There are two federal rules that come into play for hospitals here, neither of which by themselves is at all corrupt. The first is a rule that applies to all hospitals, both exempt and nonexempt. Under a federal law known as the Emergency Medical Treatment & Labor Act (EMTLA), an emergency room must examine all patients who come there to determine if they have an Emergency Medical Condition (EMC). If they do have an EMC, the act requires that the “hospital must provide either—
(A) within the staff and facilities available at the hospital, for such further medical examination and such treatment as may be required to stabilize the medical condition, or
(B) for transfer of the individual to another medical facility in accordance with subsection (c).”
Subsection (c) limits the circumstances in which the hospital may transfer the patient to another medical facility prior to the point that the patient’s condition is stablized. The hospital must do these things regardless of the patient’s ability to pay.
The Act is predicated on the notion that we do not want patients with a EMC to be denied treatment (and possibly die or suffer serious harm as a result) for inability to pay or while a hospital verifies ability to pay. It also serves to prevent private hospitals from dumping patients who cannot pay to city/county hospitals and thus overburdening those facilities and imposing on them the costs of care for the most seriously ill/wounded patients. While one might disagree with that policy (though I see no problem with it) I certainly don't think anyone could fairly characterize that as “corrupt.”
BTW a number of states also have laws that prevent emergency rooms from turning away patients needing true emergency care. Your own state of California is one of them. California Health and Safety Code § 1317(a) & (b) states:
(a) Emergency services and care shall be provided to any person requesting the services or care, or for whom services or care is requested, for any condition in which the person is in danger of loss of life, or serious injury or illness, at any health facility licensed under this chapter that maintains and operates an emergency department to provide emergency services to the public when the health facility has appropriate facilities and qualified personnel available to provide the services or care.
(b) In no event shall the provision of emergency services and care be based upon, or affected by, the person’s ethnicity, citizenship, age, preexisting medical condition, insurance status, economic status, ability to pay for medical services, or any other characteristic listed or defined in subdivision (b) or (e) of Section 51 of the Civil Code, except to the extent that a circumstance such as age, sex, preexisting medical condition, or physical or mental disability is medically significant to the provision of appropriate medical care to the patient.
The second part of federal law that is relevant here applies to hospitals that are tax exempt under IRC § 501(c)(3). In order to get that exemption the hospital has to show that it is organized “exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals.” Of course, it is the charitable purpose that tax exempt hospitals fit under. That means the hospital must show that it organized for the purpose of providing care to the needy, and to do that the hospital has to provide significant services to indigent persons free or at low cost. They are allowed to charge more to persons who are not indigent to come up with some of the money they use to provide that care. But providing that care for the poor must be the focus of what they do to get tax exemption. This rule does not force any hospital to provide that indigent care. Rather, that is simply what the hospital has to do to get tax exemption. If it doesn't want tax exemption then this won't the hospital to provide any free care. The intent here is that organizations that are providing a public benefit, like charitable health care, should not be taxed on their income because they are relieving the government of that burden and because taxing their income would leave the organization less with which to carry out that charitable goal. Thus the law itself on this I think is noble and, in any event, not corrupt.
Now one of the knocks on exempt hospitals is that for the most part they look and operate much like the for profit ones do. Most people looking at the hospitals in their cities would be hard pressed to know which ones were tax exempt as charities and which ones aren't. They don't act like a lot of people might expect a charity to act. It is fair to question just how “charitable” some of these hospitals are.