Nonprofit hospitals in the United States comprise more than half of all hospitals and play a crucial role in advancing medical research, educating healthcare professionals, and providing care to those who are uninsured or unable to pay. These hospitals are exempted from federal, state, and local taxes, and in exchange, they are required to provide charity care and other benefits to the community where they operate.
The value of nonprofit hospitals’ tax exemptions for nonprofit status was $24.6 billion in 2011, including the value of forgone federal and state corporate income taxes, state and local sales taxes, local property taxes, public contributions, and the value of tax-exempt bond financing. The American Hospital Association cites a lower number of $12.4 billion as of 2019 for the value of estimated tax revenue forgone. Despite the tax exemptions, nonprofit hospitals are required to provide charity care and other benefits to the community where they operate.
Nonprofit hospitals serve as sentinels for public health by identifying hot spots during emergencies such as the COVID-19 pandemic or the Flint water crisis. In 2018, nonprofit hospitals provided more than $23.6 billion in uncompensated care, which is equivalent to about 4 percent of their operating expenses, according to a Center for American Progress analysis of hospital financial data.
However, several nonprofit hospitals have generated negative media attention for anticompetitive contracting with insurance companies, aggressive billing tactics, and other egregious financial practices, including suing patients and garnishing wages of low-income workers over unpaid bills, even during the COVID-19 pandemic. Additionally, there is evidence that the tier of nonprofit hospitals with the highest net income in the United States collectively dedicates the smallest share of those excess earnings to charity care.
To improve the accountability of nonprofit hospitals, policy options include setting standards for charity care eligibility and obligations, tightening the definition of “community benefit,” requiring hospitals to engage the community in needs assessments and implementation plans, requiring nonprofit hospitals to participate in public health programs, limiting extraordinary debt collection practices, and empowering the Federal Trade Commission to regulate nonprofit hospital conduct. These policies would help ensure that nonprofit hospitals better serve patients, local communities, and public health.
In conclusion, nonprofit hospitals in the United States play a vital role in providing healthcare services to those who cannot afford them. However, there are concerns about their accountability and transparency in fulfilling their obligations to the community. Implementing policy options to improve accountability will ensure that nonprofit hospitals continue to provide high-quality care and other benefits to their communities while fulfilling their obligations as tax-exempt institutions.
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