A new report from Lown Institute, a healthcare think tank based in Massachusetts, found that the majority of nonprofit hospitals are falling short on the investments they are expected to make in their communities.
Lown examined the finances of 1,773 private nonprofit hospitals across the country. For more than 1,350 of these hospitals, their spending on charity care and community investment was less than the money they received in tax breaks in 2020.
Nonprofit hospitals are exempted from paying most federal, state and local taxes because they are expected to provide free or discounted care to their community. They are also expected to offer social programs that address the health needs of their community, such as those that help people obtain substance abuse treatment, access to healthy foods or affordable housing.
Due to their tax exempt status, nonprofit hospitals are categorized as charitable organizations. They should take this role more seriously and “do a better job at prioritizing social responsibility over profitability,” Lown President Vikas Saini said in a statement.
For its report, Lown analyzed nonprofit hospitals’ “fair share” deficits, which occur when the value of a hospital’s tax breaks is more than their community investment in a given year. The think tank calculated hospitals’ spending based 2020 Internal Revenue Service filings.
More than three-quarters of hospitals included in the report had a fair share deficit in 2020, and these combined deficits totaled $14.2 billion. That is enough money to relieve 18 million Americans’ medical debt or prevent 600 at-risk rural hospitals from closing, according to Lown.
UPMC Presbyterian had a larger 2020 fair share deficit than any other hospital in the country at $246 million. The next four largest fair share deficits came from NYU Langone Hospitals, Vanderbilt University Medical Center, Hospital of the University of Pennsylvania and Indiana University Health — their deficit totals ranged between $173 million and $136 million.
Many hospitals with large fair share deficits ended the year with net incomes that were close to or exceeded these deficits, making it seem as though they had the financial resources to meet expectations when it came to community spending, the report said.
One of the reasons why nonprofit hospitals are falling short on charitable spending is because of negligence from federal, state and local authorities, according to Saini.
This alleged negligence comes at a time when nonprofit tax breaks are quickly increasing. A recent report from the Kaiser Family Foundation estimated that nonprofit hospitals were exempt from paying nearly $28 billion in taxes in 2020, up 41% from about $20 billion in tax breaks in 2011.
But not all hospitals examined in Lown’s report had fair share deficits — some had surpluses, meaning their spending on charity care and community programs was greater than the value of their tax breaks in 2020. New York Presbyterian Hospital had the largest surplus at $117 million.
Nebraska Medical Center, Stanford Health Care, Mount Sinai Hospital and Christus Spohn Hospital Corpus Christi had the next four largest surpluses. Their surplus totals ranged from $116 million to $47 million.
Lown’s report did not include large health systems like Kaiser Permanente, Mass General Brigham, Cleveland Clinic, Providence or Henry Ford Health because their 2020 IRS filings were unavailable.
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