Many U.S. hospitals provide charity care to financially disadvantaged patients without the expectation of getting paid for their services. Nonprofit hospitals receive a sizable tax exemption — estimated at almost $25 billion in 2015 and likely much larger now — that is largely intended to subsidize the costs of this charity care.
But the relationship between providing charity care and obtaining a tax exemption is far from direct, and many nonprofit hospitals do not provide enough charity care to justify their exemptions. Many even have wholly owned internal collection agencies.
Do for-profit hospitals do more charity care than tax-exempt hospitals?
A study published in Health Affairs used Medicare cost reports from 2018 to study hospitals’ charity care. For every $100 in total spending, nonprofit hospitals provided $2.30 in charity care, while for-profit hospitals provided $3.80. More than one-third of nonprofit hospitals (36%) provided less than $1 of charity care for every $100 in total expenses.
In Tennessee, tax-exempt hospitals are routinely granted exemptions from local property taxes by the State Board of Equalization. This removes millions of dollars which could be used to support local schools, infrastructure projects and public safety. What’s more disturbing is this is done without the tax-exempt organization being required to provide any proof to the State Board of Equalization, or local assessor, that those exemptions are appropriate.
Other state require some level of “means testing” to demonstrate the exemptions being granted are no greater than the “chartable services” which are being provided. (The real cost to provide the care minus the overhead and mark-up.) Perhaps it’s time Tennessee address this? Many of these tax exemptions are carried over from antiquated 18th, 19th and early 20th century social /political constructs and are not relevant nor equitable for the 21st century.
When the state laws exempting not-for-profit hospitals from taxation were drafted decades ago, most not-for-profit hospitals were charitable alms houses providing free basic medical treatment to the infirm poor. Today, hospitals have become sophisticated medical centers, providing a variety of medical and related services.
Jesus never charged to heal a person or perform a miracle. He surely never had his disciples act as collection agents! Why should tax-exempt hospitals enjoy an advantage not afforded other for-profit businesses that pay their fair share? I’d love to hear what you think.
