Nonprofit hospital tax rebates top $28B: KFF

Nonprofit hospitals received $28 billion in taxpayer subsidies in 2020, but provided only $16 billion in free or subsidized care, a new analysis found.

Hospitals have long argued that nonprofits are providers that can be adequately measured for their communities and that their various investments are far more than exempt from federal and state income taxes, sales taxes, and property taxes. But the latest research from the Kaiser Family Foundation fuels arguments from many health economists and policymakers that nonprofit hospitals are Not Earning Your Tax Exemption,

“Taxpayers are subsidizing more than their fair share,” said Ge Bai, a health policy and accounting professor at Johns Hopkins University who studies charitable care spending by nonprofit hospitals but did not participate in the study. Analysis. The gap between nonprofit hospitals’ tax-deductible and charity care spending would be even wider if researchers factored in 340B drug discount program He said that subsidy is also given by the tax payers.

An American Hospital Association spokesman said in a statement that the Kaiser Family Foundation’s analysis was narrow and exclusionary. “The Widening Gap Between Federal Reimbursement for Care and the Actual Cost of Care.” The spokesperson cited a 2022 report by consulting firm EY, commissioned by the AHA, which found that for every dollar in tax rebates, hospitals provided $9 in community benefits.

The value of the nonprofit tax exemption, which was not adjusted for inflation, grew from $20 billion in 2011 to $28 billion in 2020, said project director of the Kaiser Family Foundation’s Program on Medicare Policy and co-author of the report Zachary Levinson said.

“Having tax-exempt status greatly benefits nonprofit hospitals,” he said. “We are hoping that this data can help to evaluate whether the tax benefits are a good deal for the government.”

charity care, which hospitals count as free or discounted care provided to patients, is a component of hospitals’ community benefit spending. Research has shown that there is little difference between the amount of charity care provided by nonprofit and for-profit hospitals. The Medicaid shortfall, or the difference between Medicaid payments and a hospital’s estimated cost for those services, typically accounts for the largest portion of hospitals’ community benefit spending.

But the Medicaid shortfall, which was not included in the KFF analysis, is not a good measure of community benefit spending, said Gerard Anderson, a health policy and international health professor at Johns Hopkins University who studies nonprofit hospitals’ charity care spending. he said.

“The whole concept of a Medicaid shortfall doesn’t make sense to me,” said Anderson, who was not affiliated with the KFF study. “The more expensive your hospital, the greater the Medicaid shortfall.”

In addition to charity care and Medicaid shotfalls, nonprofit hospitals’ community benefit spending includes public health investments such as testing clinics, workforce training programs and infrastructure improvements such as housing development, among other initiatives. But they are a very small portion of hospitals’ community benefit spending, and there is wide variation in the funding amount and types of programs they offer, said Gary Young, director of the Center for Health Policy and Healthcare Research at Northeastern University, who has Served on an Internal Revenue Service Advisory Committee from 2012 to 2015 Overseeing data from hospitals’ federal tax forms,

“Hospitals are not equipped to improve the infrastructure and engage in that type of activity,” he said. “So, we’re left with tax exemptions that are of substantial value to nonprofit hospitals, a tremendous amount of variability in what hospitals provide and how to remedy that variability.”

Many states have enacted laws that have forced non-profit hospitals to dedicate a certain percentage of their overall expenses to community benefit spending. Oregon, for example, Provides each hospital with a mandatory community benefit spending floor Every two years based on factors such as the hospital’s financial status, workforce and community demographics.

Public officials, including Sen. Chuck Grassley (R-Iowa), have issued a number of federal policy solutions, though the proposals typically face stiff opposition from hospital lobbying groups.

Researchers at the Kaiser Family Foundation have outlined several policy solutions, including a floor-and-trade system where hospitals would be required to subsidize the charity care of other hospitals if they do not reach a minimum threshold for charity care spending. Another policy involves replacing current tax benefits with subsidies that are linked to the value of community benefits provided.

At a minimum, nonprofit hospitals should be required to disclose estimated tax exemptions on their federal tax forms, Bai said.

Young said hospitals need more guidance from the IRS about what community investments are expected of them and some flexibility to meet the greatest needs in their communities.

“The elephant in the room is that there is wide variation in community benefit spending with some hospitals providing much more than others, and we have largely let that slide,” he said. “Are we going to continue to ignore it or do something about it?”

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