Nonprofit Hospitals Increase Trustee Compensation While Investments in Charity Care Suffer

By Consumers for Quality Care, on May 10, 2023

There’s a growing problem among nonprofit hospitals in America, according to recent reporting by Medical Xpress, a problem that involves the allocation of resources between trustee compensation and charity care.

Research conducted by Sebahattin Demirkan, Associate Professor of Accounting at George Mason University, and his colleagues revealed a troubling trend: a clear correlation between increasing in trustee compensation and reduced spending on charity care, or discounted care for consumers in financial need.

The study analyzed IRS filings of over 2,000 nonprofit hospitals from 2011 to 2019 and found a sector-wide decline of 21 percent in charity care as a proportion of total expenditure, while trustee compensation increased by 57 percent over the same period.  

Demirkan suggested that this issue may be attributed to how trustees perceive their fiduciary responsibilities towards the institution’s stakeholders. Trustees are “more about efficiency” and “operating based on profit,” according to Demikan. Reducing charity care is an easy way to boost profits.

Demirkan argues that the actions of these trustees do not align with the mission of nonprofits, the idea that “if you’re making money, you want to give back to society.” By not supporting and properly funding charity care allocations, nonprofit hospitals are hurting communities by turning away consumers in need of medical care.

Nonprofit hospitals should not be allowed to pay exorbitant salaries to their board members while simultaneously decreasing spending on charity care for patients in need. CQC urges lawmakers and regulators ensure that nonprofit health systems are part of the solution in our country’s health care system and not part of the problem.