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.
