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Oregon hospitals’ reported 'community benefit' grew in 2021

Most of the reported $2 billion was derived from serving Medicaid and Medicare patients — only 15% was actual charity care
June 6, 2023

As the cost of wages, pharmaceuticals and other Oregon hospital expenses soared in 2021, so, too, did the amount of hospitals' so-called “community benefit spending.”

A new report the state’s hospital trade group issued says its members tallied $1.97 billion in spending for their communities’ benefit in fiscal year 2021, in the midst of the pandemic. That's an increase of 13% from the year before, the Oregon Association of Hospitals and Health Systems said in a press release.

The group drew its numbers from data that hospitals are required to submit to the Oregon Health Authority.

In decades past, nonprofit hospitals primarily offered free or discounted care, called “charity care,” to needy, uninsured patients to justify their lucrative tax exemptions. But with Medicaid insurance coverage increases following the passage of the Affordable Care Act, hospitals were able to cut their charity care spending. So the Oregon Legislature in 2019 adopted standards for broader “community benefit” spending to be tracked by the state.

It is unclear from the new report the extent to which hospitals in 2021 increased the community benefit services they provided, or whether they simply paid more in pandemic-inflated wages and other costs to provide the same level of services.

The new report reflects a longstanding pattern that the greatest portion of what hospitals consider “community benefit spending” is the shortfall between what Medicare and Medicaid reimburse and what hospitals say is the actual cost of providing care to people those government insurance plans cover.

Hospitals argue that Medicaid and Medicare reimbursements don’t cover actual costs. But there is no agreed-upon method for determining that difference, and hospitals differ in how they calculate it. Plus, some observers and critics say Medicare and Medicaid payments would be sufficient if hospitals were run more efficiently and didn’t seek such large profits.

Just over half of hospitals’ community spending was attributed to treating Medicaid patients — people on the Oregon Health Plan and related programs for low-income residents. Hospitals said it cost them $1 billion more to treat these patients than the state reimbursed hospitals for those services. That was up 16% from 2020, the Oregon Association of Hospitals and Health Systems said.

The community spending tab also included roughly $173 million for the category of "subsidized services," which includes the shortfall on treating the elderly who are covered by Medicare insurance, as well as other services such as emergency and trauma care. That was up 22% from 2020, the industry group said.

Hospitals said they spent $304 million on health professions training, internships, vocational settings, physician residencies and health research, up 33% from the previous year.

Meanwhile, charity care — free or discounted care to lower-income residents — was up 4.7%, to $292 million.That amounts to 15% of the total community benefit tally. The growth came despite high insurance coverage rates of Oregonians due to Oregon Health Plan rolls swelling by more than 300,000 people.

Spending on community projects such as education and support groups was down 10%, to $79 million.

“We are proud of the many ways in which Oregon’s hospitals support the health and well-being of their communities,” said Becky Hultberg, the association’s president and CEO, in a news release. “Community benefit is just one way that hospitals make a difference in people’s lives, and it is help that is needed now more than ever.”

Oregon elected officials have pressed hospitals to spend more on community benefit. As part of that push, state lawmakers effective for 2022 required the health authority to set minimum community benefit spending levels for each hospital. Hospitals have not yet submitted their 2022 spending reports.

The 2021 numbers are, broadly, for calendar year 2021, although each hospital reports by the fiscal year it uses. Some of these may coincide with the calendar year, while others may run mid-year to mid-year, for example.

In the health care field, the cost of wages and pharmaceuticals soared throughout 2020-2022 as part of the economic fallout of the pandemic. With the statewide shortage of registered nurses, many hospitals hired contract traveler nurses at twice or more the monthly cost staff RNs. Labor contract agreements settled during the pandemic often awarded annual wage increases in the high single digits or higher as hospitals strove to attract and keep staff, from nurses to medical assistants and lab technicians. Hospitals have noted they also had to pay rising prices for many pharmaceuticals and cope with high inflation in everything from construction to materials and fuel.

You can reach Christian Wihtol at [email protected].


Submitted by Howard Klink on Tue, 06/06/2023 - 12:54 Permalink

Thank you for this!  I have been raising concern about confusion in language and tracking regarding hospital community benefit spending for some time and you did a good job of capturing the issues.  I believe it is a shell game that needs further regulation and enforcement.

Lynn Knox

Social Determinant Solutions