More than 1,900 hospitals give less in benefits than they get in tax breaks: Report

Many nonprofit hospitals are falling short of their obligations to their communities, according to a report by the Lown Institute.

Many nonprofit hospitals are getting more in tax breaks than they give in community benefit, according to a new report from the Lown Institute.

More than 1,900 nonprofit hospitals provide less in benefits to their communities than they receive in tax breaks, the institute said in a new report released Tuesday. Four out of five (80%) nonprofit hospitals give back less than they receive in tax breaks, the institute said.

The Lown Institute, a think tank which has been critical of some of the spending practices of hospitals, examined what it describes as the “fair share” deficit of nonprofit hospitals. The institute looks at how much nonprofit receives in tax breaks and how much hospitals provide in community benefit to their regions. For larger hospitals, the deficits run up to tens of millions of dollars, and higher, according to Lown.

The Lown Institute analysis found the total fair share deficit of nonprofit hospitals reached $25.7 billion. The institute said that would pay off the medical debt of everyone living in California, Texas, New York and Pennsylvania combined.

“When four out of five nonprofit hospitals do not meet obligations to benefit their community, it’s a sign that regulations and incentives need to be revisited,” Vikas Saini, MD, president of the Lown Institute, said in a statement. “Everyone wants to see their local hospital thrive, but not at the expense of the communities they serve.”

The Lown Institute has issued annual reports on tax breaks and how they stack up with community benefits, and hospitals have pushed back against those reports.

The American Hospital Association said the report is decidedly unfair to hospitals. The association said the Lown report “cherry picks” areas of benefit and ignores other areas, including medical research and training doctors and nurses, that are invaluable to communities.

"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," the association said in a statement.

The Lown Institute said it examined 2021 data from the Internal Revenue Service for 2,425 nonprofit hospitals across the United States.

The institute said it weighed tax exemptions against hospital spending on community programs, including financial assistance, community health improvement services, and community building activities. Lown said it doesn’t include research or clinician training since those areas don’t provide direct benefit to communities.

According to Lown’s analysis, nonprofit hospitals spent an average of 3.87% of their budgets on community investments.

The institute said New York-Presbyterian Hospital had the largest fair share deficit of any nonprofit hospital (-$274 million), followed by UPMC Presbyterian (-$268 million), NYU Langone Hospitals (-$222 million) and Cleveland Clinic (-$212 million).

Conversely, Lown lauded hospitals for having a “fair share surplus.”

The institute singled out North Shore University Hospital in Manhasset, N.Y., which had a fair share surplus of $93 million. Grady Memorial Hospital in Atlanta had a 2021 surplus of $71 million, while Mount Sinai Hospital in Chicago had a surplus of $67 million and Martin Luther King Jr. Community Hospital in Los Angeles had a surplus of $14 million, the institute said.

This year, Lown’s analysis included an additional 652 hospitals, compared to the institute’s report last year. In that report, Lown estimated the fair share deficit of nonprofit hospitals reached $14.2 billion.

The American Hospital Association has pointed to a 2022 study by EY, which estimated the benefits provided by nonprofit hospitals outweigh their tax breaks by nearly 9 to 1. The EY analysis, which utilized 2019 data, provided $110.9 billion in benefits to their communities, while they received $12.4 billion in tax breaks.

"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," the hospital association said in its statement.

"In addition, hospitals are often one of the largest employers in their community, providing jobs and fostering economic development in the area," the association said.

The Lown Institute also produces an annual report on America’s most racially inclusive hospitals.