Non-Profit Hospitals and the Medical Debt Crisis in America

The Impact of Non-Profit Hospitals

Instead of healing our communities, non-profit hospital systems are hurting them. 

Despite receiving local, state, and federal tax breaks to ensure community investment, many hospital systems are driving individuals and families into crippling medical debt. Indeed, some estimates show that on average, non-profit hospitals spent 77 percent less on charity care and community investment than the estimated value of their tax breaks — what some refer to as a “fair share” deficit. 

• The total “fair share” deficit for non-profit hospitals amounted to $14.2 billion in 2020. That’s enough to erase the medical debts of 18 million people or rescue the finances of more than 600 rural hospitals at risk of closure. 
• UC Health in Colorado, a non-profit hospital that recorded $839 million in 2023 profits but sues thousands of patients each year – using collection agencies so that UCHealth’s name is not associated with the lawsuits. 
• Non-profit hospitals like Allina Health System, which has an annual revenue of $4 billion, had a policy of denying care to people with medical debt – including children and those with chronic illnesses like diabetes and depression. Allina only ended this practice recently, after the state investigated.  
• Some non-profit hospitals are garnishing the wages of patients who hold medical debt, denying people care if they have outstanding bills, putting liens on people’s homes, and sending aggressive debt collectors after individuals who should have received financial assistance.   

But it doesn’t have to be that way, which is why Community Catalyst and a growing movement of local, state, and national partners, impacted individuals, and policymakers are calling on the Biden administration and IRS to act now to hold non-profit hospitals accountable to their tax breaks.  

Act now by urging the Biden administration to hold non-profit hospitals accountable to their communities.

Federal Actions to Address Hospital Debt

What the Biden administration can do:  

There are actions that the Biden administration can take to address the underlying drivers of hospital debt – including stronger regulations and better enforcement through the IRS to hold non-profit hospitals accountable to their tax breaks.  

A letter signed by more than 60 organizations was sent to the IRS and Department of Treasury in March 2023. It provides a clear path forward for the Biden administration to:   

• Bolster financial assistance policies to prevent people from incurring medical debt in the first place.  
• Regulate excessive charges from non-profit hospitals.  
• Protect people from harsh billing and collection practices.  
• Strengthen enforcement of regulations for non-profit hospitals.

Momentum grows: 

Bipartisan support for action is mounting and includes pressure from impacted community members, health advocacy organizations, and members of Congress – with Senator Warren, who sits on the Committee on Finance, along with Senators Grassley, Cassidy, and Warnock, issuing a letter to the IRS in August; and a Republican-led Ways and Means hearing last year in the House. 

Community Catalyst, backed by a growing movement of state and national partners, is pleased to see a planned audit of IRS oversight related to non-profit hospitals.   

We urge swift action to address medical debt from non-profit hospitals.  

“It’s essential that the agency does not delay in moving forward with new policies to protect people as there are clear and widespread issues.”

This builds on widespread support and praise of the Biden administration’s work through the CFPB to reign in the predatory promotion of deferred interest credit cards in medical, dental, and hospital settings. That impactful development was a result of growing public pressure from more than 11,000 people across the country who shared their stories directly with policymakers and demonstrated the power of community organizing and advocacy.   

Take, for example, people like Sahida, Kaylynn, and Aracely – who were all crushed with medical debt and should have otherwise qualified for charity care or financial assistance. Stories like these are all too common and were reflected at a medical debt roundtable and day of action in Washington, D.C. last year.  

The problem is widespread:  

In exchange for certain tax breaks, non-profit hospitals are meant to provide discounted or free care to their communities — known as charity care. But too often, these hospital systems will engage in aggressive billing and debt collection practices. 

The problem is widespread and requires federal action. According to a 2023 Lown Institute report, if non-profit hospitals wanted to, they could easily eliminate medical debt for more than 18 million people in America — just with the money that they should be, but are not, spending on the communities they are designed to serve.  

Take for example people like Sahida, Kaylynn, and Aracely – who were all crushed with medical debt and should have otherwise qualified for charity care or financial assistance. Stories like these are all too common and were reflected at a medical debt roundtable and day of action in Washington, D.C. last year. 

Identifying Bad Actors

Community Catalyst has compiled a list of bad actors, among them:  

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