U.S. nonprofit hospitals receive billions more in tax breaks than they invest in their communities

darryll 

Fair Share Spending, 2023 from Lown Institute on Vimeo.

We recently reported on a national study concluding that nonprofit hospitals benefit to the tune of about $28 billion from their tax exemptions, but provide a little more than half of that amount in charity care.  The American Hospital Association responded by correctly pointing out that nonprofit hospitals provide much more community benefit than just discounted or uncompensated patient care.  Now, the Lown Institute has published a study making the conclusion that tax benefits exceed community benefit.  The study purports to compare the value of tax exemption to the value of all community benefit, not just charity care.  Here is part of the yesterday’s presser:

“Fair share” deficits could wipe out medical debt of more than 18 million Americans or rescue the finances of every rural hospital at risk of closure

A new report examining the finances of 1,773 nonprofit hospitals in the United States finds that more than three-quarters fall short on expected investments in their communities. Nonprofit hospitals are exempted from paying most federal, state, and local taxes in exchange for providing free or discounted care and programs that address community health needs, like substance abuse treatment, affordable housing, or access to healthy foods.  Lown Institute analysts identified more than 1,350 hospitals that have “fair share” deficits, meaning that the value of their community investments fails to equal the value of their tax breaks. The combined deficits of nonprofit hospitals totaled $14.2 billion in 2020, enough to relieve the medical debt of 18 million Americans or prevent 600 at-risk rural hospitals from closing.¹

“Americans desperately need hospitals to use their billions in tax breaks as intended: to promote health while relieving the problems of medical debt and access to care,” said Vikas Saini, MD, president of the Lown Institute. “These are charitable organizations and they should do a better job at prioritizing social responsibility over profitability.”

Hospitals with the largest “fair share” deficits in the U.S.

UPMC Presbyterian had the largest “fair share” deficit of any hospital in the country at $246 million in 2020.  Other hospitals with the largest “fair share” deficits in the nation include:

• • NYU Langone Hospitals (New York) 
  • Vanderbilt University Medical Center (Nashville) 
  • Hospital of University of Pennsylvania (Philadelphia)
  • Indiana University Health (Indianapolis) 
  • Spectrum Health Butterworth Campus (Grand Rapids, Mich.) 
  • Cedars-Sinai Medical Center (Los Angeles) 
  • M Health Fairview University of Minnesota Medical Center (Minneapolis) 
  • Umass Memorial Medical Center (Worcester, MA)
  • Arizona General Hospital Mesa (Mesa, AZ)

Many of these hospitals ended the year with net incomes close to or exceeding their “fair share” deficits, suggesting they had the financial means to meet their spending obligations. “Nonprofit hospitals are going to need help changing their behavior,” said Saini. “These hospitals are supposed to be accountable to Americans through federal, state, and local authorities—but oversight has been negligible.”

Not surprisingly, the American Hospital Association rejected the findings, claiming that Lown and every other study concluding similarly is guilty of prejudice and cherry-picking.  Lies, damned lies, and statistics!

The Lown Institute’s latest report on hospital community benefits is an obvious example of relying on pre-conceived notions and faulty methodology to draw inaccurate conclusions. The report cherry-picks categories of community investment while simply ignoring others, such as researching life-saving treatments and cures and training and educating the next generation of caregivers. It overlooks many of the essential contributions hospitals make to their communities that are critically important, especially during the pandemic. For example, a number of hospitals invested considerable funds and expertise into developing COVID-19 tests after setbacks from public health agencies. Hospitals also expanded treatment capacity especially as COVID-19 cases surged, established vaccine clinics and launched outreach campaigns to ensure everyone has access to vaccines, to name just a few examples.

It is imperative to stress that financial assistance is only one part of a hospital’s total community benefit and does not account for the numerous programs and services that hospitals tailor and provide to meet the many varied needs of their community. In addition, not all the services that hospitals provide to their communities are included as part of community benefit reporting and are not captured in the Lown Institute’s analysis.

These include programs that address housing needs, accessing healthy food, educational and wellness programs, health screenings, transportation to ensure patients arrive at medical appointments, and other programs and services to address the needs that affect the community’s health and address the social determinants of health.

Hospitals also bear many uncompensated and unreimbursed costs. For instance, hospitals not only provide financial assistance to patients, but also “relieve government burden,” a touchstone of tax exemption, by absorbing underpayments from means-tested government programs such as Medicaid, as well as unreimbursed Medicare expenses. Combined underpayments were $100.4 billion in 2020, up from $75.8 billion in 2019. The 2020 underpayment includes a shortfall of $75.6 billion for Medicare and $24.8 billion for Medicaid. Further, hospitals provide benefits by covering the costs attributable to patients who would have qualified for financial assistance but did not apply.

darryll jones