Hospital Benefits to Communities Far Outweigh Tax Exemptions: A Closer Look at the Numbers

Hospitals and health systems are cornerstones of health care in their communities, providing care and services that go far beyond the walls of their facilities. A new analysis from EY prepared for the AHA highlights the ways in which nonprofit hospitals and health systems contribute to their communities. 

The EY analysis compared the benefits reported by nonprofit hospitals and health systems on their Schedule H filings to the IRS to the value of their federal tax exemptions. The report found that in 2022, nonprofit hospitals and health systems provided $149 billion in total benefits to communities compared to $13.2 billion in federal tax exemptions. This means that for every dollar in federal tax exemption, hospitals and health systems delivered $11 in benefits to the communities they serve. That ratio has grown over time, underscoring hospitals’ expanding role in meeting community needs through financial assistance (also called charity care), the provision of services to patients covered by Medicaid or Medicare, health education, research and more.

Despite this trend, some have argued that including state and local tax exemptions would provide a dramatically different picture of how much communities benefit. That’s why in this most recent report, EY also included a snapshot of state and local tax exemptions. Accounting for state and local tax exemptions in addition to the federal exemption, EY found that hospitals and health systems still provided three times more benefits to communities than the total value of all tax exemptions.

Critics also have argued that only a limited set of these benefits reported on the Schedule H should be counted toward community benefit. But even if one defines community benefit as limited to the Schedule H Part I categories, hospitals provide community benefit well in excess of their tax exemption. The EY report breaks down the components of the benefits reported by nonprofit hospitals and health systems in their Schedule H filings and finds that if only Part I of the Schedule H (Financial Assistance and Certain Other Community Benefits at Cost¹) is compared to all tax exemptions, hospitals and health systems still provided twice the value of the tax exemption in benefits to communities. Limiting the scope even further to just a subset of Part I (financial assistance, unreimbursed Medicaid and other unreimbursed costs from means-tested government programs) shows that those benefits still outweigh the value of all tax exemptions by 20%.

Hospitals and health systems serve individuals and communities in a variety of ways, not only by providing essential care 24/7 and responding to emergencies and disasters but also by advancing medical research and education and supporting local health initiatives that reach far beyond their walls. Hospitals are often among the largest employers in their regions, driving economic growth and stability, and partner with local organizations, schools, and governments to address community needs. The EY study helps to more concretely illustrate many of the ways in which America’s nonprofit hospitals and health systems serve their communities.