Nonprofit Hospital Hunting Season Begins Anew

We are pretty well into the new year so now is as good a time as any to kick off the annual twelve month nonprofit hospital hunting season.  Stakeholders started gearing up for the effort late last year, actually.  At Johns Hopkins researchers reported that nonprofit hospitals receive more in tax subsidies than the they provide in community benefit:

Between 2017 and 2021, nonprofit hospitals allocated, on average, 8.8% of their total expenses to 17 types of community benefits, with 1.8% of their expenses dedicated to charity care; 5.2% benefited from tax exemptions. There were significant disparities among nonprofit hospitals, as 24.0% received more tax benefits than they spent on community benefits, and 81.0% received more than their charity care expenditures. The characteristics and location of nonprofit hospitals influenced the provision and composition of community benefits. Teaching hospitals allocated a higher percentage of total community benefits compared to nonteaching hospitals (9.2% vs. 8.6%). The top three categories in teaching hospitals were Medicaid shortfall, charity care, and unreimbursed education, whereas nonteaching hospitals focused more on charity care and subsidized health services, in addition to Medicaid shortfall. Furthermore, the location of a nonprofit hospital impacted the distribution of community benefits. Rural hospitals prioritized Medicaid shortfall, subsidized health services, and charity care, while urban hospitals concentrated more on Medicaid shortfall, charity care, and subsidized health service (in that order). The regression results showed that system affiliation and location in the Southern region of the United States were positive predictors of charity care spending at nonprofits.

The subtitle to the Johns Hopkins press release announcing the study reads, “Study finds nearly one-quarter of nonprofit hospitals receive more in tax exemptions than they provide in community services:” 

The study’s findings point to a critical need for clearer guidelines on the requirements nonprofit hospitals must meet to justify their tax-exempt status. Currently, there is no federal or state mandate linking the level of charity care or community benefit spending to a hospital’s tax exemptions except for a few states. As a result, significant variations exist across hospitals, leaving room for some to benefit from tax breaks without adequately contributing to community welfare.

I told you last year that states are slowly beginning to quantify “community benefit” in an effort to squeeze more of whatever that means from nonprofit hospitals.  The latest example comes from Indiana, where legislators have introduced a bill to revoke nonprofit status of hospitals that charge more than 200% of the Medicare reimbursement rate.  The bill also imposes stricter disclosure and reporting requirements.  Here is the synopsis:

Synopsis: Nonprofit hospitals. Limits what may constitute community benefits for certain nonprofit hospitals.

• Requires, before November 1 of each state fiscal year, nonprofit hospitals (that are not county hospitals) to provide to the Indiana department of health a report including aggregate data on all billed services and items and a comparison of the charges for those services and items to their respective Medicare reimbursement rates.
• Provides that a nonprofit hospital that charges an amount for a service or item in excess of 200% of the Medicare reimbursement rate at the time of the charge forfeit sits status as a nonprofit hospital.
• Provides that all nonprofit hospitals are subject to an annual audit by, and at the discretion of, the secretary of state.
• Requires, before August 1 of each year, every nonprofit hospital to: (1) provide the health care cost oversight task force with the entirety of the Schedule H portion of the nonprofit hospital’s previous taxable year’s federal Form 990; and (2) make available for publication on the general assembly’s website the entirety of the Schedule H portion of the nonprofit hospital’s previous taxable year’s federal Form990.
• Provides that a nonprofit hospital may only make redactions with regard to: (1) personally identifiable information; and (2) confidential information under the Health Insurance Portability and Accountability Act (HIPAA).

The bill is already attracting sympathetic press coverage:

Indiana lawmakers on Tuesday filed the strongest bill to date to crack down on nonprofit hospitals that exploit their tax-exempt status while charging Hoosier families and employers some of the most outrageous prices in the country.  HB 1004 strips nonprofit status from hospitals that charge more than 200 percent above what Medicare pays for the same services.

Devin Anderson, a board member for Hoosiers for Affordable Healthcare applauded the bill, saying it’s a bold move to address the fact that Indiana has the ninth-highest hospital prices in the nation. “HB 1004 puts real teeth into the effort to hold nonprofit hospitals accountable for the ninth-highest prices while having billions in cash reserves,” Anderson said. “This bill sends a clear message from the Indiana House of Representatives Leadership: Lowering prices is not optional – it’s a demand on behalf of the Hoosiers they represent who can’t afford skyrocketing prices from hospitals who masquerade as nonprofits.”

Another report quotes an indignant Indiana state legislator:

“These giant hospital systems don’t pay taxes because they theoretically exist for charitable purposes, but the most charitable thing they could do with their massive reserves is lower the prices they charge Hoosier patients,” Sen. Travis Holdman said this month in a statement.  “Instead, we see Parkview in northeast Indiana paying to have its name on a baseball stadium while failing to provide 24-7 ultrasound services to a rural community. And we see Community Health paying the federal government $345 million – the largest payment of its kind in history – to settle allegations they defrauded Medicare for years. I’m afraid these systems have forgotten what charity means.”

My guess is that the rascally nonprofit hospital wabbit will get away again and we will back here next year to kick off another hunting season. 

darryll k. jones