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HCA Healthcare Under Fire for Charity Care as Part of $162 Million Lawsuit

HCA LogoThe nation’s largest for-profit hospital system, HCA Healthcare, has been slammed for not living up to its promises to improve the 11 not-for-profit hospitals it purchased in 2003. The judge also ordered a court-appointed accountant to scrutinize HCA’s charity care at the hospitals it purchased in the Kansas City region.

HCA bought the hospitals from Health Midwest in 2003 for $1.13 billion. As part of the deal, the Healthcare Foundation of Greater Kansas City was established to receive 80 percent of the proceeds, which would fund organizations that serve the underinsured in the Kansas City area. The foundation sued HCA in 2009, claiming the company had not lived up to its commitments to make improvements in the purchased hospitals, but rather had built two new ones. HCA was unable to show that it had discussed this decision with the institutions’ community boards. The suit was also brought because of the foundation’s concerns about HCA’s inability to provide consistent reporting on charity care.

Charity-Care Gap

Here’s what the testimony about HCA’s charity care revealed:

  • The foundation expressed concern not only with HCA’s failure to make good on its commitment to charity care, but also that the level of charitable care decreased at Research Medical Center, in Kansas City’s “urban core,” while charity care in relatively affluent, suburban Overland Park Regional Medical Center had increased dramatically following the purchase.
  • Mark Flaherty, the foundation’s General Counsel, testified that he was puzzled by this discrepancy because, given its size and location, he would have expected Research Medical Center to continue requiring the largest amount of charity care. He told The New York Times, “That was a big red flag to us.”
  • Judge John Torrence noted that HCA made conflicting public statements about charity care it provided in its Annual Reports and Community Benefit Reports. HCA provided no explanation at the trial for this discrepancy in reporting.

The majority of U.S. hospitals—4,699 out of 5,724—are not-for-profit, according to the American Hospital Association. Nonprofit hospitals pay no federal, state or local taxes, and in return are expected to offer a community benefit, including free or discounted care for low-income patients.

Generally, nonprofit hospitals operate in areas with higher average incomes, lower poverty rates, and lower rates of uninsurance than for-profit hospitals. The Affordable Care Act passed last year includes new rules for how not-for-profit hospitals must report charity care.

One of the terms of the HCA-Health Midwest purchase agreement specified that HCA would continue to implement diversity initiatives for employment and purchasing that HCA had in place at its existing operations. HCA operates approximately160 U.S. hospitals in addition to six hospitals in London.

Diversity & Inclusion Factor

HCA has never participated in the DiversityInc Top 50 process, which this year has more than 30 hospital participants.

According to HCA’s Community Support Update, 15 percent of corporate sponsorships were in the category of Diversity & Inclusion. The same report also describes HCA’s commitment to culturally competent care and its diversity-education series for employees. Among the 2012 DiversityInc Top 5 Hospital Systems, all of which are not-for-profit, 29 percent of philanthropic spend was directed to multicultural organizations

HCA’s website includes a diversity link one click off the homepage and features the company’s Diversity & Inclusion Vision Statement: “At HCA, we will provide culturally competent care to every patient we serve. We will foster a culture of diversity and inclusion across all areas of our company that embraces and enriches our workforce, physicians, patients, partners and communities.” Carolyn Caldwell, the CEO of Centerpoint Medical Center, one of the new facilities built by HCA Midwest, is one of the few Black female hospital CEOs in the U.S. This month, she began a three-year term on the American Hospital Association’s board of trustees.

HCA intends to appeal the decision and, in a statement on HCA Midwest’s website, the company noted the division’s commitment to charity care, which was stated as $97.4 million in the division’s 2012 Community Impact Report.

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