Trustee Compensation And Charity Care Provision in US Nonprofit Hospitals

From a study published this week in Health Affairs . No reaction yet from AHA, but I am sure it is forthcoming.  

Nonprofit hospitals are required to pursue charitable missions to justify their taxpayer subsidies, which include exemptions from federal and state income taxes, property tax, and sales tax and the privilege of receiving tax-deductible charitable contributions and issuing tax-exempt bonds.1–5 These missions may come in the form of charity care and other types of community benefit, as defined by the Internal Revenue Service (IRS). Nonprofit organizations’ trustees represent the interest of a wide range of stakeholders and fulfill critical fiduciary duties to ensure that management decisions are aligned with the advancement of the hospital’s charitable missions.6,7

Trustees are usually motivated to contribute to the nonprofit organization’s charitable mission, and many are uncompensated.6,7 Using data from mandatory filings with the Internal Revenue Service (IRS), we found that in 2019, among a total of 2,058 US nonprofit hospital organizations, 37.3 percent (n ¼ 768) compensated their trustees, and 62.7 percent (n ¼ 1,290) did not (in 2011, 40.1 percent of nonprofit hospitals compensated their trustees). The former, on average, had a lower charity-care expense ratio than the latter (1.6 percent versus 2.2 percent; p < 0:01; exhibit 1). In addition, from 2011 to 2019 the average charity-care-to expense ratio among all nonprofit hospitals decreased by 21 percent, with ratios among compensators declining more than those among noncompensators.

In a companion study published in the same Health Affairs issue, researchers found hospitals charged uninsured patients about forty to fifty percent less than the rates billed to insured patients for the same hospital service.  The outcome was especially pronounced for government and nonprofit  hospitals.  Here is page 3 of the first study: