Make nonprofit hospitals provide more charity care
The tax-exempt status of nonprofit hospitals is coming under scrutiny after new data shows that they aren’t holding up their end of the bargain.
According to a recent report from the Kaiser Family Foundation, the total value of taxes from which nonprofit hospitals nationwide were exempted in 2020 was about $28 billion, which far exceeds the $16 billion in uncompensated care to low-income patients.
Those findings are backed by a previous study from Johns Hopkins University, which found that the average nonprofit hospital saved nearly $11.3 million in tax exemptions and that the community services provided fell short of the value of the tax exemptions for 62% of hospitals.
In principle, nonprofit hospitals are exempt from taxes based on the benefit they provide to the community – namely “charity care” to individuals who cannot otherwise afford it. However, over the last half century, hospitals have expanded what counts as a community benefit. Hospitals are lumping in everything from providing care to Medicaid and Medicare beneficiaries, discounts to commercial insurers, residency programs, research, health fairs and even the distribution of marketing materials.
Little surprise then that the actual amount of charity care some Illinois hospitals provide is relatively small. In 2018, the University of Illinois Hospital’s uncompensated care accounted for just 1.7% of its net revenue, according to a Stateline analysis of documents filed with the state government. For Northwestern Memorial Hospital, charitable care came out to 1.2% of net revenues. For University of Chicago Medical Center it was 1% and for Loyola University Medical Center it was 0.6%.
Illinois must ensure that nonprofit hospitals are upholding their part of the social contract that comes with their nonprofit status, playing the role they have agreed to as a vital part of this country’s social safety net thereby earning the lucrative tax breaks they currently benefit from.
Danielle Bargo
Anderson, Indiana