Questions resurface about nonprofit hospitals’ tax-exempt status

A report from The Lown Institute, a Boston-based think tank, finds that many health systems—227 of the 275 evaluated—spend less on providing “community benefit” than the value of their tax exemptions. The American Hospital Association (AHA) criticized the report’s methodology, claiming it “cherry-picks categories of community investment.” This report builds on previous analyses that have found that, taken together, nonprofit hospitals spend less on charity care than government or for-profit hospitals.      

The Gist: Policymakers and academics, prompted by massive capital projects, high executive salaries, and—especially—aggressive pricing and billing strategies, are increasingly questioning whether nonprofit health systems provide sufficient community benefit to retain their tax-exempt status. A recent piece in Health Affairs suggests updating the community benefit standard, which the Internal Revenue Service (IRS) uses to evaluate nonprofit status, to focus on social determinants of health and measurable health outcomes. 

We’d expect tougher scrutiny on this topic in the future, especially if state budgets come under pressure from a deterioration in the broader economy.

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