N.C. Treasurer: NC hospitals profited on Medicare

Hospital lobbyists claimed $3.1B Medicare losses but received $87M in Medicare profits in 2020

UNC REX Hospital is shown in this file photo

RALEIGH — North Carolina State Treasurer Dale Folwell is calling for reforms after releasing a report detailing the profits made by hospitals in the state on Medicare patients. The latest report is the fourth in a series looking at Medicare costs in the state. 

“The hospital cartel is overcharging you because they can, not because they need to,” Folwell said in a statement. “Hospital executives can’t keep hiding behind Medicare. They tried to claim huge losses to justify financially kneecapping their patients. But now we know that the majority of hospitals are actually profiting off Medicare.”  

“Medicare losses are often the largest line item of community benefits cited by hospitals to justify their tax exemptions, mergers and price increases,” the press release also said. “North Carolina hospital lobbyists claimed they lost $3.1 billion on Medicare in 2020 — the same year hospitals actually reaped a total of $87 million in Medicare profits. The lobbyists’ loss claim was 3,670% larger than hospitals’ self-reported Medicare profits.” 

During an Oct. 25 press conference on the report, Folwell highlighted the lack of transparency in pricing from health care system providers in the state by displaying a mostly redacted and blacked-out response he received from UNC Healthcare. 

“The difference we are talking about here is hundreds of billions of dollars,” Folwell said. “It’s especially important in this environment when we are dealing with an inflationary situation where the cost of living is going up. I don’t think we have seen the inflation of health care premiums, which I think is coming down the pike in the next few months.” 

The press conference on the release of the report was streamed on the treasurer’s Facebook page.​ 

“If the federal and state governments are not going to protect the patients of North Carolina, where it’s always been profits over patients, then who will?” Folwell asked. 

Folwell concluded by saying he is seeing “the biggest transfer of wealth in his lifetime in North Carolina,” and described a “crisis” of a shortfall of “billions of dollars” in the State Health Plan over the next few years. 

The report contains an analysis of Medicare patient charges by the North Carolina State Health Plan and Rice University’s Baker Institute for Public Policy that shows on average hospitals charged privately insured individuals 280% of Medicare, resulting in employers, like the 750,000 member NC State Health Plan, and patients paying “thousands of dollars more for medical care.” 

North Carolina was in the top 10 states with the highest average hospital Medicare profit margins for five years, according to Medicare Cost Report data mentioned in Folwell’s press release. 

Folwell’s release says that without reform, nonprofit hospitals face little accountability or transparency to safeguard their commitment to their charitable mission. The release also notes that North Carolina was the 11th most expensive state in the nation for outpatient care in 2020, according to the RAND Corporation.

Some of the report’s takeaways include: 

  • Only 15 hospitals consistently lost money on Medicare, while 35 hospitals posted profits over all six years in North Carolina, according to Medicare Cost Report data. 
  • A range of 55% to 66% of more than 100 hospitals profited off Medicare from 2015 through 2020 in North Carolina, according to Medicare Cost Report data. 
  • Atrium Health made a $119.2 million profit on Medicare and Medicare Advantage — while claiming to lose $640 million in 2019. 
  • Sixty nonprofit hospitals claimed to lose a total of $863.8 million on Medicare in their federal tax filings. This claimed loss was 2,985% greater on the hospitals’ 990 tax filings than on their Medicare Cost Reports. 

Tax filings, Medicare Cost Reports, community benefit reports and hospitals’ self-reported Medicare costs from the years spanning 2015 through 2020 were used in the analysis, which was then peer-reviewed by the University of Southern California’s Sol Price School of Public Policy. 

“When we tried to make health care more affordable for state employees and taxpayers, hospital executives claimed they had to overcharge our patients because of their supposed losses on Medicare,” said Folwell in a statement following the report’s release. “At least bookies only keep two sets of books. The cartel keeps three.”  

Folwell launched the Clear Pricing Project (CPP) in 2018 to shift away from a commercial-based payment model to a reference-based, transparent pricing model tied to Medicare rates. The project has gained 28,000 partners across the state to date, including the Community Care Physician Network, the largest network of independent physician clinics in the state.  

CPP also has detractors, including the North Carolina Healthcare Association (NCHA), the lobbying group for many hospitals and large health systems in the state. 

In 2019, the NCHA pushed back on the CPP and was behind a graffiti campaign on sidewalks outside the N.C. General Assembly. The graffiti messages were chalk stencils that read, “720,000 voters want you to protect their healthcare. PassHB184.com.” 

“The latest report commissioned by Treasurer Folwell continues a pattern of reports that have used misinformation and half-truths and that make inaccurate conclusions,” NCHA said in a lengthy statement responding to Folwell’s latest report. “This report, like others the Treasurer has commissioned, fails to account for the incredible complexity of our healthcare system, including health insurance companies’ role in rising costs, and does nothing to advance affordable, high-quality healthcare in our state.” 

The NCHA statement goes on to say hospitals don’t get to decide what to charge Medicare or Medicaid for services and are paid according to the Centers for Medicare and Medicaid Services (CMS). The statement also blames insurance companies like Blue Cross Blue Shield, which supports the N.C. State Healthplan, as the “biggest culprits.”  

NCHA also criticized Folwell’s report as a “response to hospitals in crisis” that “complains about hospitals following state and federal guidelines and regulations.” 

About A.P. Dillon 1261 Articles
A.P. Dillon is a North State Journal reporter located near Raleigh, North Carolina. Find her on Twitter: @APDillon_