Nonprofit hospitals: Demonstrate real community health benefits or lose your tax exemption

tax-exempt hospitalsI’ve been pushing for many years for greater scrutiny of the tax-exempt status of not-for-profit hospitals. Now comes a comprehensive look at the tragedy of this situation from Dan Diamond of Politico. Here are a few facts from Diamond’s extensive analysis:

  • 7 of the top 10 most profitable hospitals in America are not-for-profit
  • Since the passage of the Affordable Care Act, hospitals have been provided with more than 20 million new paying customers
  • From 2013 to 2015, revenue at the top 7 hospitals, as ranked by U.S. News and World Report, jumped 15 percent
  • Over the same period, charity care at those hospitals—free treatment for low-income patients—dropped 35 percent

In other words, the big hospitals are reaping hundreds of millions of dollars in new revenue, and they’re keeping the money.

Nonprofits define what is “community benefit”

If you’re a nonprofit hospital, you’re also benefiting from some major tax exemptions, primarily property tax exemptions. By law, nonprofit hospitals are supposed to use the dollars they get from such tax breaks to benefit the health of their communities. But, because of weak laws and weak law enforcement, not-for-profit hospitals are essentially allowed to define what community benefit means themselves.

As Charles Idelson of labor union National Nurses United observes, “Hospital staff are going to a marathon and handing out water bottles, and the hospital is calling it a community benefit.”

Hospitals provide jobs, but neglect neighborhoods

Hospitals, of course, point to the fact that they are job creators. Many are the largest employers in their communities. While admirable—and the source of their political power—that’s not their mission. Their mission is to improve population health.

Take a look at some of the neighborhoods in which many of these large, urban hospital systems are located and tell me how you think the hospitals are doing at achieving community health. You can see the decay with the naked eye. If hospitals wanted to improve community health, they could address the social and environment ills of their neighborhoods—homelessness, poverty, hunger, transportation—instead of providing an emergency oxygen tank to the local country club.

As David Williams, president of the Taxpayers Protection Alliance observes,

the way forward for healthcare reform may be uncertain, [but] it is certain that the system needs dramatic reform. … It is right to demand that institutions that enjoy favorable government treatment are held accountable to high standards. Nonprofit hospitals should be no different, and the question should be asked why they receive preferential treatment.

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