There is Nothing ‘Fair’ about the Lown Institute’s ‘Fair Share’ Report

America’s hospitals and health systems have proven their dedication to caring for their patients and communities time and again, particularly during the challenging circumstances in recent years. Though the Lown Institute’s so-called “Fair Share” report highlights the important contributions of certain hospitals, it misses the larger point, selectively relying on isolated data to paint a negative picture about the hospital field in general.

In addition to ensuring access to 24/7 essential medical care, hospitals and health systems of all types, sizes and locations provide a wide variety of other important benefits to their communities. The most recent full year of data show that tax-exempt hospitals provided $129 billion in total benefits to their communities in 2020 alone. Said another way, every dollar invested in non-profit hospitals results in $9 in benefits delivered back to the community, according to a study by the accounting firm, EY.

In addition to medical care, hospitals often provide many other important social services, including food security programs, maternal and pre-natal education, vaccination clinics, nutrition and physical education classes, and subsidized transportation, to name just a few examples. In addition, hospitals are often one of the largest employers in their community, providing jobs and fostering economic development in the area. 

Despite all the available evidence showing hospitals’ devotion to their communities, the latest iteration of the Lown Institute’s so-called “Fair Share” report on hospital community benefits suffers from the same biases, flaws and shortcomings as its previous reports. 

Some of the most glaring issues with Lown’s report include:

• The report cherry-picks categories of community benefit and ignores other areas of great importance by omitting the very real underpayments from Medicaid and Medicare that hospitals must absorb.

  For example, hospitals “lessen government burden,” an IRS cornerstone of tax exemption, by accepting payment rates from government programs such as Medicaid and Medicare that do not cover the cost of providing care. Importantly, hospitals cannot deny care to patients based on their insurance status, which means that hospitals must absorb these underpayments. In 2022, combined Medicaid and Medicare underpayments totaled $130 billion. Apart from these Medicaid and Medicare underpayments, Lown also dismisses investments in researching life-saving treatments and cures, and training and educating the next generation of doctors, nurses, and other caregivers – all categories of benefits identified by the IRS for reporting. 

• The report does not grapple with state-level policy differences that can seriously skew the data.

  Policy decisions at the state level can have a major impact on the level of uncompensated care and Medicaid shortfalls that hospitals face. For example, the decision whether to expand Medicaid has a significant impact on a hospital’s financial assistance levels. Hospitals in states that have expanded Medicaid may encounter lower levels of uninsured patients but higher Medicaid underpayments. Conversely, hospitals in states that have chosen not to expand Medicaid may encounter more uninsured patients but lower Medicaid underpayments. The Lown report drastically oversimplifies an incredibly complicated set of policy, payment, and demographic realities by arguing that hospitals make a “choice” to provide financial assistance but not incur Medicaid shortfalls. This kind of error is indicative of the lack of sophistication throughout the entire Lown report.

• Lown applies an arbitrary “fair share” threshold based on a standard established using data from before implementation of the Affordable Care Act coverage provisions, such as Medicaid expansion. 

  Lown uses this standard without acknowledging how the health care landscape has changed significantly in the last decade and how those changes impact the results. In addition, data from 2021 in particular should be viewed with a heavy dose of speculation as hospitals were still very much in the midst of the COVID-19 pandemic and the government stepped up to provide desperately needed temporary support in the form of relief payments and coverage expansions. And by 2022, hospitals faced a new set of challenges, like skyrocketing expenses, many of which persist today.

• A series of flawed policy proposals that flow from the report’s flawed data analysis.

  There is a concept in computer science called “garbage in, garbage out,” in which flawed input produces a similarly flawed output. So too here. Because the Lown report’s analysis is so biased and the data so limited, its policy proposals are equally bad. For example, the Lown report proposes a minimum threshold of community benefit spending for hospitals, but by failing to account for swaths of relevant community spending, the recommendations would result in distorted and rigid standards. Likewise, the report would seek to establish one-size-fits all requirements for financial assistance without accounting for the vast swings in hospital finances that can occur year to year. Take just the first three months of 2024: no one could have expected the adverse fallout from the cyberattack on Change Healthcare, but rigid requirements like those proposed by Lown would have serious impacts on hospital finances and the communities they serve.  Having started this exercise with limited data and a biased perspective, it is not surprising that the report ends with equally bad and biased policy ideas.

We welcome a good-faith discussion about the many benefits hospitals provide to their communities, but this flawed report does not merit inclusion in that discussion. Contrary to their purported intent, misleading reports like this one do more to undermine rather than improve access to high-quality care for all Americans.