Nonprofit Hospitals Spend No More on Charity Care Than For-Profits

A study by University of California, San Francisco researchers suggests that nonprofit hospitals in California allocate little more of their expenditures to providing free or subsidized charity care than for-profit hospitals in the state, the Washington Post reports.

Based on an analysis of the spending of two hundred and sixty-four hospitals between 2011 and 2013, the report in Health Affairs found that nonprofit hospitals — which are required to provide "community benefits" such as uncompensated care and public health outreach in exchange for their tax exemption — dedicated an average of 1.9 percent of their total operating expenditures to charity care, compared with an average of 1.4 percent among for-profit hospitals. However, those averages reflected the higher figures of a handful of hospitals; about a third of the nonprofit hospitals and 40 percent of the for-profit hospitals in the study spent less than 0.9 percent on charity care. Some groups, including nurses unions, have long argued that nonprofit hospitals' tax benefits more often support exorbitant executive salaries than community benefits.

One reason nonprofit hospitals do not contribute more to uncompensated care, the report's authors note, is that the Affordable Care Act offers no guidelines for the provision of charity care, while federal law sets no minimum requirements for community benefit activities. "Charity care is important, but it is only a fraction of the total picture of how nonprofit hospitals reinvest back into their local communities," California Hospital Association spokesperson Jan Emerson-Shea told the Post. "In addition to charity care, nonprofit hospitals fund research, education, wellness services, and a myriad of other programs that are determined based on the needs of local communities."

Among other things, the report suggests that policy makers should consider measures that remove disincentives to meeting the considerable need for charity care, including boosting reimbursement rates for hospitals caring for patients newly eligible for Medicaid under the ACA and clarifying their policies to distinguish between charity care and unrecoverable patient debt, which is not considered a community benefit.

UCSF professor Renee Hsia, a lead author of the study, told the Post that a first step would be to address the lack of information about who qualifies for financial assistance. "The takeaway is not that we should not be giving tax breaks, but that there should be a little more accountability," said Hsia. "These are exemptions that, if we didn't have them, could fund education, water, or public utilities."