Dive Brief:
- Nonprofit hospitals have seen substantial growth in operating profits and cash reserves, but aren’t shelling out more money for charity care, according to a new study.
- The mean operating profits for nonprofit hospitals grew from $43 million in 2012 to $58.6 million by 2019, while mean cash reserve balances increased from $133.3 million to $224.3 million, researchers found.
- However, spending on charity care actually dropped during that time period, from $6.7 million in 2012 to $6.4 million. Nonprofits are required to provide charity care and other community benefits in exchange for their tax-exempt status.
Dive Insight:
The new study published in Health Affairs is the latest in a string of research suggesting nonprofit hospitals’ balance sheets are benefiting from the latitude they have regarding charity care spending.
Previous studies have found nonprofits spend less on charity care than for-profit facilities; richer nonprofits are stingier with charity care than their poorer counterparts; and the value of nonprofits’ tax exemptions often far outweighs the cost of charity care and community benefits.
The value of these tax exemptions has been growing. Nonprofits were exempt from paying almost $28 billion in taxes in 2020 — a 41% increase over the past nine years, according to one analysis.
Meanwhile, nonprofits’ operating income and cash reserves have also increased over the past decade.
“With operating profits for nonprofit hospitals growing, the share of community health benefits they provide should also be growing to justify their favorable tax treatment,” researchers wrote in HA.
Nonprofit hospitals have come under increased fire for what many critics view as unfairly low spending on charity care when compared to the high profits notched in recent years.
A New York Times investigation of Washington-based health system Providence in 2022 found the provider spent less than 1% of its expenses on charity care in 2021, and was saddling patients with debt who should have been eligible for financial assistance. Another NYT investigation published earlier this month found one wealthy Midwest nonprofit, Allina Health, was withholding care from patients with unpaid medical debt.
State and federal policymakers have looked to beef up hospital regulation amid concerns that charity care programs aren’t as generous or efficacious as they could be.
One government watchdog group has raised concerns about whether requirements that hospitals provide satisfactory community benefits are being adequately enforced, as federal regulations don’t set minimum standards for hospitals when it comes to charity care eligibility or amount.
Hospital charity care programs, which provide free or discounted medical care to patients who can’t afford it, can be a lifeline for uninsured and underinsured patients as the cost of care continues to rise in the U.S. Roughly four in 10 adults in the U.S. are struggling with medical debt, much due to costs associated with emergency care and hospitalizations.
Hospital groups argue that the community benefits nonprofit hospitals provide far outweigh the tax revenue local, state and federal governments forego.
