“Recent research has revealed substantial variability in hospital charity care and other financial assistance (FA) policies. This lack of standardization makes it much more difficult for patients and anyone assisting them (including clinicians) to ascertain their likely eligibility for free or discounted care. [..]
Conventionally, nonprofit hospitals have covered essentially the full range of “medically necessary” services that health insurers typically cover. But we have noticed a troubling development: some hospitals now offer assistance only if care is urgently needed, thereby excluding a broad range of necessary care.
Hospitals offer free and discounted care in several ways, as outlined in their FA policies. One way is simply to discount or cap charges for “self-pay” (i.e., uninsured) patients regardless of financial need, if the patients either pay the entire bill promptly or adhere to a structured payment plan. Hospitals also provide FA based on a patient’s financial need, either waiving charges entirely or discounting them substantially.
These discounts are often offered on a sliding scale based on the patient’s household income, typically defined in terms of specified percentages of the federal poverty level. In addition, a key provision in the Affordable Care Act, known as Section 501(r), requires that tax-exempt hospitals cap charges for low-income, uninsured patients at insured market rates.
Historically, most hospitals separated their charity care policy from their discount policy. In recent years, however, a trend toward blending these into a single FA policy has emerged. Patients with the greatest financial need continue to receive full charity care, whereas those with somewhat higher incomes may receive smaller discounts, usually on a sliding scale. For tax-exempt hospitals, Section 501(r) caps sliding-scale charges for lower-income patients at the amount the hospital generally bills for insured patients.
In addition to defining and determining measures of financial need, hospitals’ FA policies also specify which services these policies cover. Typically, charity care policies have covered the full range of medically necessary services. Accordingly, the Section 501(r) cap on charges also applies to all medically necessary care. To define medical necessity, implementing regulations suggest using generally prevailing medical or insurance standards, but they do not impose a particular definition, “in recognition of the fact that health care providers and health insurers may have reasonable differences in opinion on whether some health care services are medically necessary in particular circumstances.”
This considered reluctance to be unduly prescriptive leaves room for tax-exempt hospitals to restrict their FA policies’ coverage. Most have not done so, but some now define medical necessity much more restrictively than it has conventionally been understood, as covering only services that are urgently needed.
Under long-standing understanding, “medically necessary” commonly excludes only unproven experimental care, nonmedical “custodial” care, and cosmetic or other purely elective services. This new use of “elective,” however, seems to go quite a bit further, to exclude a major portion of medical care that is needed but not urgently needed. For example, the companywide FA policy of HCA Healthcare (a large, for-profit operator of health care facilities) states that “to be eligible for a charity write-off review, a patient must have incurred emergent, non-elective services.” [..]
Experience from the Covid-19 pandemic carries lessons for the potential effects of declining to provide FA for elective services. To protect patients and hospital workers and to optimize hospital resources during the surge in demand for critical care, most hospitals suspended all “elective” services for several months. Conducted under the guidance of the Centers for Disease Control and Prevention, this suspension was intended to focus resources on “those whose condition requires emergent or urgent attention to save a life, preserve organ function, and avoid further harms from underlying condition or disease.”
Various medical groups and experts provided specific examples of procedures that were, or could be, considered elective during the pandemic. These included kidney-stone removal, cancer biopsy, hernia repair, hysterectomy, cardiac-valve replacement, early-stage surgery for various treatable cancers, and possibly even scheduled cesarean deliveries. Clearly, many of these procedures treat serious conditions that will worsen if care is delayed for too long. As a group of international physicians cautioned, “many nonemergent surgeries, such as for cancer care, may face dire consequences if delayed considerably.”
This warning addressed the possibility of merely postponing elective care until public health normalcy was restored or until the patient’s condition became an emergency. Yet treatments for some medical conditions would probably never qualify as nonelective because the conditions are chronic, and people could conceivably live with them indefinitely. Examples might include hernias, major joint degeneration, serious back pain, debilitating carpal tunnel syndrome, and various sports injuries. If care for these conditions doesn’t cross the line from postponable to “emergent,” people may be left to cope indefinitely with considerable pain or serious physical limitations. [..]
Some straightforward steps could help further stem or reverse the spread of this new practice. First, influential advisory or advocacy groups could consider adopting model FA policies that specify a more standard definition of medically necessary care that avoids a sweeping understanding of “elective” services. Second, lawmakers could consider whether tax-exempt hospitals may restrict some or any aspects of their FA policies to “emergent” care only. Third, hospital executives should be encouraged to regularly examine their FA policies, to ensure that exclusions will not be excessively restrictive and that the policy aligns with the organization’s mission. One or more of these measures could keep this troubling development from taking root.”
Full article, MA Hall and J Garber, New England Journal of Medicine, 2025.7.5