An Irresponsible Take on Nonprofit Hospitals’ Value to Patients and Communities
The Committee for a Responsible Federal Budget is supposedly committed to being “an authoritative voice for fiscal responsibility.” That’s why it’s so disappointing that they would propose something so irresponsible in a new report — repealing nonprofit hospitals’ tax exemption. In reality, eliminating that exemption could result in more burden being placed on taxpayers to cover the cost of all the benefits and services these hospitals provide to their patients and communities. Worse than that, eliminating the longstanding exemption would cause hospitals across the country to close their doors, which would be the epitome of fiscal recklessness.
Nonprofit hospitals and health systems give back to their communities in a variety of important ways. In addition to providing charity care to those in financial need, hospitals help patients find health screenings, housing, and healthy food. They provide transportation to medical appointments that sick community members would otherwise skip. And they provide educational and other programs like vaccination clinics to address the many other needs that affect their community’s health and well-being. In 2020, the most recent year of data, nonprofit hospitals and systems provided nearly $130 billion in benefits to communities — $20 billion more than the prior year.
Hospitals tailor these benefits to the local needs of their communities, which can vary drastically based on location, patient demographics, and payer mix. In fact, the benefit that tax-exempt hospitals provided to their communities, as reported on the IRS Form 990 Schedule H, was estimated by the consulting firm EY at almost nine times greater than the value of tax revenue forgone. That is a striking return on investment.
Drastically oversimplifying these complex hospital-community relationships by boiling them down to a single metric — charity care — serves no one except those committed to smearing hospitals at every opportunity. Yet that is exactly what the Committee for a Responsible Federal Budget has done in its report. This position would be surprising if not for the fact that this report was produced in conjunction with the well-known anti-hospital, billionaire-backed Arnold Ventures and in large part relies on prior studies also funded by Arnold Ventures that the AHA has debunked time and again.
Particularly troubling is the report’s position on Medicaid shortfall — the amount of underpayments from the Medicaid program. The authors argue that this shortfall shouldn’t be considered a community benefit. But that argument seriously de-values the Medicaid program and its vital role in ensuring that Americans who need care have access to that care. It also ignores the complexity of Medicaid policy, including the extent to which Medicaid drastically underpays for services and the well-documented link between payment levels and health care access.
It’s also important to recognize that the amount of charity care provided is often directly related to how many Medicaid patients a hospital cares for. Hospitals (and states) with high Medicaid enrollment typically have lower charity care — not because they are choosing to provide less, but because more patients are insured through Medicaid. In those cases, the way that hospitals serve their community is as a safety-net that absorbs the massive financial shortfall associated with caring for Medicaid patients.
The reality is that hospitals and health systems are dedicated to providing high-quality 24/7 care to all patients in every community across the country. While that commitment never wavers, hospitals continue to face significant challenges, including high expenses, underpayments from Medicaid and Medicare, and increasing administrative burden due to inappropriate commercial health insurer practices.
Instead of pushing flawed policy proposals, let’s focus on ways we can support nonprofit hospitals and ensure they can be there 24/7 to care for the patients and communities that depend on them.