Holding Hospitals to Their Big Charity Care Promise

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Last year, Amber Holloway got an unusual letter with a blue “UNDUE” stamp in the corner. It said she no longer had to pay eight old hospital bills.

“I thought it was fake,” she said. “I was glad, but I didn’t really believe it.”

But on a recent Thursday evening, Holloway attended a community listening session at Greensboro’s Peeler Community Recreation Center. Community advocates told her about North Carolina’s new debt mitigation policy that has wiped out more than $6.5 billion dollars in medical debt for people across the state.

Now she believes it. Old bills from ER visits for severe stomach pain won’t show up on her credit report anymore.

These letters—already sent to more than 2.5 million North Carolinians, with more to come—are the fruits of a plan years in the making. 

In 2024, former Gov. Roy Cooper and former state Health and Human Services Secretary Kody Kinsley announced a novel debt relief program. All 99 acute-care hospitals in the state agreed to relieve unpaid debt back to 2014, plus increase their charity care to prevent future debt.

In exchange, the participating hospitals would receive more than $6 billion in enhanced Medicaid reimbursements from the state. It was the first time any state had tied these payments to hospitals’ provision of charity care. 

Rebecca Cerese, a senior health policy advocate with the nonprofit North Carolina Justice Center, has watched excitedly as the debt relief letters have rolled out. But now, as the hospital’s requirements for offering charity care are getting stiffer, Cerese is a bit worried. As she told the Greensboro group: “We don’t know if hospitals are doing that or not.” 

Hospitals are required to collect data and file more reports later this summer. The state Department of Health and Human Services (DHHS) will review the reports to track if hospitals are keeping their promises. 

Data already show that North Carolina hospitals don’t have the best record.

Nearly half of the state’s nonprofit hospitals received more in tax benefits than they spent on charity care in fiscal year 2022, according to an analysis of IRS data for The Assembly by Hossein Zare, an associate research professor at Johns Hopkins Bloomberg School of Public Health. 

Zare also noted that N.C.’s nonprofit hospitals could have wiped out $72 million in bad debt had they chosen to label it charity care instead.

Bad debt is when a hospital tries to collect on a bill, but fails. Yet in the cases described by Zare, the patients owing money (and being hounded by creditors) would have qualified for charity care under the hospitals’ own standards.

“When they have 72 million [dollars] in bad debt for the patients, they need to find a way to address this,” Zare said. “For me, that should be zero. It means the hospital needs to do a better job.”

One Disaster Away

James, 53, had private insurance for years before major depression led to a complete breakdown and he had to leave his job. When he moved from New York to Durham in December 2019, he dipped into savings to purchase marketplace insurance. 

But when treatment became too expensive and he remained unemployed, he asked Duke Health about financial assistance. (James asked to use only his first name, fearing judgement.) Duke covered everything at 100%.

“We’re all one health care disaster away from bankruptcy,” said James. He now works part time but is uninsured after a paperwork error caused him to get dropped from his marketplace plan earlier this year. “A lot of people don’t get that,” he said. “[They think] ‘I’m comfortably well off.’ Whatever. That can change in a heartbeat.” 

In many ways, James is the poster child for hospital charity care. 

Starting in 1956, nonprofit hospitals could qualify for a tax-exemption if they provided care—to the extent of their financial ability—to all patients, not just those who could pay for it. 

But a significant (and heavily criticized) tax code revision in 1969 removed that requirement. The IRS now said that hospitals could become tax-exempt by demonstrating that they were providing “benefits to a class of persons that is broad enough to benefit the community.”

What exactly is a community benefit? The IRS doesn’t have the authority to define it. Instead, the tax code offers a four-page example comparing two fictional hospitals, but sets no official requirements. 

Now, hospitals can count what they spend on health professions training, research, and community health services like free immunization clinics and interpreting services as community benefit. 

“Spending on health professions education and research is beneficial to public health and the generation of medical knowledge, but does not benefit members of the community directly,” said a report from the Lown Institute, a nonpartisan health care think tank. “Yet for many academic medical centers, the largest category of community benefit spending is training health professionals.”

Charity care has become just one part of a hospital’s basket of offerings—and it is often the smallest.

Some States Set Standards

From 2017 to 2021, nonprofit hospitals across the U.S. allocated an average of 8.8% of their total expenses to 17 types of community benefits, yet spent only 1.8% on charity care.

“[Nonprofit hospitals] are very variable,” says Gerard Anderson, a professor of health policy and management at Johns Hopkins Bloomberg School of Public Health. “Some of them provide a lot of community benefit and others in the same community provide very little. Some prioritize financial well-being for the hospital and other ones prioritize financial well-being for the community.”

The oft-discussed, not-so-secret problem is that  81% of U.S. nonprofit hospitals still receive far more in tax benefits than they provide in charity care. Consider these points: 

• Nationally, hospitals spend around 2% of total expenses on charity care, according to the National Academy for State Health Policy’s hospital cost tool, which pulls data from the national Healthcare Cost Report Information System. 

• A study by the nonprofit KFF found the median amount of nationwide hospital charity care spending was closer to 1.2%.

• In 2024, North Carolina’s hospitals spent an average of 2.7% of their operating budgets on charity care. Public hospitals spent 3%, for-profit hospitals spent 2.9%, and nonprofit hospitals spent 2.4%, according to the hospital cost tool.

• The state’s new medical debt policy requires that hospitals report the amount of charity care they provide as a percent of total hospital costs—but the policy sets no required amount nor outlines any consequences for reporting a low number.

Anderson said the only thing that improves hospitals’ charitable behavior is when states set standards.

Texas requires that hospitals provide charity care at least equal to their tax benefits, or spend at least 4% of their net patient revenue on charity care. 

Oregon set a community benefit spending floor for each hospital, but did not set a charity care level. Spending on community benefits increased, but charity care remains a “consistently small portion of total operating expenses at Oregon hospitals.” In 2024, it was 1.5%.

Illinois, Nevada, Pennsylvania, and Utah also established minimum community benefit requirements. Last year, Republican U.S. Rep. Victoria Spartz of Indiana introduced the “Holding Nonprofit Hospitals Accountable Act” to amend the federal tax code to create new community benefit standards. (The only action on the bill has been to refer it to a committee.)

But North Carolina has no standards for community benefits or charity care, which exacerbates the fear that some hospitals are benefiting at the community’s expense.

“North Carolinians are struggling to pay property taxes,” said Dale Folwell, the former state treasurer. “People pay property taxes in order to receive services, and the biggest users of those services are these huge multibillion dollar [hospital] corporations who disguise themselves as nonprofits. It’s always profits over patients.”

During his time in office, Folwell commissioned several scathing reports that highlighted this concern. Both reports also note that there is no “public agency or official who enforces how nonprofit hospitals are fulfilling their mission to provide charity care.”

Shifting the Burden

The state Department of Health and Human Services doesn’t have power to adjust a hospital’s tax-exempt status. However, it does control the enhanced Medicaid payments. To get those funds, hospitals agreed to four main requirements:

• Relieve old debt. Hospitals wiped out unpaid, uncollectable debt dating back to January 1, 2014 for families on Medicaid, families with incomes below 350% of the federal poverty level, or those with medical debt above 5% of their income. 

Across the state, the average per-person debt relief was $2,900. At 17 N.C. hospitals (eight of them Novant Health facilities), the relief was more than $5,000 per patient. ECU Health Medical Center relieved the most debt in the state: more than $585 million for 269,838 people. 

• Meet minimum standards for charity care. State officials noticed “significant variability” in how North Carolina’s hospitals considered patients eligible for financial assistance, and how much help hospitals provided. 

Now, all hospitals must offer at least a 50% discount for those making below 300% of the federal poverty level. Patients with incomes below 200% of the poverty level will have their care fully covered. These are discounts, not just zero-interest payment plans or a hospital-sponsored credit card. 

“Hospitals operate on very thin margins, especially in rural and underserved areas, so hospital leaders had to weigh how participating in a debt relief plan might impact day-to-day operations,” said Stephanie Strickland, executive director of communications for the North Carolina Healthcare Association. 

“It wasn’t a question of whether hospitals support helping patients with medical debt—they do—but how to balance that commitment with the responsibility to remain operational and continue serving their entire community, both now and in the long term.”

• Identify which patients are eligible for financial assistance. This requirement, called “presumptive eligibility,” means that hospitals must “presume” that patients on programs like WIC or SNAP, experiencing homelessness, or who are mentally incapacitated are eligible for financial assistance. Beginning January 2026, hospitals now also have to consider patients with income below 300% of the federal poverty level as automatically qualifying for assistance as well.

Hospitals must also do this without requiring patients to fill out lengthy forms or to provide proof of income.

“The data has made it clear that many people end up not receiving financial assistance because literally they just don’t know that it is available,” said Berneta Haynes, senior attorney with the National Consumer Law Center. “Financial assistance does not go far enough if it’s not included up front and people aren’t screened for it.”

NCDHHS did not tell hospitals exactly how to do this screening, but many hospitals use companies that pull publicly available information about a person’s income, combined with a patient’s statements.

A Novant Health spokesperson said they will review accounts by “obtaining the household size and household income through a third-party data source, such as Experian Healthcare, a data and analytics company, and calculating the Federal Poverty Percentage based on the most recent Federal Poverty Guidelines.”

• Curb harmful collections practices. Hospitals can no longer report medical debt to a credit reporting agency, nor can they seek foreclosure on property, garnish wages, hold someone in contempt, or have them arrested to try and collect on debt.

The goal with all of these changes is to “reduce the immense burden on consumers,” the state said.

Nathalie Gedeon spent hours trying to navigate two hospital bills she couldn’t afford, even with insurance. Eventually she reached out to Dollar For, a nonprofit that helps people apply for medical financial aid. They helped her submit paperwork since Gedeon, 30, said she had no idea how to fax something.

But Gedeon still had to wander through Greensboro’s Moses Cone Hospital before finally reaching a financial navigator in what felt like an “abandoned basement hallway.” 

The woman was helpful, and Gedeon soon received a letter offering her 50% off her balance of $1,205. She enrolled in a payment plan for $121 a month and in May, finished the last payment. A good outcome, Gedeon said, but it took “quite a bit of effort and perseverance on my end to get to them.”

Jared Walker, the founder of Dollar For, hears that a lot. His organization has worked with 45,000 patients across the country in the last five years and often sees hospitals making getting financial assistance “harder than it needs to be.”

“I think unfortunately that’s by design,” he said. “If you are a hospital and you can invest in making your charity care streamlined and easy or you can invest in making sure people can get on a payment plan really easy—what are you going to choose?”

Walker knows what hospitals often choose. In helping patients apply for financial aid, he said Dollar For faxes around 12,000 pages to hospitals each month. In 2025, they spent $70,000 on postage because many hospitals still require financial assistance application documents to be mailed.

Before North Carolina’s policy change, many patients had to fill out lengthy applications, provide pay stubs, and even submit letters of support to get help with medical bills.

And that was only if those patients knew financial assistance existed.

“Right now the burden of figuring out these [financial aid] policies is on the person receiving the services,” said state Secretary of Health and Human Services Dev Sangvai, also a family medicine physician. 

“When you’re in the ED with a heart attack, the last thing you’re going to do is think, ‘How much does this cost?’ We can’t change the cost of health care right now, we can’t completely change price transparency right now, but how do we shift the burden away from patients, especially the most vulnerable?”

‘Where’s the Oversight?’

The Assembly emailed and called a dozen of the largest hospital organizations and asked them how they were determining income-based presumptive eligibility, and how many people had been screened since the new policy took effect five months ago.

Only UNC Health provided numbers. Since the policy began, their hospitals have offered presumptive charity care to 321,479 patients. 

The rest of the hospitals ignored the question or offered general information about their financial aid policies.

The next reports, due mid-summer, require that hospitals promise they are complying with full presumptive eligibility screening. “Hospitals that do not attest to compliance will be subject to reduced [Medicaid] payments,” a Health and Human Services spokesperson said. 

John, 46, was thrilled to learn about the state’s medical debt relief program back in 2024. He’d been to the ER several years earlier for a kidney stone, and even after his state health plan insurance paid out, he couldn’t afford the remaining $2,600.

A high school health and physical education teacher in Charlotte, John has five children on Medicaid and “no wiggle room” in the family budget. He figured he was exactly the type of patient North Carolina’s program was designed to help. (He asked that we not use his last name to preserve his privacy as a teacher.) 

But then his bill got sent to a collections agency, and he wondered if his debt had been overlooked. He said he called Atrium and was told he did not qualify for the debt relief. He was sure he did, so he kept calling: first, the nonprofit Undue Medical Debt (which partnered with the state to relieve the debt), NCDHHS, even the state Attorney General’s office.

He ended up talking to a “complaint feedback line” at Atrium, which led to a call from Atrium’s administration last month. They told him that he’d been approved for debt relief. He’s still waiting for an official letter from Undue Medical.

“I really don’t know if it was my due diligence or if it was just coincidental,” he said. “I’d like to think that [my debt] was taken care of as the program said it would be, that it was just automatically done, because then that would mean it would be good for other people, too.”

He knows not everyone will want to, or can, advocate like he did. Besides, based on all he’s heard about the program, they shouldn’t have to. 

“I would love to know, how does this work?” he said. “Are they just trusting all the hospitals that said they want to participate? Where’s the evidence? … Where’s the oversight?”

N.C. Justice Center provides a list of health resources, including guidance on what to do when you get a medical bill and a full list of hospital financial assistance policies. (All available in Spanish and English.)