By Michelle Crouch
Co-published with The Charlotte Ledger
North Carolina hospitals are poised to cash in big by committing to the state’s ambitious medical debt relief plan — and we now know exactly how much each hospital stands to gain.
A public records request made to the state by the Charlotte Ledger/NC Health News revealed that Atrium Health alone is expected to rake in about $1.7 billion in federal Medicaid money in fiscal year 2025.
That amount is nearly double the $892.5 million it would have received had it not opted into the debt relief plan, according to preliminary calculations from the Department of Health and Human Services reviewed by the Charlotte Ledger/NC Health News.
Other hospitals across the state participating in the debt relief plan are set for similarly large gains, with all nearly doubling what they would have received in Medicaid reimbursement had they not participated. Novant Health, for example, will see its payout surge from $391 million to $751 million in 2025, while the payment to UNC Health will grow from $551 million to $1.06 billion, the calculations show.
The figures help explain why all 99 of the state’s acute care hospitals signed on to the state’s debt relief plan, even though it requires them to forgive medical debt deemed uncollectible for low- and middle-income patients dating back to 2014.
Previously, Atrium and Novant — two of the state’s largest hospital systems — had refused to get involved in debt relief.
The new program also requires hospitals to make significant changes to their financial assistance policies, including: offering discounts ranging from 50 percent to 100 percent to low-income patients, capping the patients’ interest rates on hospital-held medical debt at 3 percent, proactively screening all patients for financial aid eligibility, and agreeing not to report medical debt to credit agencies.
1 in 5 has medical debt in collections
Medical debt has become a growing concern in North Carolina and across the country, with more than 41 percent of Americans reporting they have some debt from medical or dental bills. In North Carolina, about one in five residents has medical debt in collections, according to an Urban Institute analysis.
In response, a growing number of states have enacted laws requiring hospitals to improve their charity care policies.
After North Carolina lawmakers were unable to advance such legislation in 2023, Gov. Roy Cooper, a Democrat, and state health officials saw an opportunity to take a different approach by leveraging extra dollars flowing to the state because it expanded Medicaid.
Their idea? Guarantee higher federal payments to hospitals that agreed to erase old medical debt and improve their charity care policies.
It is an innovative solution that has been praised by Vice President Kamala Harris and by health policy experts who believe it could be a model for other states to provide a financial remedy for cash-strapped families.
Jonathan Kappler, DHHS chief of staff, said the initiative is “the only effort in the country that will have such a widespread and timely benefit to people.”
“This approach is another investment in improving the health of our population – a worthy investment that we have long-known reduces costs and benefits us all,” he said. “We had an opportunity to help people living with the burden of debt, ensure hospitals – especially those in our rural communities – were whole, and to accomplish something that is ultimately good for our state, good for our economy, and good for millions of North Carolinians.”
Critics, such as state Treasurer Dale Folwell, say nonprofit and government hospital systems already receive millions of dollars in tax exemptions and should not require additional incentives to fulfill their obligation to give back to the community.
“This is a multibillion-dollar bailout for hospitals,” said Folwell, a Republican whose office has published a series of reports critical of the state’s hospitals. “It’s perfectly clear why all the hospitals signed on: The rich get richer, and they’re laughing all the way to the bank.”
He said the medical debt problem would have been better solved through legislation: “To bail out these hospitals for something they should be taking care of internally is not a solution.”
Others, including The Wall Street Journal editorial board, say that taxpayer dollars shouldn’t be used to expand what they call a perverse incentive to “expand the reach of the welfare state.”
The debt relief program takes advantage of new federal dollars coming to North Carolina because the state expanded Medicaid and shifted to Medicaid managed care under a program called the Healthcare Access and Stabilization Program. The legislature enabled hospitals to participate in HASP once they agreed to cover the state’s share of the costs of new patients added to Medicaid because of expansion.
DHHS officials maintain the program doesn’t actually change the amount of federal money flowing to North Carolina. Instead, DHHS says, it took advantage of flexibility within HASP that allows states to design their own reimbursement formulas and eligibility criteria to determine how hospitals receive funds under the program.
“States can structure the payments in different ways to achieve policy goals — some states hold back funding for quality measures, others require technology connections and data sharing,” Kappler said. “North Carolina’s is not unlike those programs in that it leveraged an existing federal funding source with new health outcome measures. In structuring the program so that each hospital could choose to participate, we addressed the variety of environments in which our hospitals operate in this state.”
The debt relief program — announced in July — will phase in over time, with hospitals required to make some changes to their financial assistance policies by Jan. 1, 2025, and other policy changes over the next year.
By March 2025, they must enter into an agreement with a vendor to help facilitate debt forgiveness for low-income patients. The actual debt relief is expected to take longer.
Dig in: Payments by hospital
This DHHS spreadsheet lists how much Medicaid money each of North Carolina’s 99 acute care hospitals will receive for opting into the state’s medical debt relief program — and what they would have received had they not participated.
This article is part of a partnership between The Charlotte Ledger and North Carolina Health News to produce original health care reporting focused on the Charlotte area. Want more information? Read more here.
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