Mayo Clinic expands charity care, writes off $90 million in patient debts

Mayo Clinic wrote off nearly $90 million in unpaid patient bills after changing how it determines eligibility for financial assistance, a step that consumer advocates are urging more hospitals to take as patients’ concerns grow over medical debt.

It’s part of an emerging trend where some medical centers, pushed at times by state laws, are adopting or expanding what’s called “presumptive eligibility” with charity care programs. It can be an alternative to waiting for patients to complete applications for financial aid that some find confusing and difficult to navigate.

Mayo disclosed the new approach, as well as the sizeable write-off, in a tax filing released this week to the Minnesota Star Tribune.

The $90 million write-off includes multiple years of debt and goes beyond the $37.8 million in hospital charity care provided last year, according to the filing. That was an increase of about 5% compared with 2022. The debt forgiveness was applied in 2023.

The change comes as Mayo and other large medical centers have been facing increased questioning over whether they provide enough charity care and other community benefits to justify the large tax exemptions they receive as nonprofit groups. The clinic denies any connection, saying it “made this change in 2023 to further benefit patients in financial need.”

“Mayo provides hundreds of millions of dollars in community benefit every year through our investments in research and education, cash and in-kind contributions to the community ... and the cost of uncompensated care provided to Medicaid patients,” a statement from the clinic said. “We are pleased that we are able to increase the amount of charity care given to our patients, but even without this increase, the magnitude of our community benefit fully supports our tax-exempt status.”

Mayo’s financial-assistance program offers discounted or even free care to qualifying patients at certain income levels. To help make determinations, the clinic says it’s now using an independent third-party vendor to provide scoring based on publicly available data to assess where patients stand relative to federal poverty guidelines.

Mayo’s tax forms did not say how many patients benefited from the debt forgiveness, or where they live. The mention of the new system came in a public tax filing that covers Mayo operations not just in Minnesota, but also Arizona, Florida, Iowa and Wisconsin.

“During 2023, Mayo implemented a presumptive approach for determining eligibility for financial assistance,” the clinic said in the filing. “Under his approach, certain patients are presumed to be eligible for financial assistance based on socioeconomic criteria rather than going through a formal application.”

Tax records show that in 2019 and 2020, Mayo’s hospitals were providing about $66 million per year in charity care before annual totals fell to about $36 million in 2021 and 2022. The charity care need was reduced, the clinic says, because “Mayo expanded a process to help more lower-income patients become enrolled in Medicaid.”

Concern has grown in Minnesota and across the country about patients being saddled with medical debts as the cost of care keeps rising along with large out-of-pocket spending requirements with many health plans.

Just this month, the city of St. Paul announced a debt-forgiveness program involving Fairview Health Services and a Boston-based nonprofit called Undue Medical Debt that’s erasing medical bills for about 32,000 residents.

In negotiating debt-forgiveness arrangements across the country, officials at Undue Medical Debt say they routinely encounter patients struggling with unpaid medical bills who qualified for hospital charity care but didn’t connect with the programs, said Jeff Smedsrud, a board member at the nonprofit group.

“So many consumers don’t understand all the opportunities available to them about how to access charity care,” Smedsrud said.

Presumptive eligibility for charity care prevents patients from being sent to collections while sparing them and health care providers the hassle of completing and processing charity care applications.

Rather than require paperwork, hospitals using the presumptive approach can provide up-front assurance of assistance through a quicker assessment of things like patient income, housing status and whether they use means-tested government programs like supplemental nutrition assistance, said Dr. Vikas Saini, president of the Lown Institute, a Boston-based health care think tank.

Lown Institute has published annual reports since 2022 comparing community benefit investments made by nonprofit hospitals to the value of tax breaks they receive. Two of these reports have argued that Mayo has one of the highest “fair share deficits” in the country, although clinic officials reject the charge and have joined with other hospitals in blasting Lown’s methodology.

The clinic’s new approach to charity care is good news for patients going forward, Saini said. It’s also good for those whose debts have been forgiven, he said, although it’s possible many experienced avoidable stress and strain over unpaid bills.

“It’s better late than never,” Saini said.

In Minnesota, the Office of the Legislative Auditor (OLA) announced in July it was launching an evaluation to compare nonprofit hospitals’ spending on community benefits with the tax exemptions they receive.

Many U.S. hospitals including Mayo are organized as nonprofit organizations, and federal and state law exempts them from a variety of taxes. Hospitals must provide what are called “community benefits” to qualify for federal exemptions as charitable entities, the OLA says. Community benefits typically include financial-assistance programs, also called charity care, that provide free or at a discounted services to patients at certain income levels.

Neither federal nor state law sets a specific minimum amount that hospitals are required to spend on community benefits, but nonprofits must report totals annually as part of lengthy filings with the Internal Revenue Service.

After an April 2022 report from Lown Institute alleged that Mayo Clinic had the 11th-highest fair share deficit among hospitals nationally, the Wall Street Journal and Rochester Post Bulletin followed up with stories questioning if Mayo could do more to make patients aware of its charity care programs.

The Post-Bulletin interviewed 20 patients sued by Mayo for unpaid bills and found 14 could have qualified for charity care. The report prompted Minnesota Attorney General Keith Ellison to announce an investigation of the clinic’s practices, although Mayo said its own eligibility standard for charity care was not prompted by Ellison’s review.

“Mayo Clinic has been expanding its presumptive assistance to patients over the last several years,” the clinic said.