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Non-Profit Hospital "Community Benefits" Standards

Health Care for All: Policy Options for 2009

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OVERVIEW

State and local governments spend at least $5.9 billion in tax exemptions for non-profit hospitals, according to a 2006 Congressional Budget Office report. Non-profit hospitals are the most common type, accounting for 68% of the 630,000 Medicare-certified hospitals beds across the US. For-profit hospitals account for a mere 16%. Clearly, the investment in non-profit hospitals is vast and we need to ensure the public is getting real value for this investment. As this section shows, states should establish clear standards for providing charity care and gaining non-profit status.  

It's counter-intuitive, but many US non-profit hospitals have bigger profits than their for-profit counterparts.  In April 2008, the Wall Street Journal reported that the combined net income of the 50 largest non-profit hospitals across the US increased nearly eight-fold from 2001 to 2006, to a staggering $4.27 billion.  77% of the 2,033 non-profit hospitals in the US routinely make money, compared with 61% of for-profit hospitals.  Congress exempts non-profits from income taxes and states free-up non-profits from paying property taxes. 

In return for their non-profit status and $12.6 billion in federal, state, and local tax exemptions, these hospitals must provide a "community benefit."  Many people assume this means charity care, or free care for the uninsured and indigent, but the term is so loosely defined that some non-profits have been reporting the wages they pay to employees as a community benefit.  Additionally, hospitals regularly assert that they cost-shift to paying and insured patients as a result of the free care they provide.  In other words, they simply shift the cost of free care to public and private payers.  A reasonable question for lawmakers to ask is whether "charity care" in this instance is providing a "community benefit" when the hospital is simply shifting the cost of free care to paying patients.  

To shed light on non-profit hospitals and the community benefits provided, the IRS will require hospitals to break-down their community benefit contributions starting in 2009.  The new reporting standards are welcome, but minimum standards for providing charity care and gaining non-profit status are a necessary next step.  

Stopping Profiteering in "Not-for-Profit" Hospitals

It's counter-intuitive, but many US not-for-profit hospitals have bigger profits than their for-profit counterparts.  Last week, a Wall Street Journal article discussed the growth of profits in the not-for-profit hospital sector and the welcome attention this is garnering from federal policymakers.  As reported, the combined net income of the 50 largest not-for-profit hospitals across the US increased nearly eight-fold from 2001 to 2006 to a staggering $4.27 billion. 77% of the 2,033 not-for-profit hospitals in the US routinely make money, compared with 61% of for-profit hospitals.