinois, the state Department of Revenue last year denied property tax exemptions to three hospitals that were found to be spending less than 2 percent of their patient revenue on charity care. That followed a 2010 ruling by the Illinois Supreme Court, which concluded that Provena Medical Center wasnt providing enough charity care to qualify for a tax exemption.
No group or agency keeps national statistics on what hospitals spend on charity care. But in some states where charity care reporting is required, the data give some sense of how hospitals stack up.
North Carolina hospitals appear to be providing less charity care than those in Texas, one of the few states that requires hospitals to give a minimum level of financial assistance.
In Texas, most hospitals spend more than 4 percent of their budgets on charity care; in North Carolina, most spend less than 3 percent.
North Carolina hospitals provide more charity care, on average, than those in California, where hospitals operate on significantly smaller profit margins.
Restrictive charity policies
In the Blue Ridge foothills that surround Caldwell Memorial, many patients could use financial help.
The closings of textile plants and furniture factories have left Caldwell County with an unemployment rate of 13 percent, among the states highest. Nearly one in five residents lives in poverty.
About 3,500 of the hospitals patients got free care last year, said Don Gardner, the hospitals vice president of finance. But many more about 7,000 to 8,000 got something else: calls or letters from collection agencies.
Rachael Shehan was among them.
She estimates her hospital bills now total more than $15,000. The 110-bed hospital put her on monthly payment plans that she says she cant afford.
Now, she says, her credit is so bad she has been turned down for a small loan and has no hope of getting a car.
I think (the hospital) should offer help, Shehan said. Theres an awful lot of people who need it.
At Caldwell Memorial, only patients who live in Caldwell County, have less than $3,000 in assets and earn less than 125 percent of the poverty level are entitled to free care, according to the hospitals website.
In 2010, the hospital reported spending about $1.5 million of its $99 million budget on charity care. But Gardner said that represents just a part of its good works.
Caldwell Memorial, for instance, provides about $1.3 million worth of free tests and medical procedures each year to a clinic that provides medical help to needy residents. It also reported losing about $2.3 million treating Medicaid patients in 2010.
I have no doubts that weve done a yeomans job of providing service, regardless of ability to pay, Gardner said.
The foundation that raises money for Caldwell Memorial recently claimed on its website that the hospital gave $18 million to charity care in 2010. In fact, the hospital spent about a tenth that much. The foundation removed that claim last year, soon after an Observer reporter asked a hospital executive about it. Gardner said he believes the error was unintentional.
The hospital operates on a slim profit margin less than 2 percent in 2010.
Gardner declined to discuss any patients accounts with the Observer. But in general, he said, some patients dont complete charity care applications or dont cooperate in providing documents the hospital needs to verify eligibility. Others, he said, are too proud to take charity care.
Policies hard to find
At some North Carolina hospitals, its not easy for patients to learn what financial help is available.
Many patients told the newspaper that hospital officials never mentioned the availability of charity care.
More than 40 hospitals including Gaston Memorial Hospital in Gastonia and Lake Norman Regional Medical Center in Mooresville didnt put key details about their charity care policies on the Web in late 2011, the newspapers review found.
Two-thirds of North Carolina hospitals didnt list their full financial assistance policies on the Web.
Sampson Regional Medical Center was among them.
The hospital spends less than $250,000 a year on charity care less than 1 percent of its budget. But many of its patients need all the financial help they can get. The hospital serves Sampson County, a rural community east of Fayetteville where more than one in five residents lives in poverty.
Hospital officials say those earning less than 125 percent of the poverty level can qualify for free care. They say theyve been working to get more patients qualified.
But many patients have not cooperated by applying, says chief financial officer Jerry Heinzman. Some simply dont care because they dont intend to pay and already have poor credit ratings, he said.
Mary Jo Warren has been swamped by hospital bills.
Since suffering a stroke in 2010, Warren lost her nursing job and her employer-sponsored health insurance. Shes since been to Sampson Regional several times for high blood pressure, congestive heart disease and broken bones from frequent falls.
Until her health worsened, Warren said she was frugal, hardworking and self-reliant. Now she frets about not being able to pay her hospital bills. She gets groceries from a food pantry and two local churches.
She applied for charity care, and Sampson Regional cut 45 percent off the balance that she owed.
Two months later, a lawyer for the hospital wrote Warren two letters demanding payment of more than $1,000 and threatening a lawsuit.
After being contacted by a reporter, Heinzman said he has asked Warren to apply again for financial assistance. He previously knew nothing about her inability to work, he said.
Still, calls from hospitals and collection agencies come almost daily, rattling her nerves.
They say, Ms. Warren, we expect you to pay us money, she said. I say, I aint got any. And they say, Well, thats no excuse.
Fearing more bills, she has been reluctant to seek additional medical treatment. So she now waits until she is really desperate to get some help.
And that, she knows, cant be good for her health.
Washington correspondent Franco Ordoñez and News & Observer database editor David Raynor contributed.