Nonprofit hospitals provided $10 in benefits for every dollar in tax breaks: Report

Nonprofit hospitals are delivering benefits to their communities that outweigh their tax breaks by 10 to 1, a new report suggests.

Health systems provided $10 in community benefits for every dollar in tax breaks they received in 2020, according to an analysis by EY. The American Hospital Association, which commissioned the analysis, released the report Tuesday.

The EY analysis examined 2020, saying it was the most recent year in which complete data was available. A previous report found hospitals produced $9 in community benefits for every dollar in tax exemptions.

Since the data covered 2020, as the report notes, “the financial information used in this analysis reflects the impacts of the COVID-19 pandemic.”

In 2020, hospitals delivered $129 billion in community benefits, while receiving $13.2 billion in tax exemptions, according to the report. Due to the pandemic, estimates of tax exemptions in 2020 may not reflect pre-pandemic years, or later years, the report states.

Rick Pollack, president and CEO of the American Hospital Association, says the report offers another indication as to why hospitals are cornerstones in their communities.

“Nonprofit hospitals have a special obligation to those they serve and this new analysis from EY shows these efforts are more than a worthy investment and that improving the health of their communities remains at the heart of the mission of the hospital field,” Pollack said in a statement.

Hospitals provided $57.4 billion in financial assistance, including unreimbursed costs from Medicaid, in 2020, the report stated.

In addition, hospitals delivered $36.6 billion in efforts to improve community health, medical education, research, and cash or in-kind contributions. And hospitals also provided $35 billion in community building activities, unreimbursed Medicare costs, and bad debt tied to financial assistance, according to the report.

Hospitals have also long bemoaned insufficient federal reimbursements, saying Medicare payments don’t adequately cover the full cost of care.

The EY report runs counter to another analysis by The Lown Institute that suggests many hospitals are providing less in community benefits than they receive in tax breaks.

The Lown Institute released a report in March suggesting that more than 1,900 hospitals received more in tax exemptions than they provided to their communities. The Lown analysis estimated the total “fair share deficit” of nonprofit hospitals reached $25.7 billion in 2021.

The American Hospital Association has faulted the Lown analysis in the past, noting that the report doesn’t account for key benefits provided by hospitals, including medical research and training doctors and nurses.

In August 2023, a bipartisan group of senators sent a letter to the Internal Revenue Service asking the agency to investigate and see if nonprofit hospitals are meeting all their obligations as tax-exempt entities.

The senators, including U.S. Sens. Elizabeth Warren, D-Mass., and Chuck Grassley, R-Iowa, suggested that some hospitals aren’t providing all required community benefits and are engaging in practices that aren’t always in the best interest of patients. The lawmakers also criticized what they described as aggressive efforts by hospitals to collect medical debts from patients.

Nonprofit hospitals are rebounding from the financial struggles they endured during the COVID-19 pandemic, but the gap is widening between systems that are doing well and those that are continuing to face difficulties.

While nonprofit hospitals are seeing improved margins, it’s unclear how much they will recover, according to Fitch Ratings.