Differences in Uncompensated Care Provided by For-Profit and Nonprofit Hospitals Called “Insignificant”

In a report released yesterday, the California State Auditor found no significant difference between the amount of uncompensated care provided by nonprofit and for-profit hospitals.  The report concluded, however, that nonprofit hospitals provide other community benefits not provided by for-profit hospitals.  The report further concluded that it was difficult to quantify those other benefits because of the manner in which nonprofit and for-profit hospital financials are reported.  Here is an excerpt from the report’s summaries:

Our review of tax-exempt hospitals revealed the following:

• About 223 of California’s 344 hospitals are eligible for income and property tax exemptions because they are organized and operated for nonprofit purposes.
• Comparing financial data reported by nonprofit and for-profit hospitals indicated the uncompensated care provided by the two types of hospitals was not significantly different.
• Benefits provided to the community, which only nonprofit hospitals are required to report, differentiate nonprofit hospitals from for-profit hospitals, but the categories of services and the associated economic value are not consistently reported among nonprofit hospitals.
• The values of tax-exempt buildings and contents owned by nonprofit hospitals are frequently misreported by county assessors.
• Lacking more reliable data, we used the reported economic values of community benefits and tax-exempt property to estimate that reported community benefits of $656 million for 2005 were roughly 2.7 times the estimated $242 million in state corporation income taxes and property taxes not collected from nonprofit hospitals.
• The Franchise Tax Board, which administers state income tax exemptions, could better use available tools, such as annual filings and audits, to monitor the continuing eligibility of nonprofit hospitals for their tax exemption.

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