Minnesota law kicks in requiring hospitals to bolster charity care checks prior to debt collections

Dive Brief:

• Minnesota hospitals are now required to check whether patients are eligible for financial assistance before referring medical debt for collections.
• The new law, which was signed by by Gov. Tim Walz in May and took effect this week, also requires hospitals to limit charges for uninsured patients in households with income below $125,000 per year and post notices of their financial assistance online.
• State regulators honed in on hospitals’ charity care practices after major nonprofit operators, including Rochester, Minnesota-based Mayo Clinic and Minneapolis-based Allina Health, came under fire for allegedly dodging care obligations by suing and temporarily denying care to low-income patients with delinquent debt.

Dive Insight:

The law has support from the state’s attorney general and follows a multi-year push from regulators to provide increased healthcare access for low-income Minnesotans.

Nonprofit hospitals are required under the Affordable Care Act to provide financial assistance to eligible patients. 

In Minnesota, few qualified patients know the option exists at all, or they stumble across information about policies from content creators on social media sites like TikTok, according to reporting from the Rochester Post Bulletin. Although the Internal Revenue Service requires nonprofit hospitals to “widely advertise” such policies, early this year, at least 8% of Minnesota nonprofit operators failed to list charity care policies on their websites, found the same outlet.

At the same time, Minnesota attorney general Keith Ellison found some state hospitals took increasingly aggressive approaches to pursuing outstanding debts. The AG began an ongoing investigation into the Mayo Clinic in December 2022, following reports that the health system was suing patients that ought to have qualified for charity care.

In August, Allina Health announced it would “formally transition away” from a policy of interrupting non-emergency, outpatient medical care from patients with outstanding medical debt following an investigation from the AG. 

Scrutiny of hosptials’ charity care practices is gaining national attention too.

Sen. Bernie Sanders, I-Vt., Chair of the Health, Education, Labor and Pensions Committee, called on Congress and the IRS last month to establish federal standards to hold nonprofit hospitals accountable for charity care requirements, alleging that nonprofits were spending “paltry amounts” on charity care.

Sanders’ report found 12 of 16 of the largest nonprofit hospital systems dedicated less than 2% of their total revenue in 2021 to charity care. Six of those nonprofits spent less than 1%. The findings echo an analysis from health policy research firm KFF which found that half of all U.S. hospitals spend just 1.4% or less of their operating expenses on charity care.

Meanwhile, nearly one in 10 U.S. adults owe at least $250 in medical debt, according to a KFF analysis.