Large nonprofit health systems in the spotlight again for not providing enough charity care

A recent Wall Street Journal analysis, published this week, provides further evidence that large, nonprofit health systems often offer less charity care than their for-profit peers. It found that, on average, nonprofit systems spent 2.3 percent of their net patient revenue on financial aid for patients, whereas for-profit hospitals spent 3.4 percent.

The American Hospital Association criticized the analysis, arguing that it doesn’t fully capture the broader community benefits that nonprofit hospitals provide. Earlier this year the Lown Institute, a Boston-based think tank, also found that most nonprofit hospitals invest less in their communities and spend less on charity care than the amount they receive from tax exemptions.

The Gist: The issue of whether hospital systems should continue to enjoy tax-exempt status is a perennial stalking horse in the health policy community. The topic often gets conflated with whether nonprofit systems are truly “nonprofit”, since many larger systems make robust profits. 

There’s no question that nonprofit systems enjoy a huge economic advantage from not being subject to taxation, in return for which we should expect them to provide “community benefit” at a level commensurate with the status.

The difficulty is in defining and measuring community benefit— for example, should serving Medicaid patients count? Is it fair to count discounts for the uninsured as “charity care”, if we know prices are artificially inflated in the first place? These are thorny questions with no obvious answers, but ones that would benefit from clearer guidance and more transparency from policymakers.

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